We’ve covered a lot of material for NAPMA Maximum Impact Members in recent months about buying your own property for your school and about building wealth from your martial arts school business – not just income.

One fantastic contributor was Terry Bryant. His presentation was was very robust and comprehensive. This topic is useful for everyone. It’s especially critical If you as a school operator perceives your long-term career path is running a single location then It’s very important to be looking at ways of developing wealth within your school; not just developing income. The two are very different.

What is a truism with a karate school is the only way really to develop wealth from a single school is if you’re now affiliated with a larger and stronger organization. As a member of a Franchise organization you may find a resale market for your school when you are ready to retire or have need to move along for any other reason.

If you are, for instance, in a different industry let’s say you run a burger shop and you run Jim’s Burgers. Well, Jim’s Burgers is only as good as Jim running the place and only as good as the revenue it can develop on a day-by-day basis. But, to actually think that you’re going to run it for 20 or 30 years and sell it for a significant amount of money, short of whatever the real estate might be, is pretty unrealistic.

It really doesn’t matter what the business is. If it’s a dental practice, if it’s a law office, if it’s a karate school, if it’s a dance school, if it’s a gymnastic school, or if it’s the Jim’s Burgers, the wealth from small, unaffiliated business comes purely from cash flows being directed into other investments or cash flows being directed into the properties that the business is in, because the building will have use for other businesses other than, in this case, the martial arts school.
So, one way of developing wealth long-term in a single location is to own a building that ends up being worth $1-million or $2-million and to be paying for that building from the cash flows of the school.

But, as a single, independent operator, it’s extremely unrealistic to think that there’s a pot of gold at the end of the rainbow where you can sell the school and have it be worth much. Now, the way that that does happen is instead of being Jim’s Burgers, you’re an independent McDonald’s franchisee. An independent McDonald’s franchisee or an affiliated business in just about any format that’s part of a large organization, now there’s an established market for people who are looking for that brand and that business.

There’s a training infrastructure. There’s a support infrastructure. And there’s an awful lot of things that collide, that create a value to the business itself with or without real estate that goes with it.

So, one way that as a martial arts school operator that you can create long-term wealth would be, for instance, a Mile High Karate franchisee has a much greater likelihood of being able to sell their business and having equity at the end of 10 or 20 years than someone who was running their own independent school, because it becomes much less personality-dependent and more systems-driven, has marketing in place, and a prospect base of people who are looking to get one.

That having been said, short of doing that, the only way really to build wealth in a martial arts school is either ownership of the property that you’re in, or create as much income as possible and put it into other investment vehicles. And those investment vehicles would be stocks or bonds or any type of mutual funds. It could be gold or it could be the property you live in or a variety of rental properties.

So you have to look at your school, thinking of it as either an opportunity to become affiliated with a large organization and have equity when you decide to retire or move on, or as an income-generator that can be funneled into other investments. One of those could be the building that you’re in.

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