| Friend,
Alright, let's talk about sex...
Did I get your attention? Good, because what I'm really going to talk about is NOT sexy, but it is important.
So, bear with me if this stuff is obvious to you, because over the years I've found that what seems like common sense to me often isn't to new and soon-to-be-new school owners.
It Ain't 1999, People
Listen up...
It is not flipping 1985 anymore. Michael J. Fox is no longer cool, and the Karate Kid movies are not driving students to the door of every studio with a sign that says, "KARATE" in a chop suey font.
It's also not time to party like it's 1999, in that golden economic era right before the dot-com bubble burst and 9/11 brought the economy crashing down. You can't just throw a dart at the map, open a dojo, and expect to make a killing doing it.
Nope. It's 2017 and we're still in a sluggish economy, nearly ten years after the biggest recession since the Great Depression flipped us the bird and then smacked us right in the face.
Sure things aren't as bad as they were nine years ago. But I have some news for you... we will never relive the halcyon days of the 80's and 90's again. Ever.
Why Things Will Never Be The Same Again
The reason? Two words, disruption and destabilization.
You see, the overall economic market has never been as volatile as it is today. I don't care what any economists or market forecasters tell you, nobody, and I mean NOBODY, knows what the hell the economy might do in six months or a year.
The reason is because we are living in unprecedented times. Technology is moving at such a breakneck pace, it is simultaneously improving our lives while disrupting job markets and economies on a nearly routine schedule.
You have companies like Apple that are worth $750 BILLION dollars. Where is their manufacturing? Overseas. Who handles their distribution? Everyone but them. They are #2 on the top public companies list and they provide almost ZERO jobs to the economy.
Then, take a company like Amazon. They might be "only" #29 on the list of top public companies, but they are responsible for 43% of U.S. online retail sales! Forty-three percent!
Do they provide jobs? Some, but they are mostly hiring people at $10 to $15 bucks an hour working in their distribution centers. Again, a company who is doing huge amounts of business, and adding almost no jobs to the economy.
Or take decentralized companies like AirBnB, Uber, and Zillow. All huge companies on paper, but they don't really do anything other than manage technology and transactions.
Is Uber adding jobs? Sort of, but I doubt you're going to see anyone retire after 40 years as an Uber driver. The jobs they offer are nothing more than a side hustle for college students and retirees.
And don't even get me started on the looming college debt bubble.
The Myth of "Other People's Money"
My point here is that you can't bank on things being in a boom cycle all the time. Right now, the economy feels relatively strong after the last recession, but that's not guaranteed to last.
And in times like these where economies are uncertain, do you think it's wise to take on a ton of debt and overhead when starting a new business?
The truth is, it never was a smart thing to do, and it never will be a smart thing to do!
See, smart entrepreneurs take calculated risks, and the really smart ones mitigate their risks, either by keeping their start-up costs low, or by using someone else's money (venture capital).
I know you've probably read Rich Dad, Poor Dad and that you might have fallen for Kyosaki's line about how borrowing money to start a business is using someone else's money. But the thing is, you're still on the hook for that money if the business goes under!
See, the founders of start-ups that are funded by venture capital aren't on the hook for anything if they go bust. Zip, zilch, nada. So, it makes sense for them to use someone else's cash to get their business going.
You, my friend, do not have that luxury.
The First Key To A Profitable Dojo
So, the first key to starting and running a profitable dojo is to keep the overhead low and the profit margins high.
Why school owners still insist on expanding into 8,000 and 10,000 square foot facilities is beyond me. I mean, I guess I get it--it's cool to have a large facility that is doing a lot of business with hundreds upon hundreds of members.
But the amount of money it takes to keep a large place like that going--not to mention the managerial and financial skills you need, and the work involved...
And then what happens if the economy sours? What do you do with 10,000 square feet, when half your clients dry up?
Look, if your dream is to have a huge operation like that, fine, there's nothing wrong with thinking big. But just remember that the risks are much higher, and the business skills you need to keep something like that going are much, much greater than those required of a small school owner.
Which is why, for the last 14 years, I've preached that small dojos are the way to go.
So, even if you have big dreams, you should probably start small. Master the skills it takes to profit in a small studio. Then, you can use those skills to build your dream school.
Or, you can continue to run a small studio, and know that when the economy takes a left turn (like it always does every ten or fifteen years), you'll still be sitting pretty with low overhead and no debt.
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Alright, enough about why you should keep your overhead low and what-not. When I come back with the next message, I'll discuss marketing and how it fits into the grand scheme of things. Stay tuned.
Until next time,
Mike Massie MartialArtsBusinessDaily.com
Quick-start Guide to My Books and Resources: - Looking for a list of books and resources I've written? Click here! - Need business coaching to grow your dojo? Click here…
P.S. - Not to say that you can't make money running a large school. Obviously, you can, else people wouldn't be running those types of schools. But, the level of difficulty is exponentially harder. So, start small, build your skill sets, and then you can go as big as you want.
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