First thing anyone would suggest is to save money. Save whatever you can. Put aside $50 or a $100 or whatever you can afford from each pay check into a separate account. Try not to buy things you want in an effort to stay with things you need and save on cash. When you get a tax refund, (if you get a tax refund) put it in the account as well instead of spending it on things you want. Remember: sacrifice.

Typical Start-up Capital Needs

Start up capital is the money you need to spend before the school opens.  The amount varies but, typically, requirements include any  or all of the following:

1. Seed money ­ for research and planning.
2. Security deposits on a lease
3. Any construction, renovations and signs needed at the school
4. Equipment ­ training equipment, office equipment, etc.
5. Start-up inventory
6. Legal and accounting fees 
7. Deposits for phone, utilities and insurance 
8. Advance marketing 
9. Printing costs for ads, business cards, etc.
10. Artist fees for logo, business card and ad design

Working capital is the money needed for the day-to-day expenses of  the school.  You must have enough working capital available to pay  all your bills until the school becomes profitable enough to support  itself.  In some schools this is several months, but in others it can be  much longer.

Typical operating expenses include:

1. Taxes
2. Payroll ­ wages, social security, unemployment, taxes
3. Utilities
4. Rent
5. Advertising
6. Debt service
7. Insurance ­ professional liability and premise
8. Maintenance
9. Supplies
10. Administrative and professional fees

Because of the volatile nature of our business and the high failure rate and low credit rating of the martial arts industry as a whole, conventional  financing is very difficult to obtain without significant collateral. Outside of your personal savings and your credit cards, there is little money available to you to get started.  Most banks won't touch  a martial arts school start-up unless the owner is willing to put  his house or car up for collateral.

Depending on your situation, you may be able to create some start-up capital within you own current student base.  Many school owners start out in community centers and have 40-100 students when they decide to open a storefront school.  That student base may represent a source of funding for your school.

Charter Memberships

The numbers, of course, will vary drastically depending on your situation, but a charter membership is a method of quickly raising money for your new venture. This is accomplished by approaching, say, ten of your most dedicated and financially stable students or parents. Let them know of your plans to open the new school and tell them how exciting the new school will be and how much more they will benefit from the opportunity. You have to paint an exciting future for your school and your students. Basically use your sales skills to get them comfortable in this idea.

Explain to them that you are creating a special Charter Membership. This membership will be active for two years of training, yet their tuition will be drastically discounted to $1000. The tuition must be paid in advance and is non-refundable. Let them know that you intend to use the money to build the school, buy equipment and create a first-class facility. You can even create a nice plaque that would recognize the Charter Members at your school. If you can get 10 Charter Members, you have a quick $10,000.

A Charter Membership can work with a brand new school that has no students, but clearly that would be a tougher sell. It's easier to sell this sort of plan to current students who already know your vision and passion and teaching and art. If, in addition to enrolling students on your regular program, you are trying to sell Charter Memberships also, it may erode some of the student¹s confidence in the financial stability of the school unless you are very careful. You don't want to come across as being strapped for money and desperate. Martial arts schools have a habit of opening and prematurely closing, so you have to be careful when working with Charter Memberships.

You also want to limit the number of Charter Memberships to 10 or so. If you make it a specific number of memberships, then it seems like a well thought out and a much more prestigious plan.

What if I don't have any students?

Selling new students is risky as well as much more difficult. The new prospect does not know if they even like your martial art or teaching style. They do not know your passion and do not know how you operate as a business. 

If you can get five or 10 friends who believe in you and want to learn from you, you can apply the same Charter Membership to them and their families. You simply have to be creative and work hard.

Advance Sales

Another strategy that can work in some circumstances is with advance sales of your programs. Try to negotiate the use of a sales office within the shopping center where your school will be located. You can begin to market the school immediately to the surrounding academic schools and neighborhoods. Include the phone number of the sales office or your home on all your marketing materials.

You may be able to sell advance Charter Memberships right out of the office. You must check state laws on bond requirements and the legal ramifications of this strategy. Clearly this can be abused.
 

When raising capital you need to think of what you will be paying for and have an idea of what these will cost. It is always wise to allow a little extra for unexpected things that will undoubtedly arise ­ so never try to cut it too close. If you have just enough money to get started, but not enough to really operate the school, you will never get anywhere. The old rule of thumb is that you need at least six months worth of  working capital to see a business through the early stages. However, if school owners stuck to this, many would have never opened, including me. Risk taking is part of the entrepreneurial spirit, but you still need to have some savings.

To be honest, when I first opened my school, I fell fault to this. I had enough to get the school started and sufficient income to operate it for a few months and continue to scrape by, but I did not have enough funds to operate the school. After about seven months, and some unexpected rising costs, I could not afford to keep the school active any longer. As I write this, I teach privately. I wish I had learned much of what I am putting in this Business Center when I had my own school.

Works Consulted

• National Association of Professional Martial Artists- NAPMA