How My School’s Gross Income Increased by 300% and My Net Income by 1,000% in Just Twenty-Four Months

Eric Sbarge — Sat, 01 Mar 2008 04:18:38 +0000

(You Can Keep the Rolex, But I’ll Take the Peace of Mind). By Master Eric Sbarge, NAPMA Maximum Impact and Inner Circle Member.

In 2003, The Peaceful Dragon Cultural Center, my martial arts and health center in Charlotte, North Carolina, was somewhat successful by industry standards. We had been in business for seven years and taught approximately 180 adult students taking in kung fu, tai chi, yoga and meditation. Our center also housed an award-winning teahouse and vegetarian restaurant, an upscale Asian gift shop and professional massage-therapy services. We had just built a custom-designed, 10,000-square-foot building on six wooded acres, with the help of a U. S. Small Business Administration loan.

The problem was my wife and I were working really hard, with long hours, and barely breaking even.

To that point, I was not concerned that we weren’t making any profit. For more than thirty years, ever since I was a teenager, I had lived my life, immersed in Ch’an (Zen) meditation, the Taoist arts of Tai Chi and Pakua, traditional Shaolin Kung Fu and Kempo. I had internalized the Zen philosophy that “You can measure your wealth by the number of things you can do without,” and my wife, being a Chinese Buddhist, shared my views. I still live by this philosophy today and I often share it with my students and others who have burned out striving to attain greater material success at the expense of genuine happiness and satisfaction.

I was making the mistake, however, of projecting my personal beliefs and values onto my school and business. That’s a fatal mistake that seems all too common among instructors of martial arts, yoga and related fields. Just because we may not wake up motivated by money doesn’t mean we’re doing our schools or our students any favors by ignoring the business side of the school. When a school’s doors close because of the owner’s neglect of good business principles everyone loses including the owners, staff and, most importantly, the students.

As fate would have it, one day, in 2003, I read a short Zen story and then a short time later listened to a CD interview with Stephen Oliver in my NAPMA package (the fact that I was nearly breaking even and had built a 10,000-square-foot school on six acres and was not totally bankrupt at that point I attribute to having been a NAPMA member since 1997).

The Zen story was about a monk who was a master calligrapher. His scrolls were so outstanding that every person of means purchased one, but, at the same time, his customers were furious because he charged exorbitant prices for his scrolls. Everyone thought it unseemly that a Buddhist monk, who had taken the vow of poverty, should demonstrate such greed and avarice. What people didn’t know was that the monk was saving every penny for three things, namely to:

1. Stock a warehouse with grain to help poor people during times of famine.

2. Repair the mountain road where hapless travelers were often killed by landslides.

3. Build a temple to honor his deceased teacher.

The NAPMA Sounds of Success CD interview with Master Oliver touched on several topics, but the most important was the need for professional martial arts schools to charge higher tuition in exchange for the high value they offer.
The coincidence of hearing the Zen story followed by Master Oliver’s comments struck a chord with me and something clicked.

I realized that, like the calligrapher of the story, I should be maximizing my school’s income, so that I could be of greater service to my students and my community, but not just so I could be more charitable. I suddenly saw just how much stress and hardship my wife and I and our entire staff were enduring trying to make ends meet, and how much “chi” or energy we were wasting that should have been used to help our students master the arts we were teaching, instead of frantically trying to keep our doors open. Some people make vows to become millionaires, and those who follow up that vow with passion and hard work often do become millionaires. I don’t have any passion to be a millionaire, but I did make a vow that day after hearing Master Oliver on the NAPMA CD. I vowed to make my school a millionaire, and with hard work and passion I am succeeding.

Focusing on the business end of the school as intensively as I had focused on the “martial arts” part of the school required a change of mindset. Once Master Oliver helped me change my mindset, the rest fell into place fairly neatly. I won’t say easily because it was and remains hard work to develop and run a top-tier school. I say neatly because we finally had a clear game plan modeled after plans used by other successful schools and businesses.

Changes and Results

Let me share some details of the important steps and changes that we made, as well as some of the results of those changes.

1. Stephen Oliver’s Martial Arts Marketing Boot Camp

Despite our ongoing shortage of money, I registered for Stephen Oliver’s Martial Arts Marketing Boot Camp, with my son George who helps manage our school. Including the plane tickets, expensive tuition, hotels and meals I think the trip cost about $5,000. My wife shook her head as we left. (This is now a coaching members-only event: learn more at: MartialArts-Mastermind.com.) At the Boot Camp, Master Oliver said we should raise our $99-a-month tuition by about 30 percent. He suggested grandfathering in our current students at the old rate, which is what other schools were doing. He also shared advice from Dan Kennedy, one of his primary business mentors that were vital: Be immune to criticism and don’t feel you have to do what everyone else is doing. We returned to our school the next day and raised our tuition 50%, from $99 a month to $149 a month. We didn’t grandfather in our current students.

“I was making the mistake of projecting my personal beliefs and values onto my school and business. That’s a fatal mistake that seems all too common among instructors of martial arts, yoga and related fields.”

Instead, I wrote a careful letter that I sent to each student, stating that our school could not survive for long with our current tuition structure. I informed them that I would double the value of their training, but only raise the tuition by 50%. I proceeded to explain in the letter exactly how I would double the value, and then closed by stating that I didn’t want to see a single student quit because of higher tuition and that if the new rates were too high, then they could come see me personally and we would work something out. The result of this tuition change was that three students quit (they were clearly looking for a good excuse to quit), two students did come see me to arrange lower tuition payments, and the other 175 students happily signed tuition agreements at the higher rate. Our new level of income paid for the Boot Camp in less than one month. The impact of the higher tuition from new students was exactly as Master Oliver promised it would be: We didn’t enroll any fewer new students – we actually enrolled more because of the higher “perceived value.”

2. A Solid Sales and Enrolment Process

The next big change I made was to implement a solid sales and enrollment process. We didn’t need more leads because we were averaging 80 – 100 leads a month due to solid marketing, but we were only closing 10 or 12 new students each month. Clearly, our lack of training in sales was hurting us and preventing us from converting leads to students. During his Boot Camp, Master Oliver gave us great advice about improving our sales processes and finding and purchasing effective sales training with integrity for our staff and my wife and I. With this sales training, we nearly doubled our enrollment percentage. After 14 months, our active student count had jumped from just fewer than 200 to nearly 350. (NAPMA Maximum impact members receive extensive sales training materials and access and direction for additional resources.)

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3. A Dan Kennedy Student

The third big step I took was to go right to the horse’s mouth and become a student of Dan Kennedy. I figured if it worked for Master Oliver, then it should work for me. I purchased every book Kennedy (one of them co-authored with Master Oliver) had written, invested about $25,000 in his marketing and business management programs, started attending his national seminars (with Master Oliver, Rob Colasanti, Toby Milroy and Frank Brown,) and eventually joined the Peak Performers group with his partners, Bill Glazer and Lee Milteer (who is also a contributor to the NAPMA Inner Circle and Peak Performers members).

[Learn more about Dan Kennedy’s programs at NAPMA.com/DanKennedy.]

A few of the profound changes we made at our school are the result of principles learned directly from Dan Kennedy as well as Master Oliver:

• Mr. Kennedy notes that, according to the 80/20 Pareto Principle, 20% of the products or services of most businesses generate 80% of their profit, while the other 80% of customers just gives owners grief. He advises isolating and keeping the most profitable parts of your business and shedding the least profitable; and he suggests keeping profit centers that require the least amount of staff (and thus headaches).

Following his advice, we closed our award-winning restaurant and tea house despite objections from long-time customers and with heavy hearts; we phased out the Asian gift shop and switched to just martial arts and yoga supplies;

and we eliminated the massage therapy services that took a disproportionate amount of our attention. We are left with our core business, about which we are most passionate: A martial arts school teaching Shaolin Kung fu, Shuai Chiao (Chinese grappling), tai chi, Zen meditation, yoga and a fitness boot camp. We have half as many employees, work significantly fewer hours, and have seen our profits rise month after month, since making these changes.

• Mr. Kennedy advocates creating a “herd” of dedicated customers (students) through constant communication and service. We now have a monthly newsletter, monthly on-line lessons, weekly e-mail correspondence and a host of activities to keep the “communication channels” always open and boost retention (NAPMA provides many resources, including their new “100% done for you” newsletter – created, printed and mailed for you). Your monthly newsletter should be distributed to the following groups: all prospects (including Internet opt-ins) and inactive and current students – and, frankly, the prospects and inactives are the most important.

• Mr. Kennedy and Master Oliver admonish business owners not to sell what they want to sell, but to sell what the market wants to buy. We built our school in a family-oriented community, and we were ignoring the huge demand for children’s classes. We decided to learn how to run a children’s martial arts program, and it now accounts for 35% of our students.

NAPMA’s Little Ninja’s Program taught us how to generate excitement in kids’ classes, and Master Oliver taught us how to run an efficient rotating block system for our children’s curriculum.

• Mr. Kennedy and Master Oliver are both strong advocates of “take-away” selling, and we have incorporated that philosophy into our school. In the old days, at the legendary Shaolin Temple, a prospect often had to beg for days, weeks or months to be admitted as a student, and most were turned away. We’re very selective about who we accept into our school. We have an application process to join our introductory program and a series of steps and applications to join our upgrade programs. This approach actually increases demand, ensures a highly dedicated and motivated student body and streamlines the upgrading procedures.

• Mr. Kennedy is an expert at “selling from the floor” during group seminars. We have copied his model, and now do exclusively group intros and group upgrades. The time we’ve saved eliminating one-on-one intros and upgrades by our staff allows our staff to serve our current students better; and we still have a high conversion rate. We upgrade approximately 85% of our adults and 70% of our kids to three-to-five-year programs, with standard tuition rates, ranging from $190 - $250 per month (we offer family, accelerated payment and pre-payment discounts).

“The impact of the higher tuition from new students was exactly as Master Oliver promised it would be: We didn’t enroll any fewer new students – we actually enrolled more because of the higher ‘perceived value’.”

• Both Master Oliver and Mr. Kennedy constantly stress the value of continuing education. This isn’t new to me, but I’ve pulled out all the stops by joining NAPMA’s Maximum Impact, NAPMA’s Inner Circle group, Stephen Oliver’s coaching group and any other programs they offer. There may be some redundancy, but repetition has always served me well in my martial arts and meditation training. No one needs to disguise the repetition for me – I appreciate it and welcome it. I attribute ALL of my improvements and 300% increase in gross to being willing to spend whatever it takes to improve my education. My continuing education investments have resulted in at least a 10 to 1 return – for every one dollar I spend in additional education (Inner Circle, Coaching, etc.) I have received at least $10 in gross revenue – but really much more return in NET PROFIT.

As a result of the management improvements we made at our school, our average monthly income has grown from $25,000 to approximately $75,000.

Previously, my wife and I took were paid salaries of $19,000 a year each. We lead a simple, Zen-influenced lifestyle by choice, and Charlotte is a relatively inexpensive city. Our accountant advised us that we may run into problems with the IRS if we don’t take hom a higher salary – apparently it is unusual for business owners not to take more cash from their businesses and this could raise warning flags. We’ve each raised our salaries dramatically; however, we simply take much of that extra money and put it back into the school, anyway. Master Oliver entices people to his coaching program with promises of big incomes and images of Rolex watches and Porsches, and that’s okay if that drives you. I choose not to make any judgments of other people’s motivations, just as I really don’t care how others judge me. I greatly respect Master Oliver’s knowledge on building and managing a martial arts school, period. What I can say with certainty, however, is that if you don’t have the compulsion or need to take lots of money from your school in personal income, but, instead, choose to reinvest it back into your school, then you will be amazed at the possibilities for growth and improvements.

“Both Master Oliver and Mr. Kennedy constantly stress the value of continuing education. My continuing education investments have resulted in at least a 10-to-1 return.”

I pay my staff double the industry norms and give each full-time employee great benefits, including health insurance, vacations and IRA contributions – and, in turn, they do a great job. My rent is high – $12,000 a month – because we are paying the mortgage and taxes on our large, custom building and the 12 commercial acres that we own (we recently purchased ad additional six acres). Every month, however, we are building thousands of dollars in equity in the land and building that will help ensure the viability of our school for my son and the next generation of students. I’ve purchased every kind of insurance imaginable, and my wife and I make sizeable contributions to IRA accounts, so we feel we are well covered for the future.

Despite our school’s high expenses, the monthly net income after salaries now averages between $10,000 and $20,000. I could buy many Rolexes or a handsome Porsche with that income, but I’ve already have some things that I personally find much more valuable: Tremendous students making great progress in their training; a more relaxed lifestyle that allows me to focus more on my training and less on bill collectors; and the security and peace of mind that comes from owning a well-managed school that is profitable and self-sufficient.