Why Martial Arts Schools Fail (and How to Succeed!)

According to the U.S. Bureau of Labor Statistics, 20% of small businesses fail within the first year. By the end of their fifth year, one-half will have closed their doors. And after 10 years, only one in three businesses have survived. So, what attributes does that business survivor possess that helped them beat the odds?

Before opening a school, most martial artists have achieved a high-level black belt ranking. This puts them a step ahead of most new entrepreneurs. Why? Because the principles and traits learned along that path, such as determination and perseverance, will help them face and overcome the many challenges of running a small business. Most schools will survive that first 20% dropout rate, and most even make it past the 50% failure rate after five years. But drive and a dogged determination to succeed alone aren’t likely to get you to that 10-year survival rate and beyond.

We could list several traits and practices that are common among the survivors. But the skill that tops our list is they all have a sharp focus on finances. Successful owners become very adept at creating budgets, tracking expenses, and looking at the return on investment of every dollar spent.

Focus on finances

If you’ve already opened a school, martial arts has surpassed simply being a passion and a hobby. It is now a business and must be run as a business. Yes, you must stay passionate about (and be good at) teaching martial arts to be successful. And you should always derive a great deal of satisfaction from seeing the positive impact you have on your students and your community.

But the most successful school owners don’t get caught up in the passion vs. profits debate. It’s not just OK, it’s ESSENTIAL to make a good profit! It’s the ONLY way you’ll be around 10 years from now. And the only way to ensure you can protect your profitability is to focus on your finances – both revenue and expenses.

Payments and pricing

Let’s start by looking at one of the most critical components of your revenue – collecting payments. Almost every school owner at one time or another will have clients who are consistently late paying their tuition. This impacts your cash flow, the lifeblood of your business. For more insight into cash flow management, check out our blog The #1 Cause of School Failure? Lack of Good Cash Flow Management.

Having a good billing system in place is a crucial part of managing your cash flow.

Believe in your worth

Another crucial component of revenue is what you charge. You may have started your school thinking you had to be priced low to attract students. But as your business matures and you increase your value, be open to increasing prices accordingly. You are providing a professional service. Don’t be afraid to charge what you are worth!

Let’s take a deeper dive into the causes of fear-based pricing.

“My students can’t afford to pay more”

Some consultants will tell you this isn’t a legitimate fear. But we are not here to tell you that. It might indeed be true – at least to a certain extent. What can you do? First, ask yourself, is it truly that they can’t afford to pay more, or is it just that they don’t feel they should pay more?

Your job as a small business owner is to not only provide a high-value, professional level of training and service (yes, you are in the service industry!), but to also effectively convey to your clients that value in both your marketing and in your everyday interactions with your students and parents. If they see and understand the value, they will be willing to pay more.

“I want to teach martial arts without feeling like I am taking advantage of someone”

You never want to charge more for the sole purpose of lining your pockets. But maybe you need to (and should) charge more so you have the resources to serve your students by investing in new equipment, paying your staff well so you can attract and retain top talent, and, yes, paying YOURSELF well.

Running a small business is hard work and comes with many challenges, frustrations, and risks. Dealing with these things and not earning a fair compensation rate ultimately leads to only one thing – burnout and closed doors. Profit allows you to employ resources to tackle daily challenges, take an occasional break, enjoy the fruits of your labor, and avoid burnout.

But how do you know when you are priced right? Start with an analysis of your competition – not just their pricing, but also their programs, training quality, and facility. Because it’s not about who can provide the lowest price, it’s about who provides the best value.

Do you offer a wider variety of programs?
Is your facility more conveniently located?
Are you open longer hours, thereby giving potential clients more options in choosing a time to train?
Do you bring in guest instructors and do seminars?
Is your facility clean and well maintained?
Do parents have a comfortable place to sit and watch as their children train?
By building your value, you can (and should) charge accordingly!

Evaluate expenses

Now let’s talk about expenses. A good place to start is by reading our blog “Beware: Little Expenses and Hidden Costs!” where we discuss rent, marketing expenses, your time (yes, your time is an expense!), and other often-overlooked expenses in running a school. You can find that article here.

Look at each and every expense in terms of not just the cost, but the benefit of the expense. You have to know where you spend that precious cash flow and what return you get on that investment. Did that marketing spend bring in the number of leads you expected? Will an investment in more training bags bring in enough new students to your cardio-kickboxing class to justify the expense?

Embrace the financial review

As a school owner, it’s easy to spend time on the fun and rewarding aspects of running a school – interacting with students, signing up that new family, doing a belt testing, and mentoring that student who needs just a little extra time. But successful owners also realize they must devote sufficient time to managing their finances. They set aside time each month, if not each week, to go over both revenue and expenses. By diligently managing your finances, it’s almost guaranteed you will see improvement in profits. (And don’t forget to add a financial review to your list of fun and rewarding things to do!).

Check out our Resources page for additional information on small business finances and follow us on Facebook to be notified about additions to our library for small business owners!