In Defense of the McDojo

[Steve]

http://www.gocomics.com/nonsequitur/2010/02/23/

Are you really trolling in your own thread now? I really am interested in an actual response from you. Or can I assume that you agree with JWLuiza? Do you now accept that profit can be misleading?

Celtic, go back and point out to me where I've suggested that a business can be successful without turning a profit. At least then, I'll know you've... you know... read what I actually wrote, as opposed to what you imagine I've written.

I think you'll find that I've never suggested otherwise. What I am suggesting is that tunnel vision on profit is often a misleading indicator of sound business policy. Of two profitable businesses, it is possible that the business generating less profit in the short term is the stronger business model. Bill was very clear that he believed otherwise. Look at banks now. The ones cashing in with questionable business practices are folding like crazy. The ones opting for less immediate profit and a more conservative long term model are not.

 

[terryl965]

All this talk about Mcdojo's have made me hungary, I am going to Mc Donalds for some fast food....

 

[Blade96]

I think people make big mistake if they label such businesses and people successful simply because they know how to make a lot of money.

It is the only objective measurement that exists.

Thanks for helping me peoples =] now i can have a nice better debate :angel:

Maybe years ago that might have been a only objective measurement that exists. But now its not the only standard by which we measure a successful business.

what are their products like? How to they treat their workers? do they take good care of them? How do they better society? Is the business owner a miserly old Scrooge and a half who just packs his money away in the bank and watches it grow? (actually i have an uncle who does exactly that and i wouldnt call him or his business successful at all. actuallly takes advantage of people and hurts those around him.) Or does he spend money to make money (as Rocky Wirtz does and the blackhawks - his business - are good now) what type of product do they produce and does that benefit or hurt society and people?

again I'd advise people to look at red wings vs maple leafs. why don't you look up Ted Lindsay and see if he thought his bosses were 'successful' people. or Gordie Howe (who was fooled for a long time and never woke up until long after). These bosses (the Norrises in the case of the Red Wings) worked like McDojo owners. of course one's hockey and one's martial arts but still the business practices were the same. (Gordie Howe when he woke up he and some other people actually sued the NHL and won a big cash settlement.) Last time the red wings won the cup while the norrises were in charge was 1955! and they never won it again. Imo they deserved it! It was only in 1997 under the Illiches who changed the business practices, that the team won again.

and became successful. Thats what would be considered a 'successful' business in my book. They dont make as much money as the TML, but look at their business practices and what comes out of it. Nothing comes from the TML except money. and if you are rating success only by how much money a business makes than its successful in your eyes, no matter what else. like SteveBJJ said, thats thinking in tunnel vision. But thats not the only measurement these days.

 

[JWLuiza]

SteveBJJ put it in perspective he's not saying no profit, he's saying some McDojo practices are harmful to the success of said business (self-canabalizing I think was the term).

BM was sayingsome McDojo practices are sound. I think the discussion would best be served by distinguishing the two categories.

 

[Flying Crane]

Or, getting more specifically to the point, given that there are other ingredients in a sound business model, is it possible that between two businesses, the one turning less profit in the short term might be operating under a healthier business model over time?

I've been saying this for years. Our entire economy is built more and more on quick profits at the expense of long-term health. This permeates all aspects of our economy, as well as how we manage our natural resources and ties into pollution and stuff too.

It's very dangerous to make short-term profit the motivator.

 

[celtic_crippler]

Celtic, go back and point out to me where I've suggested that a business can be successful without turning a profit. At least then, I'll know you've... you know... read what I actually wrote, as opposed to what you imagine I've written.

I think you'll find that I've never suggested otherwise. What I am suggesting is that tunnel vision on profit is often a misleading indicator of sound business policy. Of two profitable businesses, it is possible that the business generating less profit in the short term is the stronger business model. Bill was very clear that he believed otherwise. Look at banks now. The ones cashing in with questionable business practices are folding like crazy. The ones opting for less immediate profit and a more conservative long term model are not.

Are we talking about McDojos or GAAP?

I guess I misunderstood... or imagined... you meant something else when you wrote, "Money, however, is not the only measure of success in business" in post #57.

 

[Steve]

Are we talking about McDojos or GAAP?

I guess I misunderstood... or imagined... you meant something else when you wrote, "Money, however, is not the only measure of success in business" in post #57.

Yeah, you misunderstood. Before that, in post 21, I was very clear when I said, "Of course, a business should make enough money to be viable (And that is a number that only the business owner can know). Of course, one would need to make enough money to pay the bills both personal and professional.

Beyond this, however, there are an infinite number of ways to measure success. You're making it black and white, off or on. It's not that way."

In the context of what I wrote before and what I wrote after, I stand by the statement that, "money is not the only measure of success in business."

I would have thought that the next sentence clarified this statement, as well. I wrote, "In fact, often the unfettered pursuit of money in a business venture can undermine the values that built a profitable business in the first place." (emphasis added).

So, yes. You misunderstood. Maybe I could have been more clear, but I'll be honest. I don't know how I could have written it differently.

 

[Steve]

i've been saying this for years. Our entire economy is built more and more on quick profits at the expense of long-term health. This permeates all aspects of our economy, as well as how we manage our natural resources and ties into pollution and stuff too.

It's very dangerous to make short-term profit the motivator.

qft!

 

[KELLYG]

mcdojo's as a business model good stuff. They are profitable yes.
A Big mac is food but is it as good for you as a healthy balance meal no.
I do not think that MA has to be taught out of a garage to be the "real deal". I think that running a business and earning a living at what you love is awesome. After all a man that Loves what he does for a living never works a day in his life.

The problem arises when the MAIN motivation for having a Martial Art's business is the money. Other posters are correct that the temptation to sell out or to lower your standards to make sure the fat bucks keep rolling in is a very heavy temptation. A SMART/ETHICAL business owner knows that to keep long term business is to make sure that you never sell out, that you give quality services, meet or beat expections at a reasonable price.

 

[celtic_crippler]

Beyond this, however, there are an infinite number of ways to measure success. You're making it black and white, off or on. It's not that way.

Yes it is. Because while there may be other factors that play into whether a business is percieved as successful or not, the bottom line is if it doesn't turn a profit those other variables won't mean squat because the business will fail.

Now, are you going to argue that a business can fail and still somehow be successful? I suppose it could... if the ultimate goal was failure, but I doubt there are many entrepreneurs whose goal is to go bankrupt.

 

[Flying Crane]

Yes it is. Because while there may be other factors that play into whether a business is percieved as successful or not, the bottom line is if it doesn't turn a profit those other variables won't mean squat because the business will fail.

A business does not need to turn a profit. It can break even and be healthy. This would include meeting all payroll obligations including an established salary for the business owner, as well as other expenses like rent, utilities, and other costs of running the business.

I guess I don't understand the prevailent mentality that all businesses must grow, must make more money than the last quarter, etc. It fuels a mentality of greed that is never satisfied. Examples abound in our economy.

 

[JWLuiza]

I wouldn't call a business breaking even as successful. Sustainable, maybe, but not successful.

 

[Steve]

Yes it is. Because while there may be other factors that play into whether a business is percieved as successful or not, the bottom line is if it doesn't turn a profit those other variables won't mean squat because the business will fail.

Now, are you going to argue that a business can fail and still somehow be successful? I suppose it could... if the ultimate goal was failure, but I doubt there are many entrepreneurs whose goal is to go bankrupt.

No. Once again, that's in your imagination.

What I will do is what I've tried to do many times already: tell you that I've never suggested that an unprofitable business is successful and that I have no idea where you're getting it.

I've made two basic points.

First, that looking at profit as a sole measurement of success can be misleading. Many businesses that are ultimately dismal failures turn a profit for some period of time. Some of them, such as AIG, can be wildly profitable for years. I've given multiple examples of this, and of how a business can turn less profit in the short term, but be MORE successful over time. Profit is the result of practices that drive business. Some are destructive in the long term and others are productive in the long term.

Second, that even a financially sound business plan can be unscrupulous, and in my opinion, any unscrupulous business plan that preys upon ignorance is risky at best and despicable at worst. In a given area, there are bound to be limits on the number of ignorant customers available and one's customer base will ultimately disappear. This is a point related to but distinct from the first.

I've never said nor implied that a company can be successful and unprofitable. In fact, I've said exactly the opposite.

 

[JWLuiza]

Defining success:
http://www.powerhomebiz.com/vol15/3indicators.htm

 

[Steve]

A business does not need to turn a profit. It can break even and be healthy. This would include meeting all payroll obligations including an established salary for the business owner, as well as other expenses like rent, utilities, and other costs of running the business.

I guess I don't understand the prevailent mentality that all businesses must grow, must make more money than the last quarter, etc. It fuels a mentality of greed that is never satisfied. Examples abound in our economy.

I can see your point, but breaking even isn't what I would call successful. Surviving, may be.

Success in my opinion is at least paying all the bills and having enough left over to live on.

 

[Flying Crane]

I wouldn't call a business breaking even as successful. Sustainable, maybe, but not successful.

If all employee, including the owner, gets paid their salary and all expenses are met, how is that not a success?

 

[Flying Crane]

I can see your point, but breaking even isn't what I would call successful. Surviving, may be.

Success in my opinion is at least paying all the bills and having enough left over to live on.

Re-read what I wrote. All payroll is met, including the salary established for the owner.

 

[JWLuiza]

Re-read what I wrote. All payroll is met, including the salary established for the owner.

What about the investment in getting the school running? The sunk cost needs to be returned as part of the recompense, and it is above and beyond salary. Then, by definition, it is turning a profit and is successful.

 

[celtic_crippler]

If all employee, including the owner, gets paid their salary and all expenses are met, how is that not a success?

That's what "profit" goes to pay for. Or perhaps we should better refer to it a Operational Cash Flow.

I never said "growth" was necessary for success.

 

[Steve]

Bill. So far, you've been pretty adamant that profit is not just an indicator of business success, but the only one. You've said, "Money is the only measure of success." That "the business is measured only by how much money it earns. It is the only objective measure by which to measure the success of a business."

You've also said that "Investors and stockholders and business owners can only measure the success of a business by the money it makes," and that, "The [business] that makes more money *is* more successful."

So, I'll ask you again. Two BJJ Schools, A and B, and you have the opportunity to take over as a co-owner of either one. One represents a typical BJJ school that's well run. The other is a lucrative "MMA" school capitalizing on the typical McDojo business model. Both are turning a profit, although the MMA school is making significantly more money right now. Which of those would you choose to invest in, if you had the chance? As an investor, which of those two is more successful in your opinion?