Costs and Aspects to opening a Martial Arts School?

[Luckykboxer]

Hello,

 

This is my first post here on these forums.

 

I found this site while researching my goal of opening my own studio.

 

A quick background on myself before i get into the question.

 

I am a 1st Black Belt in Kenpo Karate, and will be testing for second Black in June of 2005, I have been training for 14 years and am at a Black Belt level, or equivilent and have experience training, teaching, and competing in Boxing, Muay Thai Kickboxing, Jiu Jitsu, and Kenpo Karate I plan on opening the doors on my own studio shortly after that test.

 

My instructor is a 6th degree Black Belt, and while my school will be 45 minutes away from his studio and the nearest Kenpo studio, it is in a high traffic and largely populated area. I will have the assistance of other black belts who have no interest in opening their own schools for various reasons, this is still in negotiations, but for this purpose lets consider it handled.

 

My question is this..

 

What are all the costs associated with this.

 

at this time this is what i have slated to research..

 

Building - I will be buying a commercial building- Size I am unsure on, I have big plans and I have capital to back up Big plans, but i am unsure if there is such a thing as too big to start.

 

Insurance - No clue what is required in California, or costs associated with it.

 

Taxes - I have not run my own business before, unsure where to start looking into this.

 

Marketing - I have a 12 year background as an outside sales rep, I am extremely successful in this area and have a wealth of training and seminars under my belt. I am also in negotiations with my current instructor to change my current job and go work for him, to build his studio up from a current attendance of approximately 450 students to his goal of 1000 students. Our area can easily support that kind of enrollment.

 

Equipment - I am unsure on vendors, but I know what I am looking for, good mats, large mirrors, a full sized boxing ring, several dozen heavy bags and of course any other main kenpo karate gear i would need that i may not have listed here.

 

Employees - This is a tough one, I do plan on eventually having other instructors and also front office personel, but i am unsure how to start planning for this.

 

Office Equipment - In a perfect world I would like to have all the equipment you would possibly want.

 

I guess thats the start of where I am at, If anyone has any good sites, or information I would appreciate it.

 

Thanks

 

Dave

[White Warlock]

Building - I do marketing and small business consulting for a real estate and finance company here in California (i assist other companies as well, but this is my main). If you are need of assistance finding a commercial property, shoot an email to froila@prfs.net, the acting broker for the company and a whiz at creative financing. I'm sure she, or one of her associates, can help you find and purchase what you need.

 

Insurance - Liability insurance is your biggest concern when dealing with martial arts. Second, is property insurance. Prices vary, so again, i recommend talking to Froila (above email) for assistance or referrals.

 

Taxes - The most important thing to remember, is 'save your receipts.' An income and expense report helps you keep track of it all, and you can provide both of these to a CPA a few months before tax due day. Depending on the type of business, you will need to update-file once every 3 months, or not at all until tax time. Unless you're educated on the tax laws, i seriously recommend you hire an cpa 'when the time comes.' Generally speaking, it will run you around $200 to $1000 (depending on your tax returns, if any... or a straight fee. This is negotiable). Also, not all taxpersons are the same. Some really suck. I have a few i can refer to you that actually 'know' what their doing.

 

Additional note on this: It would be prudent to incorporate. The expense is minimal, the protection optimal.

 

Marketing - seems you're set on this, so i won't pester you, although... again, i can refer you to a good graphic/print man who also does websites. If interested, i'll shoot you a PM.

 

Equipment - Well, first off get your business license and a retail license (you may already have the latter, considering your sales background), so you can contact major suppliers and obtain wholesale vendor prices. Bulk purchases are the way to go and, as you know, building a relationship with your sales rep will get you extra bennies. As to which one, pick one you respect. Try not to get equipment from a variety of different vendors. Not only will it cost you a lot more, but returns will be a pain.

 

Employees - Ah, my specialty.

 

I push this with every startup company i help, and that is... commissioned associates (contracted). Employees require a helluva lot of extra work that, unless you're big enough and rich enough to afford a human resources specialist, isn't something you want to touch. Not to mention it makes your tax issues a nightmare. Instead, have all your staff be contracted, working on a commission basis. Anywhere from 30%-70% to 60%-40% is reasonable. I recommend starting them out with a low commission, and then raising it up when they become lead or senior instructor status. And, if you feel this is more of a hobby for them than it is a job, you may be able get away with a lower 'starting' commission than the ones i mentioned.

 

As they are contractors, you are not required to provide them medical coverage (and in this business, that's really something you don't want to have to provide), although you can (and i seriously recommend this) require that each of them provide 'proof of insurance' and/or 'proof of medical coverage.' The payment structure is also flexible. I recommend monthly payments to your contractors (to correspond with the payments received from the students). You don't pay them until you get paid, essentially.

 

Office Equipment - I also setup networks and computer systems (hardware/software). My recommend here is, keep it simple. Purchase what you need, and keep it at that. The temptation is to buy truckload, but each and every item you purchase, will require 'maintenance.' Something so many small business owners fail to take into account.

 

Additional questions can be answered by the U.S. Small Business Administration in California - http://www.sba.gov/ca/

 

I've found the San Diego branch to be the most communicative - http://www.sba.gov/ca/sandiego/

 

And, of course, there's me at - white_warlock@hotmail.com

 

May you succeed.

Edited June 7, 2004 by White Warlock

[White Warlock]

Three more bits of general advice:

 

1. Open up a business account at a reputable bank. Don't use your personal account to purchase items for your business. Try to start out right, and keep your business expenses/life separate from your personal expenses/life. And... again... incorporate as soon as you can. Incorporating is like a second layer of protection, over and above insurance.

 

2. You're in the business of martial arts instruction. Don't get sidetracked into thinking you need to handle every part of your business. You don't. You don't need to handle the human resources end, the taxes, the office maintenance, the janitorial services, etc. You don't need to, but you may 'want' to. Make that very critical differentiation, or you'll find the process of running a small business way too overwhelming.

 

3. Network - Manage and maintain what you want to, delegate other responsibilities to your commissioned associates or students, and outsource the rest. It's not that expensive to do and you may get lucky with some of your students actually working in fields that you need assist from. Don't hesitate to give discounts or full-trade for services (i.e., discounted or free classes for office maintenance, graphic work, marketing assist, tax services, etc etc).

 

Being rich isn't required to be a successful small business owner. Being smart is.

[Shorinryu Sensei]

White Warlock has already given you GREAT advice, so the only other thing I'd add is this question.

 

You say you're a 1st degree black belt and never run a school before. It sounds to me like you're trying to start out really big (and expensive), and from what I've seen in large cities around the country is that schools are run by (legitimate or not) "Master This", or "GrandMaster That".

 

I obviously don't know your area, but in the area you're going to open your school, are there many dojo's with "Masters" running them? If so, liek I said, legitimate or not, the general public will always go to a "Master" school over some guy that just got his black belt...whether you're any good or not.

 

See what I mean? The public is easily fooled by titles, mirros and flash.

[Luckykboxer]

Thanks for the advice.

 

a few things of note.

 

There is "Master" in my area, but it is Tae Kwon Do, and while his credentials so to speak are much more developed, longer, fuller, etc. the style is different enough, and the area is large enough that there is definitely a student base to support all. His school is also across town.

 

One of the Black Belts that will be coming in to teach has a small club out of his garage atm. About 45 students total, they will be coming over and we have already reached an agreement on that part, so there is a small base for referrals set up.

 

I am about 1 year away, so obviously things can happen..

 

I am going to be incorporating, that is actually in the process as we speak.

 

I am also in negotiations at this time to work a summer program at the community center in the area, and will go from there.

 

I have to head out to the office now, but i will come back afterwards.

 

Once again thanks for the advice so far.

[Shorinryu Sensei]

Thanks for the advice.

 

a few things of note.

 

There is "Master" in my area, but it is Tae Kwon Do, and while his credentials so to speak are much more developed, longer, fuller, etc. the style is different enough, and the area is large enough that there is definitely a student base to support all. His school is also across town.

 

I'm not trying to talk you out of opening a dojo bud, just trying to give you something to think about.

 

Like I said, the general public, ignorant of the "politics" and shams that are so prolific in the martial arts (ie: phony masters and over-inflated belt ranks/belt factory's) will say to themselves.."I want to take a martial arts class. We have Master Whatever over here, and we have 1st degree black belt guy over there. Hmmm...which is more skilled?" Whgether it is correct or not, I would think the majority of the martial arts ignorant public will choose the "Master" most of the time.

 

I lived in Houston, Tx for 6 months back in 2000 and travelled all over that city visiting various dojo's to see what "big city" martial arts was like. It seemed to me that just about EVERYBODY was a master of their art, and believe me..many were truly poor to medium in their abilities in my opinion. Yet they had hundreds of students, trophies all over the place, year long contracts and business managers, etc. I saw very few low ranking black belts trying to run a commercial dojo, and those that I did were small places in poor neighborhoods. Generally,m I thought the skill level of these lower black belts was better oftentimes than the "masters" that I witnessed, which may (or may not) be true in your case.

 

Anyway, just something to think about...and good luck to you.

[Red J]

Are you sure you want to buy a building? You may want to consider a lease. With ownership comes other responsibilities that you may not consider or want to waste your time with.

 

You want to be sure that you will be spending your time doing the things that you enjoy the most. Many small business owners get bogged down in the details of running a business and find that they are not getting to do the things that made them want to open shop in the first place. In this case they would have been better off working for someone else. Food for thought.

[Luckykboxer]

Ok a few things...

 

first. I have the ability to invest up to a million dollarsfor the building itself..

 

so that is a foregone conclusion. I am currently looking at buildings in the area ranging from 15,000 to 20,000 square feet. My intent is to lease off approximately half of this office space, and keep half of this space for my business. I own a full sized regulation ring at this time, and plan on having approximately 8000 SQ foot, broken up into a Boxing/kickboxing floor, a floor with machines and freeweights, a floor for grappling/tai chi/yoga/free workout,and a floor for karate.

 

My wife is in property management and has been for 8 years now.

 

So I am fairly confident I will be able to purchase a building, lease space, and have a large space left over to build a fairly spectacular studio.

 

Yes I realize I am fortunate to be able to invest this, but it isnt a huge overhead to be honest

 

second. I wont be opening this until I am a 2nd degree Black Belt, which will be next june. approx 1 year, I agree that on the surface most people will look to a higher degreed black belt over a lower one, but I am also a firm believer that if you reach the right people, have the right marketing and advertising campaign, and are good at teaching, then you can overcome things like this. Now obviously I am not going to open up shop next door to this other school. I am definitely not a glutton for punishment hehe

 

I do also have a tentative agreement, with another 2nd degree(who has been a 2nd degree for 5 years now, no clue why he doesnt test) and a 4th degree, who both live in the area already, and while they both thoroughly enjoy teaching, neither has the mindset or desire to open their own schools... for various reasons.

 

Both however are wanting to teach/train on a regular basis.

 

In the town my Studio is in there are 14 studios in a 12 mile radius.

 

My instructor is not the highest ranked black belt of those schools.

 

Those schools range over 7 different styles, with Tae Kwon Do being the prevelant style. My Instructors school has been around for over 20 years now, and I have seen people come from other styles in the area to this school, even though the other instructors were higher ranked in their arts.

 

I am sure we have probably had some students leave our studio for other studios that may include lower ranked black belts as well.

 

It all depends on if you have what a student is looking for.

 

People in So California seem pretty smart, and as long as an instructor is able to offer them a service, at a price that seems appropriate, it doesnt seem to matter what the level of black belt they are is.

 

To be quite honest, there is simply more then enough people to support these schools.

 

I do understand that the first 5 years are the toughest. I have no qualms about that.

 

I also am fortunate enough that my wife also works, and makes a decent salary, to where We can can float for a while on one salary and be fine.

 

My goal isnt to be profitable the first year.

 

My goal is to get my income to exceed my outgoing expenses.

 

I figure that at whatever point in the future I decide to retire the cost i sell the commercial building at at that time will fund my retirement fairly well.

 

My goal here is to do what i love.

 

I make a decent living doing what i do now, but i dont like it.

 

I want to do what i love, follow my passions.

 

I believe that with the studio set up I have planned, the personel I have to work with, and the population I have in the area, that all the ingredients are there to succeed.

 

I just need to get all the details as ironed out now as i possibly can, so that when I am ready to move on this Its more a matter of recruiting students and teaching then a matter of wondering where i am going to get all the other necessary aspects handled.

[kenpo4life]

Lucky boxer,

 

I have some ideas, but it would take a while to list here. If you want, email me at sensei_anthony@hotmail.com