THE TRACY SYSTEM OF KENPO
Business Index - click last updated 07/27/06
Statement of purpose and intent - so you know where I am coming from!
You will find I have very strong opinions!
I'm not here to be your friend - tell you what you want to hear - hold your hand - pat you on the back - or tell you how easy it is to build a studio with 500 students, and if you don't, you are a failure!
I am here to help keep you in business!
Not just for today - but for the long haul! Not just keep you in business, but
to help you make a comfortable living year after year, and at the same time enjoy what you
are doing!
You don't have to have hundreds of students and gross a half million a year. Less than a dozen studios do this - and most of them are not taking home any more money than a properly run studio with LOW OVERHEAD!
Many of you are new to the martial arts, and have no idea who I am or what qualifies me to offer business advice.
In a few short/long paragraphs I will try to fill you in on 40 years of martial arts business history!
In the mid 60's my brother Jim and I developed the TRACY BUSINESS SYSTEM -- the same basic system we use today. We only tinkered with two things: 1) we got more professional 2) We try to raise our prices about every two years!
In 1965 our main location in San Jose, California had over **800 active accounts all taking private lessons with their own instructor (*personal trainer). Many students were taking more than one private lesson a week All of this was done with a building of only 2,400 sq. ft of space. Our closing office was 6'X6'. The entire office and reception/counter area measured only 9'x18'! There was only room for three chairs against the window!
* We taught a lot of families! A family of 3-4-5-6 was still just "one active paying account"! We never counted just bodies! Therefore one of our studios with 100 active paying accounts has between 175 and 200 physical students taking lessons.
We had 32 instructors (ten were full time). Three secretary/receptionists. We GROSSED (Cash - not contracts - but cold hard cash) over
$500,000 a year. That was back in 1965 (with adjustment for inflation; that would be $2,570,887 today, 1999!To check me out go to the inflation calculator on the web! It's a great business tool. Inflation Calculator When the screen comes up type in 1)500000 for the amount 2) starting year 1965 3) ending year 1998 4) then hit submit! Using the calculator on a yearly basis will tell you when it's time to raise your prices! It's best to raise prices in $5 increments if possible.
Or, to work backwards - Those schools claiming to gross $500,000 today would have grossed $97,000 per year back in 1965 -- while we were grossing $500,000 per year!
Let today's "heavy hitters" try to even come close to those figures! Tracy's never plays with "paper numbers". We don't "PLAY NUMBERS GAMES" by telling you how many contracts we have, how many new people we put on contracts last week or brag about how many students we have!
As Jerry McGuire's client would say: "Show me the money"!
Another well known expression in most businesses: "B.S. walks, money talks'!
On top of that we netted over 65% of gross!
Our rent was $450 - Yellow Pages were $100 per month! Wages were $2 per hour. We paid Jay T. Will, working full time, $100 a week - we also employed his wife, Kathy, as a secretary for another $100 per week. (We had so many students Jay's only job was to put students on their 2nd contract for $495! Our renewal rate was over 60%!
To put things in proper perspective:
My 1968 Corvette 427 (two tops) cost $4,300 and leased for $108 per month; my Porsche 911 cost $6,800 and leased for $136 per month.
My real "toy" was a 1968 Ferrari 275 GTB-4 which cost me $12,500. Yes I had all of those at once plus a Cadillac; 4 wheel drive Blazer; and lots of motorcycles! Oh yes, we also owned several airplanes (Those were really my brother Jim's toys). Actually we used the air planes to pick up potential "franchise buyers" and fly them in to a local studio so they could see a "real" studio in operation!
We were doing so well our people bought 3 Ferraris' at once: my self, Ray Klingenburg and Dennis Nackord.
We did this with only 2,400 sq. ft. and that included a shower. There was no such thing as "central air" back in the mid 60's. You opened all the doors and windows and had a lot of portable fans! At times it was so crowded we had to teach in the hallways. We taught from 6 or 7am to 11:00pm every night. 6 am is when we trained our own people. That way no teaching time was lost. Saturdays we closed at about 6:00pm. Sunday was our only day off, unless we had to go to a tournament.
Back in 1964/65/66 our basic fee was $40 a month! That would now be equivalent to charging $205 a month! Now you will understand why I refer to this period of time (1964-1975) as the "Golden Age" of the martial arts.
Our basic contract was $495. Both California and New York had limits on contracts for "health clubs/spas": $500. Our legal counsel advised us that we came under that law and not to fight it. We could easily live with that law! (Today that contract would be equivalent to $2,500 - and we were getting it in less than a year)! Everyone was on contracts - there were no exceptions! We had so much "cash flow" coming in we did not push for "cash outs"! Not that we ever turned a "cash out" down. We did all of our own collections!
RULE: Something we learned very early was that 1/3 of all your contracts will go bad! That is still true today! To gross $10,000 a month you will need to write $15,000 in contracts. This is no problem as long as you don't try and run the business thinking you are going to bring in that full $15,000. Our closing rate on contracts was over 90%!
The basic contract (Orange/Purple Belt Program) was for 66 half-hour private lessons; 133 hours of groups; and 33 hours of freestyle! "Tracys" never guaranteed a belt - and we never sold "Black Belt" programs. Every belt had to be earned: one belt at a time! There were exact requirement for each belt. You could move from California to New York and be taught exactly the same -- no instructors "making it up" as they went along!
*Personal trainers: and you though this was a "new" concept! We have been giving all of our students private lessons for over 35 years! Why? That is why we have been so successful year in and year out! That coupled with our family rates made us unbeatable!
** Active "Paying" accounts. Too many studio owners are not looking at reality when it comes to how well their studio is doing. They will keep students on the book for months after they have stopped paying and taking lessons. It's even harder to control when a 3rd party is collecting the money! You may be teaching students that are not paying. When you run nothing but group classes it's very hard to keep an accurate account of all your students. This does not happen with "private lessons". When a student is 15 minutes late - the instructor (who is sitting there with no one to teach) makes a phone call to see why he has missed his appointment. We always know who is active and paying.
**I will be writing an article on Inflation: "the silent killer"! This is what all economists are worried about today! Fortunately we have not had really bad inflation since the early and mid 80's! Everything around us was more expensive - but there was so much NEW competition - none of us could raise our prices to keep up - so we had to "suck it up"!
SCIENTIFIC APPROACH: It has to be repeatable - with consistent results"
Sure the "High Powered" Tracy Brothers and that "selling machine"Tom Connor proved they could make a lot of money year after year! 1964 - 375,000; 1965 - $500,000 - 1966 $500,000+! Then we just walked away from the studio and started franchising full time! Seemed like a good idea at the time!
But what about the "average" martial artist? We knew the average person would never be able to bring in as much money as we did, but could they constantly gross $50,000 a year? Today (using 1970 as the base year) that would be equivalent to $217,381 gross per year!
The answer was yes.
We first opened 10 studios in California - but that was too easy. They all made grosses well over $50,000 per year! But they were all our top people with lots of support from us.
Now came the first nation-wide test: Columbus, Ohio. Columbus had a reputation of being a great test market: conservative, not jumping on every fad, willing to spend the "buck" if the value were there. If it would fly in Columbus, it would fly anywhere!
We sent Jay T. Will and his family out to Columbus. His father was a policeman in Springfield, Ohio so he was ready to go. Another gold mine. Jay was grossing well over $100,000 by the second year. He had positive cash flow after the first month! All of our studios did!
By now we expanded to over twenty studios in California! And all the time we were selling franchises and taking a year or more to train the people to go out on their own! Now we were ready to take on the world! The original franchise sold for $6,500 - then $9,500 and eventually $12,000 and we took 6% of gross!
Next came Philadelphia (5) - Chicago (8) - Baltimore (3)- New York - Long Island (8) Cleveland (20) - Miami (8) - Indianapolis (4)- Louisville (3)- St. Louis (8)- Denver (8) - Salt Lake City (2) - Seattle - Portland - Boise - Vancouver B. C. (4) (Canada) - St. Paul - Dallas - Wichita Falls - Spokane - Salem - Eugene - Milwaukee - Buffalo (5) - Springfield - Birmingham - Atlanta (3) - Cincinnati. We were opening one or two new locations a week! We had so many applications for franchises we could not open them fast enough - we got to the point we could only accept about one out of every 10 applications!
We had developed "central training" (CT), where a person would be trained at our live-in facilities for 2-3 weeks! 10-12 hours a days, 7 days a week. We ran it just like boot camp!
A new person after being trained at (Central Training for 2-3 weeks) could easily gross over $50,000 a year if they followed the system! We made sure they did!
We all used to joke: "Grossing only $50,000 a year? You must be taking a 6 month vacation each year!"
Age-wise we were only in our 30's and most of the "kids" with franchises were in their 20's!
One thing for sure: "We were all having fun"!
GRASSHOPPER: Sifu, it's nice that everyone was making so much money -- but what about the Kenpo you were teaching?
SIFU: Good question, grasshopper. We first got their attention with our 'business system". Now it was time to "kick some butt" in the karate world. Tracy's teamed up with Joe Lewis. Now you had the two bad guys: Joe Lewis, Karate's "bad boy" and Tracy's, the "bad boys" of business on one team. And to make it even worse we really broke from tradition when Joe Lewis, now Tracys National Director - developed our famous/infamous (click) "Checkered Fighting GI". The word soon got out, "if you did not like our Gi your could try and rip it off our backs!" To prove our system we fought at every level all across the United States. The only team to ever beat a Tracy's team was one put up by Chuck Norris. Then we took it one step further, in conjunction with Joe Lewis we invented Kickboxing!
Anyone can win in the game of touch karate tournaments. The first Kickboxing match ever was held January 17, 1970 in the Long Beach Arena -- it matched Tracy's Nation Director Joe Lewis against Greg "ohm" Baines, another Tracy Kenpo black belt belt trained by Harry Hutchings, Al Tracy's first black belt.
It was fought in a professional boxing ring - wearing professional "boxing" gloves. This revolutionary event for the first time allowed kicks above the waist.
Joe Lewis won the fight with a knockout and remained undefeated World Heavyweight Kickboxing champion for ten years until he retired.
TO BE CONTINUED
©1999 Al Tracy - all rights reserved last updated 07/27/06