| Friend,
I've told this story before, so if you've heard it already you can skip to the postscript...
Even so, I think it's worth repeating for those of you who haven't yet heard what happened to my second school during the Great Recession.
I sold my first studio back in 2003 due to some health issues. I wrote Small Dojo Big Profits in the interim while I was healing up, and then opened another school in 2005.
The town I chose for this location was among the top five fastest growing towns in Texas (and in a state that has been experiencing record growth for years, that's saying something).
Small footprint studio, only 1,000 square feet. Every starting expense paid for with money out of pocket. Low-cost, high-yield marketing blitz to get things off the ground.
Within two months, I was in profit. Within a year, my little dojo was pulling down a nice tidy profit and contributing handsomely to the Massie household income.
Then I decided to get bold. My one-year lease was coming up for renewal, and I had to decide whether or not I was going to stay in the little postage-stamp space.
As it so happened, a larger space became available in a much nicer strip center just a few blocks down the street. A women's fitness center went belly-up, and with the exception of the paint scheme, the place was perfect for a martial art school.
The only problem?
Rent was two-and-one-half times what I was already paying.
Never to be deterred, I quickly decided that I wanted the space (I mean, I had enough students to cover the added expense and then some) and that I'd start another after-school karate program to boost my revenues.
I took out a line of credit at the bank, bought two vehicles, and started marketing my after-school pick-up program.
And then the gas prices went through the roof. The school year rolled around, and I didn't even come close to hitting my numbers for my after-school camp. Even worse, people weren't signing up for classes like they usually did in the fall.
Within a few months after that, we started getting hit by the mortgage crisis. Houses started going up on the foreclosure listings left and right in the neighborhoods around my dojo.
As it turned out, the town I'd opened my dojo in was growing fast because it was a haven for displaced inner-city families, many of whom had purchased houses by getting FHA-guaranteed mortgages that they couldn't afford.
So when the gas prices skyrocketed, local families started defaulting on their home loans right and left.
Needless to say, we had a tough row to hoe for a time.
Of course, I'm sharing this story as a cautionary tale. You can't predict what the economy or the markets will do, and if you overextend yourself in your business at the wrong time it can spell disaster for your dojo.
If I'd have stayed in the little postage-stamp studio, I'd have been fine. I was already making a nice little profit every month - enough to pay the bills at home and then some - and I probably would have continued to see a nice, steady growth in my numbers, despite the recession.
Granted, all entrepreneurship involves risk by definition. But the less financial risk you take, the greater your chances of succeeding over the long haul in your business.
And that's why I recommend that you stick to the Small Dojo Big Profits approach to starting and running a martial art school, no matter your financial situation. By starting it small and keeping it small, you can easily scale up your business and keep more profits with less risk.
Of course, if you really want to have a huge school someday, I'm not here to kill your dreams. However, I do suggest that you start off small and build your school up gradually, so you don't run into the same troubles I did.
And who knows? The economy could remain stable for the next 20 years (doubtful, but possible). But even if it does, you'll still have peace of mind and a much larger bank account to boot by sticking to the SDBP approach in your dojo.
Until next time,
Mike Massie MartialArtsBusinessDaily.com
P.S. - How I got myself out of that mess is a topic for another email series. I'll be getting into that next week. Stay tuned.
P.S.S. - In case you missed it, I have a hell of an interview on the podcast this week. Here's the link if you care to check it out. | 