How many students does it take to...? (Financial question)

dvcochran

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That was the idea. Of course, there are a few cons...
  • Reduced potential student body size
  • Difficulty balancing wildly different electives in terms of what a credit is
  • Difficulty balancing electives in terms of likely participation (I'm guessing the forms class would be very low participation)
Skribs,

I still think you are looking at the business model wrong.
Ask yourself: "how can I make enough money to support my hobby/passion". If we are all being honest this is what training in the MA's is. Right? Converting this hobby/passion into a profitable venture is very, very tough. Unless you fully look at it as a business venture and Fully leverage this approach it just doesn't happen, unless you are a trust fund kid. Often times 'going big' is the best move, which is what I have tried to describe.

You have been given a ton of very good information. There is a LOT of work to do when moving into a new, unknown business area and I feel this increases the risk of failure. Source out the local Chamber of Commerce or whatever economic resources are available in the area for business data. Unabashedly meet with business & building owners to determine expense stats. Go to the local schools. See what they are doing. Find out what they charge and how they are structured on payment. Learn.
I get the feeling you are still confined in the box of your current school. Reach, expand, grow. Get out and see what the rest of the MA world is doing.
This does Not mean leaving your current school as a student. This in now way means there is anything wrong with your current school; clearly it is a large school so something is working. That said, what can you learn from your current school, OFF the mat? Get in the office and learn what is going on behind the scenes.

Make a plan. Plan the plan. Execute the plan. This is always fluid and I am certain there is much you can already do. You say you are a spreadsheet so get to work. If you are willing it would be great to share this as a talking point.
 

Christopher Adamchek

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Other ways to keep costs down
- partner with martial arts place (that is different enough from yours) use their off hours
- partner with a non martial arts place such as community center, dance hall, yoga studio, school gym using their off hours
- partner with a kids organization such as boys and girls club or YMCA, teach kids class on their time, and adults off hours
- Utilize outdoor parks
- Get a house with large basement or garage = private dojo
- make the jump to a public dojo once you already have several committed students

Ive used all of these and more to break even and turn a small profit with several students
 

Steve

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I am going to be that guy and give you an indirect answer.
But first some Big questions:
Of the 5k monthly expense estimate how much is going toward rent?
What is the national cost of living scale where you will rent?
If 2/3s of that is for rent you are better off purchasing. I will explain.
Why be the slave when you can be the master?

My first school was/is in a strip mall. Dont make that bigger than it is. It is a 4-unit complex that I was able to purchase after the school had been there about six months. But the wheels of purchase were set in motion about a year before opening the school.
By starting out with a 30 year variable mortgage , the payment was less than any spot I could rent of equal size in a comparable area. I converted to a fixed 15 year 3 years later and paid it off in less than 10.
Using a rough pen, 2 rented units pay the bills. Especially with the consistent change in the martial arts as a business landscape, it allows for maintainability of a commercial size Dojang that I could not see having any other way.
And here is a salient point; I do not believe it would matter what service industry it is. As long as the product is not costing you money it can stay viable.
I dont ever remember doing the per student financial evaluation since it hasnt been needed but your number will only be relevant to your input/output situation. It is pretty hard for me to picture a commercial school of big enough to support the student numbers you talked about without some way to offset the initial deficits. Yes, that can be working another full time job but that surely changes the dynamic.

Now, for some realities you will need to embrace:
You need to either take a really good business MANAGEMENT class (not sports management), get experience from your work, or have a good, trustworthy mentor. No shame in the latter and it has paid huge dividends to me for years. He has helped me make all my big financial decisions.

Expect to spend more on marketing than rent in the beginning.

Expect to take a loss or make little to no money for 3-years. This is how you have to plan you finances (most people anyway). IF you do it right you will far out pace the 3 year timeframe.

Dont be afraid to sublet in the beginning.


One of the biggest changes I have seen through the years is what people perceive to be a nice gym. Gone are the days of the old sweat boxes. When people pay for a service they want the whole enchilada. And I think that is within reason. This means you must plan and design your Dojang for what works now and that can expand/modify in the future. And teaching classes will be less than 50% of the job.
This is another area visiting as many schools as possible has great value.

If you can show us an actual budget it would give us all great points to talk around. Would also need to see some comps on rentals in the area and then see what is for sale in your area.
This is great advice if you can get the loan.
 

Flying Crane

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Other ways to keep costs down
- partner with martial arts place (that is different enough from yours) use their off hours
- partner with a non martial arts place such as community center, dance hall, yoga studio, school gym using their off hours
- partner with a kids organization such as boys and girls club or YMCA, teach kids class on their time, and adults off hours
- Utilize outdoor parks
- Get a house with large basement or garage = private dojo
- make the jump to a public dojo once you already have several committed students

Ive used all of these and more to break even and turn a small profit with several students
If you teach out of your own home, including basement, garage, or yard, be very careful because it likely will void your homeowners insurance. I researched this extensively a couple years back. Homeowners insurance providers do not like teaching martial arts at the home. Even if you have separate liability coverage for teaching, the homeowners insurance providers will not tolerate it.
 

JowGaWolf

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At your school, how many students does it take to:
  1. Break even?
  2. Make a decent living?
  3. Make a good living?
1. Break Even? Start by keeping your cost low and take advantage of other possible income outlets that your school can take advantage of. If you don't have enough students to pay for building or office rent then don't get one. Your biggest challenge is going to be Covid. So anything you do will need to factor in Covid. For example, what if you can't have in-person classes? How will your school continue to generate income. If you have a physical school then you may want your school to have outdoor space in which to practice.

Who will be your students. This is also important. Some school thrive on younger students (kids) other schools focus more on older students. Things like this will factor into your Break Even.

2. Make a decent living? Have a job other than Martial Arts Instructor. Especially now with Covid. Either that or embrace Online Martial Arts training, which allows you to reach students beyond your physical location. Here's something to think about. 50 states make up the US + DC + Puerto Rico +Other US territories. Now. Say you were to get 5 students in each location. Then you charge each student $100. That's how much you would make a month. With an online format. Easier said than done, but not impossible. You can get that many just form people who want to learn forms but not learn how to fight with MA. But such a thing will require you to change how you think and feel about the martial arts you train.

3. Calculate #2
 

JowGaWolf

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Take a couple of business classes at your local community college. Even better if they have a sports business class. That'll give you a much better chance at having the knowledge to be successful. And you might consider looking into some of the more turnkey franchise programs, like Premier Martial Arts. You've got the martial arts side, and they provide the business stuff.
Either this or let someone run the business. If the Martial Arts teacher is going to run the school then Business Classes are a must. Martial Arts Ego gets in the way and that person will need to know how to be of 2 mindsets. The Martial Artist and the Business Person. The Martial Artist Ego thinks he or she controls everything in the school. That mindset needs to be destroyed. This is why most martial arts schools go broke or don't make enough money to survive. The 3 questions asked were all business questions. So the Business Mindset needs to be the driving force for those 3 areas.

There is a junk yard of Martial Arts schools that have failed because they didn't understand business, or could not switch into that business mindset.
 

JowGaWolf

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Yeah, I also put up a website, printed some business cards, got a business license from the city, publishing a fictitious business name. Those are simple start-up costs but not very heavy. The big thing is, not paying rent and heat and water and electric and insurance on the building.
You could probably get a good deal these days for rent, but that could also increase the chances that someone may get Covid as well. Another thing I've been seeing is that Martial Arts schools are teaming up on rent. So you may have 2 schools at one location which is similar to what some of the combat sports gyms have. Different schools under the same name. One of the Jow Ga classmates teaches kung fu in a TKD school. The TKD school is now able to stay in business because it only has to pay half of the physical costs.
 

Gerry Seymour

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Either this or let someone run the business. If the Martial Arts teacher is going to run the school then Business Classes are a must. Martial Arts Ego gets in the way and that person will need to know how to be of 2 mindsets. The Martial Artist and the Business Person. The Martial Artist Ego thinks he or she controls everything in the school. That mindset needs to be destroyed. This is why most martial arts schools go broke or don't make enough money to survive. The 3 questions asked were all business questions. So the Business Mindset needs to be the driving force for those 3 areas.

There is a junk yard of Martial Arts schools that have failed because they didn't understand business, or could not switch into that business mindset.
I'd argue a portion of those failed in spite of the fact the person understood business and had the right mindset - they just weren't equippped to execute. This is especially true on the marketing side. Even if you understand basic marketing, it's difficult to get a gauge on what works in MA, because most MA schools simply parrot what they saw done at their instructor's place, in sort of a shotgun approach to marketing. So it's difficult to find out what really makes the difference between successful and unsuccessful schools.
 

JowGaWolf

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Even if you understand basic marketing, it's difficult to get a gauge on what works in MA, because most MA schools simply parrot what they saw done at their instructor's place, in sort of a shotgun approach to marketing.
Days of the "shotgun marketing approach" and flyers are long gone. Those are no longer effective means of advertising unless you have a captive audience like a school full of kids or another group of people, say a church group with younger members, or older depending on the type of martial arts being advertised.

These days when people want to look for something, they do a "google search" or the search engine of their choice. Before the Internet, flyers on cars was a good way to try to get some local attention, but the marketing changed once the Internet became a reliable source of "Where can I find...."

When I took Business classes there were no topics or discussions on how important websites are. When I took marketing classes, there were no topics about online marketing or keywords, or social media. The only reason I know and understand these things is because I design webpages and do SEO analysis. I know all of the tricks in things that make online marketing work. It used to be easier, but now it's a lot of work. If Online Marketing, SEO Analysis, Keyword Analysis, Social media are strange things in terms of business, then I highly recommend learning how those things works. Also learn the impact of how they affect businesses. I would also recommend learning how to do these things even on the lower levels just so you don't get ripped off by people who sale these services.

So it's difficult to find out what really makes the difference between successful and unsuccessful schools.
Mods Feel free to delete this post if needed. I'm not trying to promote the school or diss it. I'm just showing the Marketing Effort

Find a successful school that grows fast enough to open up additional schools. Take a look at their websites. What are they talking about? What are they selling? How much are they selling it for? What type of events do they do? Are they teaching the same martial arts that you do? Are they "stealing" students interested in what you teach?

For example, there was a Choe's Hapkido School that was advertising that they did kung fu. They had it on their website and they had a video of kids in a park swinging around weapons. To me it looked like neglect. Coming from Chinese system that uses weapon, there is no way we would let kids just swing swords and spears around. To me it was clear that they didn't train in the weapons they were swinging around. So my teacher then called the school and confront them about their honest. The reason I bring this up is because things like that can take a person who wants to learn Kung Fu and get them into a Hapkido Class thinking that's what they are learning. There are schools out there who will do this.

My point is, if you don't market what you do , them someone else will fill that gap for you and it won't always be from a school that trains the same system you do. I also bring up Choes Hapkido because they do put a lot of effort in Marketing and I can't hate on them for that. If I hate it, then I need to up my own marketing efforts.

If you look at their kid's martial arts youtube channel Choes Hapkido Duluth Ga. You will see that they have separate youtube channels for adults and children and the kids stuff has a lot of testimony and a lot of demos. They aren't shy to tell the world about what they do.

In short, "They cast a lot of nets, so they catch a lot of fish." They probably pay a lot for their marketing too. I probably wouldn't recommend too much of that as there are easy ways to do marketing these days and to get big results without spending big money. But it's not possible to get good results without spending any money.

I personally wouldn't waste the money to print flyers, unless I lived in a small town and it had a shop that people like to visit. Or unless I could get the flyer in the school system handed out to all the kids. grades 1-12. But with Covid around. That probably won't attract as many as it used to.
 

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@dvcochran

If I under stand you correctly, you're suggesting something along the lines of: Buy a building that has 4 units in it. Use 1 unit to teach, and rent the other three out to pay for my mortgage. Is that correct?

Buying isn't something I've considered. When I've been looking in the area I'll be moving to, the 7-figure price tags on the spaces for sale have turned me off. Right now, that area is going through a huge growth spurt. Property prices are skyrocketing right now. (That's one of two reasons I haven't given specifics about my budget). I'm also a little bit concerned with the extra work of managing rental properties.

It is something I'll consider. It does go in line with one of my plans which is: win the lottery, and then buy some land on which to build my dream dojang.

The two reasons I'm not getting more specific about my budget are:
  • The prices where I'm looking at going are pretty volatile right now, so any analysis we do today will be wrong in 3 months, let alone before I move
  • Privacy
Yeah, we're in the same boat. There's not really anything available to buy other than empty lots, and if there were, it would be crazy expensive anyway.

Renting isn't all bad. The landlord takes care of everything outside of our unit (landscaping, snow plowing, trash pickup, etc). Just... know that 3-10 year lease terms are pretty standard for commercial units, and for your first one they'll probably require you to personally guarantee the lease.

Edit: You know, I decided to look on Loopnet just to check, and discovered that our landlord is looking to sell our building. No price listed, but, hmmm.
 

dvcochran

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This is great advice if you can get the loan.
It would definitely be harder moving into a new area not knowing anyone. But try to work close with the seller and banker. There are several ways to purchase, especially in the commercial environment that are not commonly heard of.
On the first strip, a large part of the collateral was offset by a percentage of future profits; which was deferred for 3 years so the was could get past startup.

You just cant walk in cold to the loan company and say hey, I think it would be really cool to star a karate school.
This is great advice if you can get the loan.
 

Steve

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It would definitely be harder moving into a new area not knowing anyone. But try to work close with the seller and banker. There are several ways to purchase, especially in the commercial environment that are not commonly heard of.
On the first strip, a large part of the collateral was offset by a percentage of future profits; which was deferred for 3 years so the was could get past startup.

You just cant walk in cold to the loan company and say hey, I think it would be really cool to star a karate school.
If youre a vet and you have good credit, there are lots of options, too.
 

dvcochran

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If youre a vet and you have good credit, there are lots of options, too.
Agree. I do not know if that applies to Skribs or not.

I thought I had deleted the post when I realized I had already covered this in a previous quote.
 
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skribs

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If youre a vet and you have good credit, there are lots of options, too.
Someone once asked who would win between me and my Master. My response was, "He was Special Forces. I've played Call of Duty."
It would definitely be harder moving into a new area not knowing anyone. But try to work close with the seller and banker. There are several ways to purchase, especially in the commercial environment that are not commonly heard of.
On the first strip, a large part of the collateral was offset by a percentage of future profits; which was deferred for 3 years so the was could get past startup.

You just cant walk in cold to the loan company and say hey, I think it would be really cool to star a karate school.
The good news is my family lives where I'm moving.

I'm honestly way out of my lane on all this real-estate stuff. I don't see how I would be able to purchase property without being able to afford it before-hand. Otherwise, wouldn't everyone just do that? I definitely can't afford a down payment on 7 figures, nor do I have collateral that would get me there.

I think it's a great suggestion for someone with the acumen to do that. I just don't think it's me.
 

JowGaWolf

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Someone once asked who would win between me and my Master. My response was, "He was Special Forces. I've played Call of Duty."
Then definitely Call of Duty wins. lol.

I don't see how I would be able to purchase property without being able to afford it before-hand. Otherwise, wouldn't everyone just do that? I definitely can't afford a down payment on 7 figures, nor do I have collateral that would get me there.
I look at it this way. Why is the person trying to sell the property. If he can't find people to rent it, then that should be a big alarm in your mind. There could be other issues with property that you are unaware of. It's one thing if you could own the property and rent out space. I've seen that done as well. But it's something totally different if you only want to have a martial arts school.

No you not only have know about leasing commercial space, you have added the extra headache of trying to get someone in that space. All of that on top of running a martial arts school.
 

Flying Crane

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Someone once asked who would win between me and my Master. My response was, "He was Special Forces. I've played Call of Duty."

The good news is my family lives where I'm moving.

I'm honestly way out of my lane on all this real-estate stuff. I don't see how I would be able to purchase property without being able to afford it before-hand. Otherwise, wouldn't everyone just do that? I definitely can't afford a down payment on 7 figures, nor do I have collateral that would get me there.

I think it's a great suggestion for someone with the acumen to do that. I just don't think it's me.
While it sounds like a great idea and perhaps some people have the right combination of luck, timing, resources, connections, and business experience to get it done, I suspect that for most of us it is not realistic. Maybe down the road a ways it might become possible, but especially for someone who is just getting started, I am skeptical.
 

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Here I'll give you my answers straight up the way you asked them: Currently teaching out of a community center

1. 30 students to breakeven (includes rent, marketing, and software).
2. 70 students to decent living. I'm on average charging around 115 per student, you can do the math.
3. N/A -> I'll hit capacity around 60-70 in the community center (800 sq ft studio)

My phase 2:
1. 70 students to breakeven
2. 120 to decent living
3. 180 to good living
Max capacity of my own place (2500 - 3000 sq ft) will be around 200-250. Poissbly 300 if I really push it.
 

dvcochran

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Here I'll give you my answers straight up the way you asked them: Currently teaching out of a community center

1. 30 students to breakeven (includes rent, marketing, and software).
2. 70 students to decent living. I'm on average charging around 115 per student, you can do the math.
3. N/A -> I'll hit capacity around 60-70 in the community center (800 sq ft studio)

My phase 2:
1. 70 students to breakeven
2. 120 to decent living
3. 180 to good living
Max capacity of my own place (2500 - 3000 sq ft) will be around 200-250. Poissbly 300 if I really push it.
I would love to see the layout of your 2500-3000 sq/ft facility. We struggle running 150-175 in our 2,500 sq/ft locations. Subtract for office, storage room, dressing, bathroom, hallway, and seating area there is about 1,700 sq/ft workout space. One building is truss built so the area is fully open, no columns. Something we have to deal with at the other location.
 

WaterGal

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I would love to see the layout of your 2500-3000 sq/ft facility. We struggle running 150-175 in our 2,500 sq/ft locations. Subtract for office, storage room, dressing, bathroom, hallway, and seating area there is about 1,700 sq/ft workout space. One building is truss built so the area is fully open, no columns. Something we have to deal with at the other location.

If you have 1700 sqft mat space, you should be able to have around 35 students per class (50sqft per person per class) without it being very crowded. If each student is attending an average of 3 classes per week, and you have 24 classes per week, the facility should be able to accommodate 280 students.

Of course, that assumes that every one of your classes are maxed out, which is unlikely. I know right now, for us, our intermediate classes are practically empty because we didn't have a lot of new signups last year, but our advanced classes (people who stuck with us through covid) and beginner classes are very busy. So it's a bit lumpy, but we can't just drop the intermediate classes from the schedule lol.
 
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