Basic Costs in Opening a School

[KungFuGirl]

My husband and I are headed down the road of opening a school. I won't go into all the details here, but we just need some advice for our business plan. Specifically, I need to know what kinds of costs other instructors have had and what they generally run.
So far we have found a place that is about 2600 square feet for about 55-65 cents a square foot (depending upon things like who pays for the air conditioning when it breaks!)
We know the utilities run about 175 on the highest month.
I figure we need to budget about $100 a month for our business phone line.

What else? And I mean specific.. like how much do you spend on toilet paper?? We need to be very specific in our business plan. We aren't getting a loan at this time, but want to know what it will cost.
Thanks in advance,

Sandra Butler

[Eliz]

Hi Sandra,
I don't own a school, but I've certainly taught in my share of schools.

I don't have specific numbers. Sorry. But here are some expenditures that come to mind:

-Matts/mirrors
-Changing rooms
-Cleaning supplies (these costs sneak up fast!)
-First Aid supplies
-Benches/chairs for people to sit
-Inventory (mainly doboks - but some schools carry quite a bit of inventory)
-toilet paper/hand soap/paper towels/ trash can liners
-Office supplies (computer,printer,fax,file cabinet, cash register/or cash box - this list is endless)
-Postal supplies
-Advertising
-Insurance


And than the big spending: MA training equipment. The schools that I've taught in that attract younger students usually have a HUGE variety of training equipment. (and shelves to store everything on) The schools I've been in that are more adult oriented, really get by with the basics.

The TKD school I'm teaching for barters a lot of services and supplies. (free training in exchange for...) It works well. The school has been around for a long while and is very well known. Another school I know of purchased MA equipment 2nd hand - auctions, private sales, etc. A little beat up looking, but in great condition overall.

Best of luck.

[kodanjaclay]

I have owned a 4,000 sq ft facility in VA. The things that Eliz cited are just about basic requirements. You will also have to be concerned with CAM but if you look enough you may be able to find some flex space, which is typically cheaper. You may also be able to work out several months free while you get started. I have a really good book that helps figure some of this stuff out and I'll see if I can get the title for you... oh, and you need to add your baseline salary to the over head so you can plan for it. Send me an email to remind me to find that book title for you.
frankclay@indy.rr.com

[kodanjaclay]

I also forgot to mention. Give some details in your email so I can share them with my wife. She is an MBA and is about to enroll in her PhD program for business. (If I don't kill her before she gets it that is... MBA was bad enough!! )

[DragonMind]

Here's some places to start.

http://www.amazon.com/exec/obidos/tg...books&n=507846

http://www.small-dojo-big-profits.com/

I'll pull more together when I have some time, probably over the weekend.

[Cliff Hargrave]

I once picked the brain of a successful businessman for the same reason. He told me that you should figure out to the penny how much money you should need to start your business and the operating costs to run it for three to six months. Check with similar businesses and make sure you figure everything in, from toilet paper to utilities. Then when you finally have the amount.............triple it.

[kmtsd]

What Cliff said is most important...

Unless you are taking over an existing school don't count on making a profit for atleast 6 months...maybe more if the area you will be working is not a high turnover population... I think this is the biggest mistake our friends have made... it really takes about 2 years to build up a school.
We started a new school from scratch in a working town with low turnover...it took two years to start earning a profit. (But we knew this ahead of time and negotiated the rental for 6 months-no rent, then one year 1/2 rent... the owner originally turned us down...but after the empty building sat there for 6 more months he took up our offer...its been 8 years and the school is strong now)
We have had several other friends end up paying the rent for the school with money from their "real" jobs or savings and losing all of it because they didn't count on the time you need to build the business.
Maybe you are teaching a class at a gym or the YMCA... you can't count on all the students following you...
For the longest time I remember teaching one student on a Saturday morning...and 5 or 6 students was a "big" class, now my saturday mornings have 15-20+ students and our biggest classes are 30+...you have to hang in there and don't give up(if you can afford it)

[De_Franza]

I don't own a school, and have only general adivce, but I was going to say what Cliff said: figure it to the worst case scenario, and at least double it. and figure on 5 times as much TIME as you think it will take to get going (years to self-sufficiency, not hours per week, I mean). also paln for the scenario that you get no or few students for 3, 4 5 months.... eek! what then?
To help avoid/mitigate that problem, you need to advertize... and word of mouth is best for that, but not always tangeble and easy to generate. I'm sure there's a thread or three about it on here somewhere.
Don't forget insurance! and it's worth using a lawyer for the legal forms such as liability wavers that you make every student sign.

NOt to sound discouraging, but you sound like this won't be discouraging. ALL THE BEST!!!

[DragonMind]

My husband and I are headed down the road of opening a school. I won't go into all the details here, but we just need some advice for our business plan. Specifically, I need to know what kinds of costs other instructors have had and what they generally run.
So far we have found a place that is about 2600 square feet for about 55-65 cents a square foot (depending upon things like who pays for the air conditioning when it breaks!)
We know the utilities run about 175 on the highest month.
I figure we need to budget about $100 a month for our business phone line.

What else? And I mean specific.. like how much do you spend on toilet paper?? We need to be very specific in our business plan. We aren't getting a loan at this time, but want to know what it will cost.
Thanks in advance,

Sandra Butler

First, if the facility is decent that is an outstanding price/sq-ft.

Make them pay for the A/C since they own the property and get a tax break for repairs, but invest in business continuity insurance. Doesn't matter who pays for the A/C if you're out of business for two weeks waiting on parts. Add a contingency clause to your contract that specifies remedies if you are unable to operate due to landlord repairs (e.g. free rent, etc).

Some areas you need to budget for:
Payroll = salaries + payroll taxes + SS + worker's comp + benefits

Sales and Marketing = 10% of gross income. During the first six months you'll be spending heavily on advertising in standard media since you won't have much word-of-mouth.

Initial Equipment = depends on the style of MA

Depreciation and Replacement = estimate useful life and future cost

Insurance = business continuity + contents + liability

Rent = sq footage + CAM + projected increases

Utilities = last year's averages + projected rate increases

Leased Equipment

Consumable Supplies

Web site hosting & development

Internet connection

Contingency = 5% of gross income

One problem with your question is that many of the numbers will depend on how many students, operating hours, and MA style. Consider having a service do the cleaning and supplies like toilet paper. That way you have a fixed amount to budget for. Make your best guess about the little consumables but don't stress over them too much. No school ever went broke buying too much toilet paper. Hit Sam's/CostCo and buy in bulk.

You really need to focus on your costs to get students in the door and keep them. That means a solid, CONSISTENT marketing plan; a manageable and complete curriculum; and a regular self-improvement plan for instructors. Look at the factors that kill new schools and plan how you are going to deal with them.

Another good resource: Martial Arts Teachers Assoc

[KungFuGirl]

Thanks to everyone for the details. Dragonmind: we do belong to MATA, it is a great resource.

If anyone has a martial arts business plan that they could share as an example, that would be great.

Right now we are just trying to find a decent spot to continue working... besides my living room.. we are looking at several dance studios..

I think we may be able to take the leap in January..
We have about 15 people from the old school who left soon after we did and have asked us if we are going start a new school.
Nick also has a list of about 20-25 other people who have expressed interest in starting. Every week someone new asks us if they can join once we start, so our word of mouth advertising seems good already... granted not all of those 40 are going to join, but it is a good start. If we get space in the dance studio, we can build a little bit until January and open with a good 50 people.. I hope. Also a nice thing, is that we have many upper belts who have already been doing the art 2-4 years who will be with us when we open.. not just a bunch of white belts.

If anyone has any other good advice, please let me know, we are continuing to plan and of course practice Kung Fu whenever we can..

Sandra Butler

[KungFuGirl]

Just talked to the landlord for the property we are interested in: it is only $600 a month, no CAM... Downside.. rent month to month.. in the future he will rebuild that area.. more details in July. But for a first place it can't be beat!

[Eliz]

Congratulations Sandra

Month to month is tough, I agree. But it is also a good out for you if you get in there and find the facility is not all you thought it would be. Is this the dance studio?

[KungFuGirl]

The dance studio didn't work out. She said at first that her dance studio was open practicallly all summer, then we found out about this class and that class.. until we could only use it Monday after 8. Friday, Saturday after 3. Nobody could do these times. The landlord who owns this space is a martial artist himself and likes to see MA businesses go up, even though as he says "they are risky". We are meeting with him this morning to talk.

[Typoman]

So far all the advice given has been right on track.

Addtional things to consider.

Business liscense
Sole prop or LLC?
Accountant ( New to business learn your tax options & liablities)
Review Labor laws in your state ( if you hire staff)
Liablity insurance, rental insurance,
Cost of Alarm system
Utilites including trash pick-up, sewer, water, power ( some where mentioned)
Lawyer fees
Cost of Yellow page ads, website(maybe), fyliers, promotional marketing costs.

Are you attempting a business Loan?
check out possiblity of grants, Small business assocation etc.
( female owner has better chance of getting Loan via govt agency if you go that route. So determine ownership issues upfront)

Good luck with your business.

Why most people fail in business, it that they don't execute an effective marketing campaign to drive paying customers to their business. They put all their eggs into one or two resources that are two expensive for their budget.

A website is a great marketing tool, if you use it properly and optimize it for your geographical location. For example I see 1000's of MA websites that are all flash, have neet names, or Joe's dojo.com. They are ineffective. If you have Joe's Dojo Your city your state.com and optimize the site for your geographical location, then you will get top search engine results for every mother looking via google, yahoo, MSN for "self defense" "Martial Arts" in your city.

When starting your marketing, make sure you cross-reference all materal on all marketing advertisment. If you have a website, make sure all material has the website url.

Work on your Advertisment, your Plan. If that is successful, then everything else will be successful. The location can be a Top of the line, but if you are not getting people to visit and then sign up ( make a Sale) then it doesn't matter if the Location is the top of the line or a hole in the wall.

If you want to pick my brain on any more of this just let me know.

Eric
Richmond VA

[KungFuGirl]

Thanks for the reply.
We filed our fictitious business name already and we are set up as a sole Prop, but it has husband wife on the fictitious business name. We are going to use the webiste a great deal. Our domain is www.reddingmartialarts.com When someone types in our redding and martial arts, we should come up pretty high. We have an older couple who is willing to give us initial capital and then in January I might try for the loan (yes it is easier as a woman).

One question: what is the effectiveness of radio advertising? Is it worth the money?

Thanks
Sandra

[Typoman]

Thanks for the reply.

One question: what is the effectiveness of radio advertising? Is it worth the money?

Thanks
Sandra

In general terms, radio advertisement is more effective than print advertisment, however it is Niche centered. Meaning you are targeting a certian group or demographic with radio ads.

Is it worth the money? That depends upon the scope of your ad, who you are targeting, what is your message, who is listening to your message, and then the converson rates.

Unfortunately, with MA Schools, there is a single location, with a narrow target audience, that wants your goods & services. To reach them effectively, you need to have Advertisement presence in their "comfort zones".

Let's say you feel as a business you only want to work with Adults. Ask yourself, in your community were do the "active" adults hang out, shop, play, etc. Those area's or services that cater to those area's is where you want to advertise. Radio could be effective if the station does "reach" your target demographic.

As a start up business, Personally I would concentraite on the ground floor advertisment (cheaper) before working up to more expensive (radio tv etc).

Must have advertisment:
1) Yellow page ad or lisiting ( can be expensive)
2) Website that is Geographical detailed ( Redding? Where? California,Pennsilvania, Ohio ?? Change your title tag to include your state. Aslo put your physcial address on your web Index Home page.
3) A continual ongoing promotional campaign, that targets your "core audience" with your "message" wether it is something simple like a newsletter,a flyier,a business card, an email signature tag with website URL, or Print and radio ads. Something MUST be visable at all times and is cross-referenced in all media/ advertisments.


In short, I believe in a strong level marketing campaign, before I Spend more $ on Radio and TV etc. If your "ad" is not well written and conveys the right message,it could be more harmful then benifical. When you are ready to take the jump to upper level adveritsment like radio, you will know it already. It won't be should I? It will be it is now the time for it.

[Typoman]

I have owned a 4,000 sq ft facility in VA.

Bullshido...notice how member closed account after I reached this thread.. nuff said.

[Dennis Monk]

Bullshido...notice how member closed account after I reached this thread.. nuff said.

This member was a senior moderator on this forum. He closed his account for reasons other than this thread, I can assure you.

[Typoman]

removed by user

[Mandeigh Wells]

why does this thread need to be deleted?