July 6, 2008

 For too many studios my advice will be too late

3,200++ Martial Arts Studios  went out of business in the month of May alone.
In the history of Martial Arts in the United States - nothing like this has ever happened. In one month about 20% of all studios closed their door. Most will never reopen! Most should never been in business to start with.
Fact:  Starbucks is closing 600 locations this year because people cannot afford to pay $3 for a cup of coffee.
How do studio owners - especially those with 90% kids expect parents to pay $100 per month plus testing fee's? Now they have the added expense of $4 a gallon gas.
This is a no brainier for parents: Cut out the kids Karate and Dance lessons. 

Three Critical Areas are at the top of the list:

1. Keep your overhead low
2. Do everything yourself!
3. Teaching mixed martial arts is not the solution its part of the PROBLEM!

Your goal for Studio Survival:
Keep you total Studio overhead below $2,200 per month. If you can't do that there is a good chance you will go Bankrupt.
Warning: You still may not be able to survive if your personal living expenses are more then to studio can bring in.

Keeping your overhead low starts with your biggest fixed expenses:
1. Rent and utilities
You control your rent by Leasing a smaller building:
How? If your main teaching tool is Private Lessons you do not need a big building: 
1000-1200 feet is ideal!
Lease (Rent) the cost of a building is based upon its size (sq. ft.) Typical Lease fees of $12 a sq, ft, plus about $3 sq. ft for triple net brings the cost of a 1,200 sq. ft . building to about $1500 a month. Many areas may be a little less but most will be a lot more.

The math is simple:
2000 sq. ft will cost you $3000 - per month - $36,000 per year
3000 sq. ft. will cost you $4500 - per month - $58,000 per year
4000 sq. ft. will cost you $6000 - per month - $72,000 per year
All of this goes into your landlords pocket.
To this you must add the new - double edged sword: Utilities - Gas - Heating Oil and Electricity. In the past year energy cost have gone up over 50% and the will get worse!
I know of one large studio that just had a three months utility bill of $10,000!

Warning: The size of your building will directly reflect the cost of Utilities:
Typical Example: 1000 sq ft - average monthly utility costs $150 - annual $1,800.00
2000 sq ft - $300 per month - $3,600 per year
3000 sq ft - $450 per month - $5,800 per year
4000 sq ft - $600 per month - $7,200 per year
Watch out for the knock-out punch: In the hot summers of the south Air Conditioning can easily cost over $1,000 per month. The Same is true of the Cold Winter Months of the North where heating bills have double over the past 1-2 years

2. Wages (get rid of any payroll - that is part of #2: Doing everything yourself!
Assume your are teaching 60 students that is only 30 hours of private instruction - you can easily do yourself!

To Be continued!

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