Hot Tip of the Month

(The following was written by IMAMS founder Jim Mather many years ago. This is the first time it's been made available to non-IMAMS members. If you would like to receive copies of the charts and forms that accompanied this training module, and that are discussed in it, please email or call and we'll send it right out to you.)

A few years ago, we were contacted by a married couple (both of whom were black belts) who wanted to open a dojo in their town. There were already several well-established schools in operation, including one which had 10 or 11 branches throughout the city. So, the goal they had set for themselves - establishing a successful a new school in an already highly-competitive market - was not an easy one to reach.

We allowed them to join IMAMS and began sending them information so that they would have everything they needed to get off on the best possible foot. And, they did just that.

Within their first 90 days of operation, they registered 160 students and quickly established their school on a firm financial base. From there, they continued to grow rapidly. Both were able to quit their jobs within a few months and focus their time totally upon teaching the martial arts and building up their dojo. And, how did they do? Well, they did so well that by the end of their third year in business, they reported an annual gross of one million dollars!

What could you do with one million dollars?

Becoming a millionaire via the martial arts would not only allow you to have everything you ever wanted in life but it would also allow you to become a major force for good within your town. This, in turn, would enable you to attract more and more people into your programs, allowing you to have a major positive impact on both your students and your community.

We should point out that creating a dojo or school that generates one million dollars of gross per year won’t necessarily make you a millionaire (because you will have expenses). But, if you can keep your overhead as low as possible and invest or secure your profits properly, you will surely become a millionaire before too long.

How do you create a million dollar gross?

There are several things you must do if your dojo or school is to create an annual gross of one million dollars, and do it the right way.

First, you must attract a sufficient number of students.

Second, you must get your students to pay as high a dollar amount as possible.

Third, you must keep your students with you for several years.

Fourth, you must generate as much additional revenue - revenue in addition to tuition - as you possibly can.

Establishing your monthly goal

To reach any medium or long-range goal, your first step should generally be to break it down into a series of short-range goals. So, we will begin by doing the same here.

If you are to generate an annual gross of one million dollars, your dojo or school must produce at least $83,334 each month in revenue. (This number was determined by dividing one million dollars by 12, the number of months in a year.)

This monthly amount doesn’t have to come from tuition alone, although monthly tuition payments will probably comprise a major chunk of it. A substantial amount can be generated by means of a variety of other revenue producing programs, some of which we will outline later.

Now, when we have discussed this monthly figure with instructors in the part, the initial response of some has been one of disbelief. They don’t believe that it is possible to create such a high monthly gross. But it is not only possible, it is actually being done by some instructors right now. And, if they can do it, you can do it too.

Generating a sufficient number of students

How many students do you need if you are to generate a sufficient amount in residual tuition payments each month to reach a monthly gross of over $83,000? Well, to determine the minimum number, you must first determine how much each student will pay.

A good initial target is to get your average student paying at least $85 per month. You may want to have an entry rate - the rate students pay when they first join your dojo or school - which is lower. This entry rate might be for an initial course of one year. But, you don’t want to keep students in such a program for long.

Within their first three to six months, you want to upgrade as many students as possible to one of your elite programs. You should attempt to get 80-90% of your students involved in such programs, which charge a higher rate and commits them to multi-year programs. (We discuss this topic in great depth in our training module on Elite Programs.) As a result, we will use $85 (which is actually a relatively low figure) as our base rate.

One hundred students regularly paying you a monthly tuition of $85 will generate revenues of $8,500 per month. Two hundred and fifty regularly paying students will generate $21,250 per month in revenue. Five hundred regularly paying students will generate $42,500 in monthly gross. Seven hundred and fifty regularly paying students will generate a monthly gross of $63,750. And, one thousand regularly paying students will generate a monthly gross of $85,000.

So, if you are to generate a sufficient amount each month to reach a million dollar annual gross from student tuition alone, you will need to register close to 1,000 paying students. If your student average is less than $85 per month, then you will need more students in order to reach your target monthly gross. And, if you charge more on average, then you will need less.

But, student tuition shouldn’t be your only source of revenue. There are several other sources which should help produce the amount of revenue you need in order to reach a one million dollar annual gross.

Other revenue-producing sources

Down Payments

Our $85 per month base rate doesn’t include the down payments which students should pay you when they register for their programs. If your students pay - on average - a down payment of $150 (which is probably a low figure for most of you), then registering 30 new students each month will generate an additional $4,500 per month, or $54,000 per year, in down payments. If your average down payment is higher than $150, then you will obviously produce even more revenue from this source.

How much you generate in down payments from your existing students as they renew their courses will depend upon the length of the courses (including the elite courses) you offer. If your basic course is for one year, then it is easy to calculate, since each student you retain should pay you another down payment each year.

But, if you offer longer, multi-year elite programs and have 80-90% of your students in such courses (as you should), then the bulk of your existing students obviously won’t renew as often. However, you should charge students on multi-year programs down payments which are two or three times as much as those you charge students in your basic one year course. So, on average, you should still generate a comparable amount each year from your existing students.

A student on a two year course, for example, should be charged a down payment of at least $300. One on a three year course should be charged a down payment of at least $450. This produces down payments which average around $150 per year per student.

So, if you have 100 students within your program, you should generate an additional $15,000 per year on average, or an average of $1,250 per month, in down payments. Two hundred and fifty students should generate around an additional $37,500 per year, or $3,125 per month, in down payments. Five hundred students should generate around an additional $75,000 per year, or $6,250 per month, in down payments. The down payments from 750 students should generate an additional $112,500 per year, or $9,375 per month. And, the down payments from 1,000 students should generate an additional $150,000 per year, or an average additional income of $12,500 per month.

A student on a two year course, for example, should be charged a down payment of at least $300. One on a three year course should be charged a down payment of at least $450. This produces down payments which average around $150 per year per student.

So, if you have 100 students within your program, you should generate an additional $15,000 per year on average, or an average of $1,250 per month, in down payments. Two hundred and fifty students should generate around an additional $37,500 per year, or $3,125 per month, in down payments. Five hundred students should generate around an additional $75,000 per year, or $6,250 per month, in down payments. The down payments from 750 students should generate an additional $112,500 per year, or $9,375 per month. And, the down payments from 1,000 students should generate an additional $150,000 per year, or an average additional income of $12,500 per month.

Merchandise Sales

Merchandise sales is another area where a significant amount of additional revenue can be generated.

The head of one of the major martial arts supply companies recently told us that the average martial arts student purchases approximately $240 per year of martial arts merchandise.

If this figure is accurate, and you handle merchandise sales properly, then 100 students should, on average, generate an additional $24,000 per year, or an additional $2,000 per month, in merchandise sales. Two hundred and fifty students should generate merchandise sales of $60,000 per year, or $5,000 per month. Five hundred students should generate merchandise sales of $120,000 per year, or $10,000 per month. Seven hundred and fifty students should generate merchandise sales of $180,000 per year, or $15,000 per month. And 1,000 students should generate an additional $240,000 per year, or $20,000 per month, in merchandise sales.

So, how many students do you need?

If you add together the revenue capable of being generated from each of the above programs or sources (tuition, down payments, and merchandise sales), you should be able to establish an approximate student number capable of taking you to a one million dollar annual gross.

If you have 700 students who pay you on a regular basis, then their tuition payments alone should generate around $60,000 in monthly gross. (Since you will never have a situation in which 100% of your students pay on a regular basis, you will need to register more than 700 students in order to cover yourself for this factor.) Seven hundred students should generate around $8,750 per month in down payments. And, this same number of students should also generate merchandise sales of around $14,000 per month. If you add these figures together ($60,000 + $8,750 + $14,000 = $82,750), it shows that around 700 students are needed if you are to generate revenues somewhere in the neighborhood of your target monthly gross.

In Appendix A, we have included a revised version of a chart which we supply in our first training manual. The figures it lists are in dollar amounts generated during a given month. These figures are based upon the following average item charges: $9.95 Introductory Course, $150 down payment, $85 monthly tuition payment, and $20 per month in merchandise sales. It assumes that you register 30 new students each month, which should be a reachable number for all of you if you work at it properly. (We discuss ways to attract new students to your dojo or school in our training manual on Media Marketing and in a variety of our training modules.)

It is important to note that neither this chart nor any of the additional revenue producing sources or programs we have discussed so far include the $10 to $30 you should generate per student in revenue each month from seminars or the $5 to $10 per month each student should contribute on average for dojo or school tournaments. It also doesn’t include any test fees which some of you are able to produce. And, it also doesn’t include the additional $17 or so per student you should be able to generate by offering Merit Badges.

The chart also assumes you are starting from scratch. Those of you who have an existing student population should be able to more easily reach our target numbers - or reach them more quickly.

Our chart also assumes that you don’t lose anyone, that everyone renews their programs with you as soon as their present courses expire. But, this is not realistic. You will lose some students no matter what you do. People die. They move away. They change jobs. And, you can’t prevent any of these factors.

However, if you register a high percentage of your students into elite, long-term programs, student loss becomes less of a problem than it is if you register everyone onto 3 month, 6 month, 9 month, or even one year programs.

Also, using the high-retention techniques we supply should also reduce a good deal of your controllable student loss. (We get into the subject of retention in great detail in a training manual dedicated to that specific topic and we also cover it often in various training modules.) You should still, however, count on losing a percentage of your students. And, you should compensate for this by registering an additional number of students each month. The number you need to register must be at least equal to the number you lose.

Targets and Results

There are two columns on our chart. One is named "Target" and the other is named "Results."

In the Target column, we have listed the dollar amounts you should attempt to reach by the end of your 1st Month, 2nd Month, and so on throughout Year One. And, we do the same for Year Two and Year Three. These figures include Introductory Course fees, student tuition, down payments, and merchandise sales.

The Results column is where you should record the total dollar amounts you actually produce during a given period. Your figures should include all of the revenue you produced, not just what you generated via the four revenue producing items included in the Target column (Introductory Course fees, down payments, monthly tuition, and merchandise sales). You might want to use black ink to write-in figures which are higher than, or equal to, the Target amount. And, you might want to use red ink to write-in figures which fall below the Target amount.

You should attempt to stay ahead of the listed Target figures. If you ever fall behind, you should immediately increase your efforts and get back on track.

It is generally best if you can register more than the targeted 30 new students per month during any good months which may come your way because there may be some months when it becomes much more difficult to reach this goal. So, try to cover yourself whenever you can.

"You couldn't reach those numbers in my town."

Some instructors have told us that they don’t believe they could ever register 30 students per month in their towns. And, they offer a variety of excuses for why it is impossible.

However, the actual problem is generally not something attributable to anything within their local communities. Rather, the problem is usually something within the instructors themselves.

Generally, there are two problems. The first problem is that an instructor has to believe that he or she can achieve something if it is to ever happen. And, the second problem is they don’t understand the true potential size of their markets. We will look at the second problem first.

How many people within your local community do you think could use what you have to offer? How many could benefit from some aspect of your program? Well, there are probably a lot more people than you might imagine.

How many of the young people within your area could use the self control necessary to say no to drugs, cigarettes, alcohol, and gang membership? How many could use the skills and knowledge you could give them to avoid becoming the victims of violence? How many could use the self discipline needed to raise their grades and open the doors to higher academic achievement, which, in turn, will give them more prosperous, successful, and contented lives?

How many of the adults within your local community could use help controlling their weight? How many could use the self control and self discipline necessary to quit smoking, stop abusing drugs or alcohol, or exercise sexual restraint or utilize proper sexual precautions when necessary? How many could use help in gaining the inner strength they need to get sufficient exercise and eat the right things, enabling them to combat our society’s most dangerous killers - heart disease, stroke, and high blood pressure? How many could use help in managing the tremendous amounts of stress present in everyone’s life today?

How many of the women within your local community could use the skills and confidence they need to avoid or defend themselves against becoming the victim of a rapist? How many could use help in avoiding or dealing with domestic violence?

How many of the senior citizens within your local community could use the many benefits which your art offers them? How many could use greater strength, dexterity, balance, and stamina, which would make them more healthy, confident, active, and comfortable in their declining years? How many could use the reduction in back and joint pain which results from enhanced flexibility and greater muscle tone? How many could use the skill necessary to avoid or better defend themselves against those who pray upon the elderly?

Well, the answer to all of these questions is most, if not all, of them! With the exception of those on their deathbeds and those who were only recently born into this world, we believe that everyone else within your local community could benefit in some way from studying the martial arts with you. So, 90% or more of those within your town are potential students.

Most dojo or school directors make the mistake of focusing their energy totally upon increasing their market-share within a single market - children. And, this is okay in the beginning. But, to become as large and successful as you have the potential to become, you must expand your sights. You should begin thinking now about ways to tap into the many additional markets that are available within your local community, markets in which there are many people in need of what you have to offer.

How do you move into new markets? Well, you must first select the market or markets you want to target. Then, you figure out how best to penetrate it. (We cover a variety of potential new markets and ways to take advantage of them in a variety of our training modules.)

What if you live in a small town?

Some instructors believe that they live in towns which are so small that they couldn’t possibly build a student population sufficient to reach anywhere near these numbers. But, consider the following:

IMAMS founder Jim Mather once had an acquaintance who ran a traditional dojo in a small town in Northern Canada. The town and entire surrounding area had a total population of only around 1200 people. But, this instructor had 400 students in his dojo! One-third of the entire local population were students of his.

How many people live in your town? Well, if you have more than this instructor did, then you can potentially register even more students.

Actually, if you live in a small town, it may be far easier to build a highly successful dojo or school than it is in a large town. This is often the case for several reasons.

First, it is often easier because word travels much faster in a small town. If you have a great program, everyone will know about it in a very short period of time and will want to get themselves or their children involved in it. (If you have a bad program, however, it will make the rounds equally fast and people will avoid you like the plague.)

Second, there is often less to do in a small town than there is in a big one. And, third, with the generally lower overhead required to operate within a small town, you may be able to take home more money than does a person in a large town, where rents and advertising rates are sky-high, who has twice as many students.

So, running a dojo or school in a small town may actually be a huge asset, not a liability.

"Your attitude will determine your altitude"

As we mentioned earlier, one of the major factors which will determine whether or not you will be able to reach these numbers and achieve millionaire status is your attitude. You generally can’t achieve more than you think you can.

You must take the numbers we have discussed to heart and set you mind firmly upon achieving them each week or month, no matter what you have to do to do it. This may entail opening one of more branch dojos or schools in order to attract a sufficient number of new students each month. But, don’t do this too soon. And, don’t be in too big a hurry to get into your own building. You don’t want to double your expenses without also increasing your income proportionately. (We cover the opening of branch dojos or schools in our training module on that subject.)

Do you know where you want to go?

There is an old saying that if you don’t know where you are going, then every road will take you there. But, if you know where you are going, then there is only one path which is correct. So, set your sights on where you want to be three years from now. Then, map out your route based upon the information we have given you. And, finally, don’t let anything or anyone sway you from your path.

If you do everything right, you should be able to reach millionaire status. But (for those doubters out there), even if you don't, for some reason, reach this lofty goal, your efforts should still enable you to achieve much more than you would had you continued along the same path you are following now.

Remember, if 700 students can create enough revenue to reach one million dollars in annual gross, then half of that number of students can create one half million dollars in annual gross. And, one fourth of that number of students can create one quarter million dollars in annual gross. Reaching any of these amounts could certainly not be considered something bad.

But, none of you should set your sights on anything short of one million dollars in annual gross. A tremendous, perhaps once-in-a-lifetime opportunity has been given to you. Don’t let it slip away. If you are willing to work extremely hard right now, you should be able to become set for life!

If you would like to receive a free copy of the charts and forms that go along with this training module, please give us a call, write, or email, and we'll send it right out to you.

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