It’s amazing to me sometimes what concerns school owners of small and barely profitable schools.

You see there’s a big difference between the way that successful school owners think about issues big and small versus how failures think about the issues in their business.

Recently when speaking at a NAPMA  event I was inundated with comments and questions from small school owners that belied two common problems:

•  A lack of an abundance mentality, and

•  A focus on saving pennies rather than earning dollars.

First,

Most school owners have expectations that are way too low for their business and lack faith in their own capabilities to achieve a high level.

They ask how to run their school more effectively while holding a full-time job in some other career. Rather than looking at the real potential of their business they try to coordinate their day job to support their life-style needs while working at the school 40 hours a week also.

While they are struggling along with their two jobs other schools are thriving.

Just this month three of my close friends had schools gross over $100,000 in a single month. They are spread out across the country. Have different programs, different curriculum, different strategies for attracting new students, and much different personalities. However, each of these school owners are not just surviving – they are thriving.

It is important for the school owners to make a decision that they are going to not just survive but, thrive in their school. School owners who are running their school on a part-time basis must decide to thrive then “jump off the cliff” and run their school and a professional, full-time basis.

Second,

Saving pennies rather than earning dollars works in two specific ways.

First, doing everything themselves rather than farming out critical support items. School owners go through their daily routine looking a small incremental gains in their business and hoping to save a few dollars here and there.

School owners who are grossing $5,000, $7,500, $11,000 or $13,000 patiently explain how they are saving $1 or $2 per payment by doing their billing in-house rather than farming it out to a service provider or, explain that they do all of their payroll and bookkeeping on their own rather than pay the $60 or $70 per month that a service firm like Paychex or ADP would charge.

Focusing on items like billing, payroll, or accounting and taxes takes up valuable time that could better be spent on the important elements of growing a school.

Every school owner must master three key elements for their school:

•  Marketing to generate new students;

•  Sales – enrollment processes and renewal or upgrade processes;

•  Motivational teaching.

These three elements must be attended to effectively every day.

Really the owner’s main role is in marketing his school and then monitoring for quality student service – everything else is secondary.

Second, failing to invest in crucial points for growth.

Every school owner must spare no expense on two items:

•  His or her own education as a martial arts business person;

•  Marketing and advertising their school.

When speaking with owners of small schools they often patiently explain to me how attending a worthwhile seminar is just not in their budget. They just are not willing to spend $1,500 to $5,000 on their own education – even if they might learn enough to add 10 or 20 times the investment. Often, I see even a more perverse spin on this where martial artists will spend huge amounts of money on curriculum oriented training developing their own athletic talents but those same individuals fail to see the value of business education to support their school’s growth.

Next, the most frustrating aspect of attempting to teach school owners about marketing is their lack of willingness to invest effectively in the growth of their own school. Proven concepts with a 3 to 1, 5 to 1, or even 10 to 1 return on investment are ignored or derided as too expensive or too ineffective. Smaller school owners often combine unrealistic expectations with a lack of willingness to invest effectively.

In conclusion, we are in a wonderful business. The more students we have and the more effectively we develop our students then the more income we will earn. Financially successful school owners are impacting high numbers of students in a very positive way.

In order to grow your school you must have a belief in the opportunity provided by your school and be willing to invest in both your own education as well as in marketing your school.

A powerful formula that I shared with you already while discussing how a Mile High Karate school generates revenue. Here I will expand upon that formula.

The formula again is as follows:

New Enrollments X Tuition Rate X Retention Rates X Renewal Upsells X Cash Ratio

Really, I believe that properly applied this formula encompasses just about every important factor in improving the financial results of your school. An improvement in any piece of this formula can have a dramatic impact on your “bottom line – net profit” and, on your “top-line revenue.”

Let’s take a quick look at three of these factors: Retention Rates, Renewal Upsells, and Cash Ratio.

There has been a creeping mythology by some of the billing companies – that accepting cash up front as opposed to a monthly payment is a bad or, even illegal activity. This goes right along with the myth that students should enroll at a given price per lesson or month – and, just go right along paying that rate forever (which of course means until they dropout.)

There is a huge problem with the philosophy of never accepting cash: Students dropout.

Certainly one factor (but, only one) in the long-term financial health of a school is minimizing student attrition (drop-outs.) The industry average dropout rates probably range from 7-10% per month. Now to give you a comparism – I did a little research and found that Harvard University (not known for it’s easy curriculum) has a graduation rate of 93% — put differently Harvard has 7% of their entering freshment who will dropout sometime in the four or five year process of getting their degree – 93% of those entering freshmen will hang in their all the way to their degree.

What would happen if you could get your school to have a 93% graduation rate to Black Belt? If you enrolled 250 new students this year you would graduate over 225 Black Belts in four years.

The absolute BEST dropout rate I’ve been able to find in our industry is around 2% per month – or approximately 100% by the end of four years – again compared to Harvard’s 7% by the end of four years. Again, I believe that our industry average ranges from 7% to 10% PER MONTH dropping out.

If the numbers I’ve just quoted are anywhere near accurate what that leads us to is two conclusions.

First, I someone pays you upfront for three or four years ahead – then there will be a bump in revenue as opposed to them paying monthly over that same period of time.

Second, A huge opportunity for improvement in all martial arts schools is figuring out how to extend the average length of time that a student continues to train in your school. Dropping the attrition rate monthly from 7% to 3.5% per month will DOUBLE your active count – and, boost your revenue per student dramatically.

Next – the Renewal Upsell.

If you are a good martial arts instructor – do you think that it is possible to build a perception of value over a couple of months that exceeds their perception after one or two introductory lessons? It seems obvious to me that if your program is high quality and if your instructors are good – then a student after a couple of weeks or after a couple of months should be more tuned into the value of instruction than on their initial couple of visits.

Also, in the long-term of your program is the value of a white belt lesson comparable to the lesson a Black Belt would receive?

Maybe going back to my example from academics. Is tuition for a quality private high school, BA level college classes, Master’s level college classes, and a Ph.D. program of comparable value? Do they price them the same? If you don’t know the price per class hour typically escalates significantly at each step up (and, at the same time the number of students at each level typically declines significantly.) When I completed my MBA – it was an Executive program only accepting individuals with a minimum of 10 years in management experience. The director of the program gleefully explained that we were in the highest profit per student program at the university.

A very successful school operator that I knows works it out like this: Basic course (new enrollment) $120 per month, Black Belt Course: $150 per month, Master Club: $175 per month, Leadership program $200 per month.

At Mile High Karate we do it this way: New enrollment: $159 per month – Master Club $250 per month.

To sum up this initial overview:

First, go to work on your student retention rates. Make every effort to extend the average training time of each student.

Second, have a renewal upsell that you implement quickly into their enrollment (2 – 4 months.) That renewal program should bump up their tuition and, give them a cash option with some incentives to pre-pay the tuition.

hird, Target a fairly high percentage of cash programs at the renewal. We target 35% or more cash at Master Club. It boosts our average revenue per student – and, gives those students more incentive to continue training to the completion of their Black Belt.

Learn to grow your school:  http://www.ExtraordinaryMarketing.com

When I started in martial arts – over 32 years ago – or, even as I worked my way through Georgetown University I never would have imagined that martial arts instruction would become my profession rather than just my passionate hobby.

When I founded Mile High Karate in 1983 it was an alternative to using my degree in International Economics to land in Banking or work for a corporate giant such as Procter and Gamble or IBM. Instead I moved from Washington , D.C. to Denver to open commercial martial arts schools.

My instructors and friends all thought I was crazy.

My key martial arts instructor gave me encouraging words that went something like this: “well, you can play karate for a few years then get a real job!” I’m sure you can imagine how satisfying it was to make them all “eat crow.”

In the year’s since it’s founding Mile High Karate has achieved a truly international reputation for combining student quality with financial success. We’ve been the leading martial arts instruction organization in this region since inception.

At one time or another I’ve been featured in all of the industry’s trade publications and have been a sought after speaker and consultant throughout North America – and, the world. More recently I’ve written several well received books on martial arts school operations and teaching that have been well received throughout the United States, Canada, and as far away as New Zealand, Australia, Tokyo, UK, Germany, and even South Africa.

In Denver Mile High Karate has taught over 25,000 students directly in our commercial facilities and have introduced our program to kids in all of the major public and private schools – impacting well over 200,000 kids and their families in some small way. We’ve been featured on all of the major TV news programs – and, in the local newspapers. We’ve even hosted Chuck Norris and other celebrities in the industry.

Honestly, when I pursued martial arts to a high level it was as an athlete – with intentions to follow in the path of my mentors (Jeff Smith, Pat Worley, and others) to become a professional fighter and competitor. I was soon to grow out of that rather narcissistic focus and to realize the potential for true significance through teaching. I’m certain that I’ll never win another championship trophy in tournament competition – and, many of my friends would humiliate me in seconds in a grappling match – however, that’s not what I do as a career – or, frankly even as a hobby anymore.

My focus for Mile High Karate since the early 1980’s has been Elementary age children – and, their families. Teaching character, values, self esteem, focus, and goal setting skills. We’ve developed a program that greatly enhances a child’s achievement in school and contributions at home and in their community. To further enhance that mission Mile High Karate students have contributed to Children’s Hospital, local Public and Private Schools, and Chuck Norris’ Kick Drugs Out of America.

Honestly, I can think of no other way to combine financial growth and security – with true significant contributions to individuals, their families, and the local community. Our direct impact on our students is huge – the ripple effect throughout our communities is immeasurable.

Many times in the past 20 years I have been criticized for being “too commercial,” “for being in martial arts ‘only for the money.’” Or, for running “a Belt Factory” – or, the McDonald’s of martial arts. To those critics I answer – I am in business to make money – I am in the Martial Arts Business because it combines the ability for me to make a satisfactory income with the ability to impact a huge portion of my community in a positive way. Honestly, I have the capability to make more money in some other industries – but, not enough more to encourage me to turn my back on what I love.

Why would I want to work in a career that I was less passionate about in order to support my martial arts school as a hobby? Alternatively, my wealth from martial arts is only in proportion to the number of students I serve and the depth of their enthusiasm for my service. Or, as Zig Ziglar is fond of saying: “You can get everything that you want in life – if you help enough other people get what they want.

Personally I believe that the broader significance of a career as an educator far outweighs my own youthful enthusiasms for becoming a better fighter and high-end athlete. The personal satisfaction that grows from watching a beginner grow into a Black Belt and a shy and withdrawn child grow into a community leader makes all the difference in the world. I cannot imagine having spent that last 20 years selling real estate, marketing fast food, or working in a corporate bureaucracy – I hope all martial artists will transition into this perspective. I hope many instructors will join my mission to expand our influence and develop a career that combines financial rewards, team-work, family, and contribution.

When you decide to become a school owner you really must decide to become a businessman – entrepreneur. You no longer are just a martial artist, competitor, teacher. You now must wear lots of hats that may be totally unfamiliar, uncomfortable, or just that you are not very good at – at least initially.

One of the biggest failings that martial artists have in general is an EGO that engulfs everything else.

Until you let go of how great you think you are – and, really start learning from anyone who has something to teach – you will ALWAYS languish in mediocrity.

To separate your ego from your business consider the following:

Anytime you are in the company of other school owners – or other business owners learn to SHUT UP. Ask questions, listen, find out what they do well and figure out “how they think” about things.
When you ask someone for advice – ask a question, listen to the answer, then ask them what questions you should be asking. Avoid at all costs telling them everything about yourself – by the time you get done they just may be out of time – or out of patience!
Create your school to provide a nice first impression for intros and a quality learning environment for your students. Not to impress other martial artists, other school owners, or your friends and family.
Forget what you think you know – and, become a real student of every aspect of running your business.
Don’t be afraid to look dumb or ignorant. Ask questions. Seek new information. Find people who are better at EVERYTHING than you are and be a humble student.
Remember that at your school you are an EDUCATOR – not an ATHLETE or COMPETITOR. Never try to compete with your students. Make your goal that while you maintain your own skills you teach them to surpass you in any way possible.
Don’t pretend to know all the answers. Let your Black Belts, Staff, and Students contribute their ideas and expertise – you’ll be way ahead.
Take the blame for failures yourself – share the credit for success with everyone

It’s really interesting but, incredibly counter-productive for these people to be so “passionate” about tuition pricing.

They each have the option to run a non-profit that teaches cheaply or inexpensively (which we do as well.)
They also have the option of running a “for-profit” business then the consideration should be at what point they can
maximize their profits, provide high quality service to their students, and optimize their use of facilities and staffing.

I’ve yet to meet a martial artist (myself included) who got into running martial arts school because they thought it
was the easiest way to make a huge income.   However, once you decide on a career you have every right to maximize
your income.  In the long-run the higher value you provide and the higher quality service to your students then the
more stable your school will be, the more likely to be profitable and the more likely to be thought of well in the community.

Several of my locations of been in the same location for as long as 25 years and have a great reputation due to the
quality of service they provide.  In most every case there are schools charging 1/2 or less of what we do in the immediate
vicinity with fewer students and a much lower quality reputation among churches, schools, and other community
organizations.

On Apr 20, 2008, at 5:39 PM, RiverRidlers wrote:
And to be fair to those that commented, most were sent prior to my posting them and I didn’t print the names because I didn’t ask them each if I could.  All of them are full time martial artists, and one was the founder of one of the sport karate circuits on the east coast.  I thought the “woman of the year” letter was probably the most…passionate.

Be Blessed,

Chad Ridler
Ridler’s Martial Arts Academy

I spend between $75,000 and $150,000 each year on my on education and development.  Obviously this includes lots of books and tapes.  In the past year or so I’ve spent $12,000 on a single seminar.  Hired Dan Kennedy & Bill Glazier to do a day of consulting for NAPMA (and, another day for Mile High Karate with Dan.)   Recently I took Rob & Toby to a Dan Kennedy “Superconference”  Frankly, more to model their operations that for specific learning - although I picked up ALOT.  Much of the value in “hallway” conversations between myself, Chris Pizzo, Lloyd Irvin, Terry Bryan and others.

Anyway.  Here’s a Trump connection.  George Ross who was a speaker at the event.   Also you can join us on a special martial arts industry Telconference with Dan Kennedy:  http://www.NAPMA.com/DanKennedy in July.

great!

If you could somehow write a story without it sounding like bragging I think that would be a great addition to your magazine.  How to set up a program, the good/bad ways, what not to do, tax implications…that sort of thing.

Chad Ridler

Hello,

I was surprised to see my letter to the editor printed in you magazine this month.  I didn’t know until people started to call and e-mail from around the country.  Some of the notes are a little…harsh towards you to say the least.  Just wanted to let you know that I don’t believe you are the evil money man trying to kill Martial Arts in America.  I was surprised at the response I have gotten and just the bitter feelings some of these people have towards you and your franchise, I’m not sure if they were perhaps in direct competition with you at one time or another.  I do enjoy being challenged to look at my own actions and be able to find reasons for the way I do things.  I have been putting in some time and wanted to share;

Have you ever considered offering a “Mile High Scholarship”?  To make your classes available to someone who otherwise couldn’t afford the training.  This could go a long way towards softening your image in the “pure martial arts” community (not that you need to do so), and it could become a great marketing strategy.  I offer this on a limited basis at my gym, there are criteria that must be met, contact with teachers, grades, parents, and a few other things that make them earn it and have something invested.  I have found if there is nothing invested there is no dedication or commitment.
I have even done mandatory volunteer time, I give them an hour, they must give back an hour.  I have a list of organizations that they can choose from.  (this resulted in free advertisement as well)  My students that are on this program are some of the most dedicated, humble students, who always give 100%.

I would be more than willing to help in any way I can if this is something that you might be interested in.

Again thanks for printing the letter,  I have gotten to know many Martial Artist from around the country because of it.

Chad Ridler
Ridler’s Martial Arts Academy
RiverRidlers@tds.net