Knowing your financials

A few months ago I wrote Is 50k enough to open your own academy? And I was really surprised by the amount of comments and feedback that I received.

Short answer: Yes, you can open your academy with $50,000. In fact many people have done it with far less.

Having this much money or more will not only afford you better facilities in a better location but also access to highly skilled instructors.

Being able to bypass a lot of the physical hands on work that many martial arts academies with less resources go through initially. Letting you focus on developing systems and people.

But there is a catch.

With more resources there is a tendency to think that most problems can be solved by throwing money at them.

In fact, sometimes too much money can be a bigger problem than not having enough money if you can believe it.

I wish I had 50k when I cofounded my first martial arts school. It would have made a lot of things easier.

But because we didn’t have a lot of money. That forced my business partner and I to keep track of where every dollar went. Keeping costs as low as possible

I’m going to ask that you take the same diligence and self discipline that you use everyday in your martial arts training and try to apply it to your business.

No easy task.

We are going to go over a few technical terms but stay with me.

My friend Charles brought up some important topics that I did not mention in my first post that I am going to address in this post. Charles writes:

I’d add financials: knowing the numbers. How many students to break even? Churn rate. How many students in Marketing gets people in the door, sales is what turns them into students. What other ways can you monetize besides the $100’ish a month?

Breaking Even

Breaking even is an accounting term that means that your martial arts business is able to meet all of its financial obligations and total costs including: rent, utilities, payroll, insurance etc.

This means that you are not losing money in your business but also not making money.

But that’s okay!

You would be surprised by the number of companies that haven’t made any profits. A number of tech companies come to mind.

Instead focus on knowing your finances.

It’s important that you have your finances down because when you decide to open up your martial arts business you are no longer just responsible for yourself and your family’s well being.

You are also on the line for those that you employ and their families, as well as all of your clients and their families.

I’m not saying that you will have to be a math wiz or a CPA, but you will need to know some basic accounting and little bit of financial literacy too.

Of course being a business owner, profiting is the next step once you break even. But your profit will be determined by your expenses.

For academies starting out, keep your expenses as low as possible. This might mean that you will have to do a lot of the hands on work yourself at first, but that’s okay.

Find the best, most efficient way to go about running and operating your program and then use this experience to create systems for your future employees.

I put together a sample of a small martial arts academy’s monthly financials. Just to see the how the cost of operating a school can easily add up.

Everything is pretty self explanatory but for now I just want you to focus on the part that says net profit. This is where you will see if your business is making money, losing money or breaking even. In this sample plan the net profit is zero, so that means that the monthly income that this fictional business was bringing in was enough to cover all of its expenses for that month which is great!

Do you know the financial details of your martial arts Business?
Do you know the financial details of your martial arts
Business?

Even if you have a lot of resources and cash saved up, keep your expenses small.

You will thank me in the long run.

New Students In

Bringing in new students will always be the lifeblood of a martial arts business.

For newer schools, your initial income will come from acquiring new students (marketing) but as Charles brought up earlier. It’s what you do when you get them through the door that really matters.

Knowing your breakeven point will allow you to calculate the amount of students you will need to obtain, and retain in order to keep your business running.

Once you have that figured out then any number over that will be pure profit for you to invest back into your business systems (marketing and sales) so that you will be able to make even more money and make your service better (premium equipment and amenities).

The important link here is your sales system. Sales is the process of turning those new prospects into paying students.

I will go into more detail in a later post but for now just know that you will need a system.

Have a system for when prospects walk into your academy.

Have a system when prospects check out your website.

Have a system for your existing members to refer their friends.

If you don’t learn anything else from me, the importance of having systems is key.

Churn Rate

Churn rate is the percent of students that no longer pay for your service.

This also includes employees leaving as well.

No one likes to talk about this in the martial arts industry but most students will fall off of training at some point. Only a few will stick with it all the way to black belt.

Of course some students do find their way back. I have a friend that completely stopped training in 2008. Right before getting his purple belt.

Only to find his way back to Jiu Jitsu in 2015.

That’s a seven year lay off!

But it’s not the norm.

If you have your own academy you will become really sensitive to this.

You will notice when certain people begin attending classes less frequently.

That’s when you will need to motivate them to keep training.

I know that life happens.

But Jiu Jitsu is capable of so many positive life changes. That to let people quit. Only to regret leaving and to take years to get back into, seems like a big mistake.

Once you know your churn rate you will have a better picture of your business.

Use the churn rate to see where people are falling off in your business pipeline.

For instance, many students drop off at or before blue belt.

Can you develop systems to help you identify this drop off?

Can you develop systems to help you retain those students?

And for the students that you aren’t able to motivate to keep training, will you be able to replace them with new students and through other means.

Monetization

When you first start a martial arts academy. Your students will be your livelihood.

Through acquiring new students you will begin to break even and hopefully become profitable.

As you gain more students it’s unavoidable that a few of those students will drop off (churn rate). But as long as you are able to replace those students with new students at a rate higher than the churn rate. Then you are in business.

Once you have a client base of over twenty students you are ready to monetize your martial arts business in other ways.

Producing your own brand of gear.

Adding additional classes such as kickboxing and conditioning classes.

Instructor training programs.

If you can dream it, you can do it.

Most businesses fight tooth and nail for the level of brand loyalty that is built in to martial arts.

But it does come at a price.

The price of having integrity and building, and developing relationships.

Don’t underestimate the power of relationships.

Especially in this industry. Relationships are everything.

If you try to monetize before you have grown a loyal client base then you may risk alienating your existing clients. Many of which could be among your first students that believed in you enough to entrust their martial arts study to your hands.

Know your students.

Know your finances.

Grow your school.

Confidence on your feet

This post was originally about the similarities between Jiu Jitsu and wrestling.

Not just the surface level similarities like the techniques or the cauliflower ears.

There is a lot built in to wrestling naturally that I think benefits Jiu Jitsu.

That wrestling mindset to never give up.

The level of grit.

Perseverance

These are all things that I think of when I think of wrestlers.

But then I started writing more from a beginners mind.

Someone with no knowledge of Jiu Jitsu or wrestling.

How would they be able to relate?

Many of the first lessons that a beginning student attends involves teaching them about balance (base) and proper body mechanics.

We spend a large percentage of our lives on our feet. But with technology becoming ever more present and life in general going from the physical to more automated. More and more people are becoming disconnected from their bodies.

My friend Sam has an excellent post on this topic titles “On Exercise and Building Character” on his website Musttriumph.

We have disembodied ourselves from our bodies. We no longer use exercise to build ourselves up, we are looking for ways to use exercise to only build up our bodies. We have reduced and isolated: machines, molecules, cells, and even ourselves. Reducing our being to only the mind. The mind has become the thing of value, just a hard drive. Our bodies the vehicle — its sole purpose is to get our minds to work and back.

Here Sam delves more into a philosophical examination of the body and the mind.

As an instructor I would often receive students with little or no athletic experience.

This made teaching them the basic of Jiu Jitsu harder compared to those students with backgrounds in other martial arts and activities.

Not only were these students physically unconditioned. Having done nothing physically tasking in their lives they had little to no awareness of their bodies.

In fact, the first lesson that I teach to complete beginners is all about how they carry themselves on their feet.

Standing in base, feet hip width or shoulder width a apart. Back straight with a slight bend in their knees.

I will emphasize these details over and over.

Physically adjusting the students into the desired body position if I have to.

Before they learn a single technique. This is the first class that all of my students go through.

Self Defense

Self defense from classical Jiu Jitsu is all about staying on your feet.

No matter the situation. Stay on your feet.

Close the distance, clinch, takedown, submit.

If you happen to slip and fall. Safely return to your feet and do the above.

It’s really quite simple.

I don’t expect most people will go through an altercation in their life. But the beauty behind teaching self defense to a beginner is that they gain a tremendous amount of confidence from the fact that they have some idea of how to handle themselves.

They know that when push comes to shove that they will be okay.

Sport Jiu jitsu

Having confidence on your feet in sport Jiu Jitsu has similar benefits.

Being able to hold your own.

Not fearing the takedown and being able to take others down.

The feeling of having a strong base. Knowing if anyone wants to take you down they will have to work for it.

There are a lot of academies that give their students a strong foundation of standing techniques such as takedowns, sprawls, and proper movement.

But as sports Jiu Jitsu continues to grow. Many schools have changed their curriculums to fit the rules of the tournaments.

Often this might mean less emphasis on certain techniques.

For example, ADCC rules stir it’s competitors away from pulling guard. Therefore takedowns become more prominent.

However this is an outlier in terms of tournaments.

The majority of tournaments don’t emphasize takedowns. Almost as if it is an afterthought.

So we see things such as double guard pulling and more battles for advantages.

I’m not saying one is better than the other. But if we get to the point where Jiu Jitsu black belts no longer have the skill to utilize their standing techniques nor the confidence to at least try them. Then we do a disservice to ourselves and future Jiu Jitsu artist.

Having confidence on your feet is the basis of all martial arts, most sporting activities and even Brazilian Jiu Jitsu.

It’s in this area that wrestling, judo, and sambo are great tools for developing confidence.

Everything from self-defense to sport Jiu Jitsu starts standing.

By developing students to have confidence on their feet. We empower them to achieve great things both on and off the mats.

Think about the traits of a confident person.

Their posture.

How the hold themselves.

The way they walk.

You can tell alot about a person by the way they carry themselves.

That’s the power that we have as Jiu Jitsu instructors.

Physical exertion was and still is the first form of character building

-Sam Yang

And I think it’s something that we as Jiu Jitsu instructors and practitioners should place a greater emphasis on.

When we take the focus off of the feet. Off of having confidence on our feet. We really limit ourselves.

We limit ourselves in not being able to cross train with the other combat sports.

We limit ourselves in further developing our coordination and natural body movement

And most importantly of all we limit ourselves to all the positive benefits that having confidence on our feet instills.

Part of the reason that I wanted to go to Japan and train with the Nichidai wrestling team was to get better at takedowns and wrestling.

It’s easy to keep doing what you’ve always done. But when you step out of your comfort zone that when the real learning begins.

Step out of your comfort zone. Maybe try a wrestling or judo class.

If that’s not possible, you can always drill a few takedowns after class or even review some standing self defense techniques.

I’m not saying that you need to become the next Jordan Burroughs.

But in its complete form. Jiu Jitsu is just as much about standing technique as it is the ground technique.

Instructor Progression

I’m currently embarking on my next adventure in Japan. Over the next next few months I’m going to be traveling. Competing and teaching seminars.

There’s a lot that goes into getting to this point and today I’m going to break down the progression that one might take to make this a career or not.

Being a full-time instructor is often not a straight path. In fact, many of the instructors that I know started in other fields. But then made their way to teaching Jiu Jitsu.

I’ve seen that as Jiu Jitsu has gotten more popular. The younger generation is looking towards this lifestyle as their future career.

Many a blue belt has told me that their dream is to have their own school one day.

They usually have no business experience and very little life experience and they want to do this for the rest of their life?

I’m not going to deter anyone from following their dreams.

But I’m also not going to sugar coat this topic.

Teaching Jiu Jitsu is a rewarding and often life changing path. But it’s not the easiest nor most stable path, especially in the beginning.

Many of the guys that own academies often run it as a side business or a hobby.

That means they might not be making any money off their academy or just breaking even.

Of course there are exceptions out there. The world champion instructors making mid – high six figures, have state of the art facilities, and drive around in Porsches.

Or the academies where the owner already has a lot of money and can pour an unlimited amount of resources into their school. Bringing in world class competitors to teach a class here and there, and whatever else they can dream of.

Does this sound like any academies that you know of?

Maybe, but they are very few in number.

If you decide to walk down this path. I applaud you.

Not only because of all the good that you could potentially do but because you will receive a lot of push back.

The people around you might not understand your decision.

Family and friends will tell you to get a normal, stable job.

Coworkers and bosses will think that you’re crazy.

I’ve been doing this for years and I still hear this from my grandparents.

But I wouldn’t change a thing.

Again, if you do decide to walk this path. I want you to be able to make an informed decision.

A lot of this stuff I had to figure out on my own through trial and error.

Of course I had mentors.

Really good ones.

But I still made a lot of mistakes and had to learn from those mistakes.

Mentors can only guide you. You still have to take action and work towards your goal.

I have a post I’m working on for those of you looking to become full-time competitors, but for now I’m going to focus more on the teaching side of the martial arts industry and lessons that I’ve learned the hard way so you won’t have to.

Apprenticeship

A lot of guys get there start apprenticing or volunteering to help their academies kids program. The major difference between apprentices and volunteers being that the apprentice will often get paid or get their academy tuition covered. While volunteers still pay dues and are not paid.

It’s been a while but most competitive schools will pay between $25-$40 per class at this level. A few times a week.

While this money is pretty good. You have other things to work on.

At this stage your focus should be on learning.

Don’t worry, no one expects you to be a good instructor yet.

You should observe the class instructor and follow his/her lead.

Observe how they interact with students, and how they deal different situations.

For example, a good friend of mine was covering a class for one of the instructors recently. While showing the technique to the class one of the students very rudely asked the instructor why he had to do whatever move he was showing. It made quite a scene.

I kept this example vague for a reason but my point is that being a professional instructor, you will often be put in uncomfortable interactions. These interactions can affect everything from how your students see you to future clients deciding to join your academy over your competitors.

I won’t lie to you, it’s not easy and you will make a lot, and I mean a lot, of mistakes. When I first started teaching kids BJJ as a newly minted seven-teen year old blue belt. I will never forget how bad I was. I didn’t have any formal teaching skills. I didn’t come off as an authority figure. I was pretty shy. Despite my shortcomings I tried my best everyday, taking all the feedback that I received from the other instructors and worked to improve little by little.

Skills to develop: Learn to be observant, listen to instruction, basic teaching fundamentals, learn how to take constructive criticism.

Full Fledged Instructor

Once you’re a full fledged instructor and have proven your teaching ability, you will have a lot more freedom than you had as a volunteer or an apprentice. Freedom to choose your own lesson plan or if your school has a structured instructor program, freedom to add your unique take on those techniques.

At this stage you should have a good understanding of the class dynamic. When you are instructing not only are you in charge of the flow of the class but you’re also responsible for teaching all the techniques that you are suppose to cover.

Time management is key! Especially for academies with classes one right after the other. Spending too much time on a technique or losing track of time during training could potentially set back all of your other classes.

Clients love when their classes start and end on time. If you do tend to go over the class time, don’t be afraid to communicate the fact. Let the clients that have to leave go without a fuss. But if you tend to show up late to your classes then you have to stop that immediately. Especially in the U.S. and most of Europe.

Learning how to communicate will also be important at this stage. Learn how to communicate with students not just about technique but about their progress. The more detail the better. So if you are able to break down moves into very detailed steps. Not only will your students learn more effectively but they will also have better recall later.

As an instructor, when I am helping a student. No matter what technique they are doing. I like to focus on one thing that they are doing really well.

From here I am able to communicate to them that I’m invested in helping them.

Now since they are more open to me. I like to make any corrections/hints that I think will improve their technique.

Then when they perform their technique again. With the added corrections of course. I like to complement their improvement.

This isn’t some secret technique.

There is no script that I’m following when I do this.

Just a genuine want to help my students get better. The students can feel this too.

At this stage, instructors at competitive academies might still be getting paid on a per class/hourly basis. This range could be any where from $40-$100 depending on the location and size of the academy. As well as the belt level of the instructor. Black belts tend to get paid higher than lower belts.

Skills to Develop: Understanding the class dynamic, becoming an authority figure, communication skills, time management

Head Instructor

Being the head instructor for a martial arts academy is something that I have heard a lot of people talk about. Usually they will say that their dream is to own and operate their own school but very few actually take the leap of faith.

The head instructor can be the owner of the academy or an employee. Usually when a full fledged instructor reaches a certain level of skill and notoriety do they reach this stage. Being a head instructor comes with even more responsibility than the previous levels. Especially when it comes to designing the lesson plan, motivating students, and the overall feel of the academy.

The head instructor is the heart of the gym. Whatever your approach on training, competing, self defense, etc will set the tone for the rest of your school and influence all of your students. For example, if the head instructor is big into competing. It is more likely that the students will be exposed to competitions early on and want to compete.

Being a head instructor is more than just having the technical know how and showing techniques.

This is the image that a lot of people have. The instructor rolls in to class five minutes before it starts. Shows two or three techniques. Rolls for a bit and then makes bank haha.

But there is a lot that goes on behind the scenes.

Deciding what techniques will benefit your students.

Figuring out how to motivate students when they begin falling off or get injured.

Structuring the beginner classes. What techniques should they learn. When should they be able to progress to more advance classes.

Should you add another nogi class to boost attendance on a slow day.

These are all off the top of my head. But these are common situations that a head instructor will have to face. All while trying to balance different personalities, skill levels, motivational levels, etc.

Outside of the technical aspects of teaching. The head instructor will also have to be able to manage other instructors as well as the students.

For students this could include designing the schedule, contacting students when they miss a few classes, designing the curriculum and all the testing requirements and graduation details.

For instructors this could include payment for classes, which instructors gets a salary versus those that are paid hourly, implementing curriculums, performing belt test, setting up seminars.

The list goes on and on. But I hope you see that this is a very involved process.

This is where that communication skill will really come in handy. Teaching students is one thing, but interacting with students on an interpersonal level and developing other instructors takes time and experience.

I’ve seen many high level instructors miss this step in that they are able to convey techniques really well but they never develop relationships with their students.

They become close to the select few that they see have “potential”. As the head instructor you will have to be available to all students.

Everyone from new prospects to even those really crazy students that every academy has.

I personally suggest a minimum of 10 years of training and teaching before you even consider becoming the head instructor of an academy. Even more time if you have plans of competing or traveling.

Head instructors can be paid per class but most have a salary at more established academies. There’s a lot that goes on to figuring out how much an instructor’s salary will be. It’s very dependent on what the academy can sustain based on the number of clients. As well as the skill and level of the instructor.

I’ve personally seen that the salary for an average black instructors starting out is around $2000 per month or $24,000 per year for a moderate to highly successful academy.

Of course, instructors with more tournament success and fame will have more room in negotiating their salaries. Along with other benefits like housing cost, transportation, tournaments costs, etc.

World champions can expect to make 2 to 4 times as much as the average black belt.

If the head instructor is also the owner then there really is no cap on how much they can make.

Skills to develop: Ability to teach at all experience levels, school wide programming, focus of the academy, providing motivation, student progression

Association Head

I haven’t seen a lot of people write about what happens after becoming a head instructor. Luckily, I trained at the headquarters of one of the top teams in the world. So I have seen first hand the ins and outs of running an association and now I’m going to share the details with you.

After you have been the head instructor for a successful school for many years (5 plus years at least). Have reached a rank where you can graduate students to the level of black belt, then you have reached the association stage.

If you have run your school well and have graduated enough students to black belt. It is only natural that a small percent of those students would have some interest in starting their own schools. Hopefully they went through all of the previous steps that I listed.

If so, and you have managed to maintain a good relationship with those students. Then many of them will want to join your association out of loyalty for all the work that you put into them.

In the martial arts, especially in Brazilian Jiu Jitsu, lineage is something that we really care about. If you travel a lot and train, one of the first questions after what belt rank you hold is who is your instructor. Students take pride in their instructors and if they have the choice, would rather promote your association over a less personal big name association.

Organization will be key here.

This includes deciding who will be eligible to join your associations and any other requirements including things such as school size, revenue, location, etc.

For instance a common requirement for the larger associations is that the affiliate schools have to wear and sell only the official associations gi and accessory items.

I will probably go further in depth on associations in future posts but for now you should get a sense of the different levels that are possible for someone should they choose to make Jiu Jitsu their full-time career.

There is no limit on how much the head of an association can make. Some of the larger associations have 100 plus affiliate schools.

With many affiliate schools paying upwards of a few thousand dollars per year to be a part of a particular association.

Imagine 100 academies paying you $1000 every year. For an indefinite amount of time.

That’s a lot of revenue!

Who says you can’t make money in Jiu Jitsu?

Skills to develop: Organization, branding, leadership, marketing

Being a competitor is one thing but the world of teaching Jiu Jitsu for a living is a whole other animal.

There are lots of world champions that can’t teach and there are a lot of really great instructors that have never stepped foot on to the competition mat.

The best thing that you can do now is get as much experience as you can.

And keep learning!

I’ve been teaching Jiu Jitsu since I was seventeen and I swear I learn something new everyday.

Of course you learn from other instructors but you can also learn from your students as well.

Listen to your students questions. Don’t just blow them off or if you don’t know the answer don’t be afraid.

Sometimes when I’m teaching, a student might ask me about a situation or technique that I don’t know a lot about. That’s when I will use my experience and my pre-existing knowledge to work out a solution along with the student.

One concept that I took away from studying mathematics is that multiple brains are a lot better at solving complex problems than just one.

This same concept applies in Jiu Jitsu. Working alongside your student(s) to figure out a new position is one of the best aspects of Jiu Jitsu.

This is how you will improve as an instructor.

Getting Started

The best time to start is now. If there is an opportunity for you to volunteer or apprentice I say you should take it.

Continue reading “Instructor Progression”