Friend,
So what's the first step to take if you want to raise the rates in your dojo?
First, you need to figure out where you are, profit-wise... and then you need to figure out where you want to be.
And when we're talking about profit, we're referring to your "net" - your take-home profit. This is what you take home after all your expenses are paid at the dojo.
So, after advertising, rent, utilities, insurance, payroll, taxes, licenses, fees, inventory, professional development, education, office supplies, repairs, and all the other myriad costs of running a dojo...
What's left is your net.
Now, for a lot of school owners it ain't much. If you're paying your bills, or if you're making enough to replace your income from your day job, you're actually doing pretty well in comparison to the majority of the schools out there.
But if you want to do more than just scrape by, you need to know how to set your rates properly so you can turn a profit.
Let's start with calculating your overhead. Set up a spreadsheet in Excel or Google docs, and title it "Expenses". List all your expenses in the first column (note: it helps to have all your bills and your bank statement handy when you do this).
Then, in the next column enter the average monthly expense for each of those items (I suggest rounding up and adding 10%, because school owners almost always err on the low side when estimating expenses).
Add it all up and multiply by 12.
Now, open up another tab on that spreadsheet, and title it "Income". List all your income sources in the first column, and in the second column list what each income source brings in each month. USE ACTUAL NUMBERS from your bank statement - NOT estimates.
Add it all up, and multiply by 12 again.
Next, open up Quickbooks or whatever accounting software you use, and run a profit and loss report for 2015. Be sure to print out the itemized expense and income breakdown for all items.
Compare the two. Notice the difference between what you estimated your school was costing you to keep it open, and what you thought you were taking home, and the actual profit and loss from your P&L report from last year.
In most cases, you'll tend to underestimate your expenses, and overestimate your income. This is what is known as magical thinking. "Magical thinking" greatly contributes to the financial failure of thousands of small businesses, each and every year.
Now, take a good hard look at the entry on your P&L report that says "PROFIT OR LOSS." Let it sink in.
Is that where you want to be this time next year? Is that what you want for your family? Is that enough to pay your bills, feed your kids, clothe them, take them on a nice vacation, and still have money left over for emergencies and your retirement?
No?
Then you need to raise your rates. Tomorrow, I'm going to start showing you how to do it without looking like and feeling like a chump.
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!
- Starting a dojo? Wondering where to start? Click here...
- Looking for one-on-one coaching to grow your dojo? Click here...
P.S. - Today's email was not intended to discourage you, but to motivate you. Just like they said in G.I. Joe, knowing is half the battle. Once you have a handle on where you really are financially in your school, you're in a much better position to create a plan to get you where you want to be.
P.S.S. - The other half of the battle is dodging red and blue lasers.
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