In December, Kathy Hayden, the perpetually smiling, bouncing and singing owner of Kindermusik with Kathy, received tough news from her property management company. The lease on her State Street studio was ending, and the owners wanted more rent — a lot more rent.

“They jacked it up like you wouldn’t believe,” Hayden said. “I was paying $1,400, and it went up to $2,200.”

Using her own spin on the licensed Kindermusik curriculum and materials, Hayden has introduced hundreds of children to the formal world of music. Her hourlong classes provide a whirlwind of activities, both physical and mental. Music is the means and the end.

Ideally, students leave class knowing something new about making music and music theory, but she also emphasizes using music and movement to build motor skills, encourage concentration and build confidence.

Hayden excels at what she does, and the children repay with smiles and laughter. It takes incredible energy to keep class going, to keep so many small children focused and entertained. She succeeds because of her energy. Out of 5,000 Kindermusik educators worldwide, Hayden said she was voted the third-largest and most successful.  Participants in’s 2007 “Parent’s Choice Awards” voted Kindermusik with Kathy “Best ‘Parent and Child’ Class.”

The business logistics are pretty simple. To keep it going, Hayden needs a group of willing children, a clean, open space, and vast physical and creative energy. Take away one and the business topples. Last December, it looked as if she was going to lose her clean, open space. It sapped her morale and put a serious hit on her vast source of energy.

Hayden is a single mother of two girls. Her business provides her only income. She owns a home, but to meet that mortgage she needs her business income and the rent from the three tenants who share the space with her.

Hopeless though it seemed, her first response to the problem was to talk things over with the leasing company. At first, she just wanted to know how the company could raise the rent nearly 60 percent at one time. She wanted to know how it could expect such a small business to meet that expense. The answer was succinct, Hayden recalls; “They said, ‘This is the market price right now, this is what we’re getting.’ ” Harsh, but true. She tried some different angles.

She argued that her business brings the foot traffic of 300 families walking past the neighboring storefronts every week. All of these businesses lease from the same company. Her business adds value to those others; therefore, her business adds value to the leasing company’s property. She argued that several of the company’s clients are well-financed national retail chains. “Charge them what you want, but I’m a small business. I service families. I benefit you. Give me reduced rent because I benefit you by bringing in families.”

The company tried to compromise. It cut the increase by half. Unfortunately, it wasn’t enough. “They tried to work with me,” Hayden says, “but it just wasn’t what I could afford.”

Where could she cut costs? To help teach several of the 40 weekly classes, Hayden hired several part-time teachers. Could she lay them off and teach the classes by herself? Aside from easing the teaching load, they each bring something unique that makes the business greater than the sum of its parts. Loss of those teachers certainly would mean a loss in enrollment. The other option was raising tuition, but Hayden knew she had little margin to work with on that front. “My main focus is to keep Kindermusik affordable to families,” she said, “and I know I would have to jack up prices if I stayed downtown.”

Time was running out. Eventually she would have to sign a lease, raise tuition and just hope that students continued to enroll, or close her doors and find a different business plan that didn’t require a studio space.

Her salvation came in digital form. She received an e-mail from the new owner of Arts Alive, who was seeking renters to sublease space in her roomy location on Calle Cesar Chavez. “In one week, we did the deal.” Hayden notified her property management company. “I think I threw them for a loop,” she said.

She completely remodeled the studio in two days. “I spent four grand on this room to move in. I had to tear down a wall. I really went to town.” Part of the expense stemmed from her need to use only environmentally friendly or child-safe products that would be toxin free.

All of this sounds peachy, but there’s a catch. Hayden moved to a very different part of town — a part known commonly as “the funk zone.” This is a large area zoned for light industry. The new location rests adjacent to a sewage treatment center, a homeless shelter, a concrete company and the freeway overpass. Foot traffic is nearly nonexistent. There is no where to stroll or shop.

But upon entering the building, all bleakness vanishes. Inside, visitors are greeted with warmth and creativity. “When you’re in the building, you’re welcomed,” Hayden said.

The space does more than welcome visitors. It deluges their senses. Besides Kindermusik With Kathy, this portion of the building contains Arts Alive and Santa Barbara Dance Arts — visual and performing arts schools.

As much as Hayden felt the push to move from her old location, she didn’t immediately feel a pull toward the new one. “I was real hesitant to come down here because of the area at first.” She talked with her new neighbor, Steven Lovelace, co-owner with Alana Tillim of Santa Barbara Dance Arts. “He said he felt the same way when he first moved here, and they’ve had no problems. No issues at all,” she said.

“Before, I was little old Kindermusik Kathy downtown. My dream was for children to experience art and music, but I felt so isolated there. It was just me,” she added. “Now I feel like I’m part of a large community of artists and musicians. The benefit is that the children are being exposed. It just feels like your part of an academy.”

For all of her optimism about the new location, Hayden fears she will not have the built-in marketing that the State Street foot traffic provided. “All I can rely on is advertising and word of mouth,” she says. “That’s my worry. It’s like, ‘I’m here! Find me!’ “

This spring will be the first full semester in the new building. So far, enrollment has shrunk a bit, but, Hayden says, the other businesses in her building have seen a dip, too. The sour economy may be a greater influence than the change in location.

Hayden is ambivalent about the future. For now, she is back smiling, bouncing and singing with the kids, and they sure seem happy about it.