In 95% of cases, opening a second location splits your revenue instead of doubling it and leaves you working twice as hard for no money. Before you sign a lease, make your first school very profitable, systems driven and staffed by accountable people. When you do expand, put the second school geographically close to the first without cannibalizing its market.
Key Takeaways
- The typical outcome: the first school drops from $20,000 to $15,000 a month while its expenses rise from $10,000 to $15,000.
- The second location loses money for a while, then grows to $15,000 with $15,000 of expenses, leaving combined net profit at zero.
- Staff goes up by three full-time people and the owner works twice as hard for no money.
- A multiple-school operator must be a systems designer, people developer and staff supervisor, not just a good instructor.
- Key full-time staff need a solid financial incentive and a real career opportunity to share in the school’s success.
- Locate the second school as close as possible without taking market from the first, so marketing benefits both.
The Questions to Ask Before a Second Location
In the last column I explained that most school owners who want to do multiple schools probably shouldn’t. I gave you a few questions to ask yourself prior to considering a second location:
- Why do I want a second location?
- Am I capable of managing multiple locations?
- Is my existing staff focused on our growth objectives, or am I the only one worried about our numbers?
- Am I capable of managing a large staff?
What Usually Happens When You Open a Second School
My recent panel of Martial Arts Millionaires unanimously agreed about the usual outcome when a school owner opens a second location. What usually happens is you get a school operator who is doing fairly well (probably because of his/her personality as an instructor). He decides that he will make more money running two schools, so he opens a second location.
In 95% of the cases, the first location was grossing $20,000 and netting $10,000. The second location opens. The first location drops from $20,000 per month to $15,000. At the same time, the first location’s expenses increase from $10,000 to $15,000.
The second location loses money for quite awhile, then grows to do $15,000 with expenses of $15,000. Now instead of taking home $10,000 per month, the net profit combined is $-0-. Staff is up by three full-time people. Profits are gone. The owner works twice as hard for no money.
Make sure that all key full-time staff members have a solid financial incentive and a real career opportunity to share in the success of your school.
What a Multiple-School Operator Actually Has to Be
Gee, isn’t that an exciting picture?
I’m really not trying to be doom and gloom, just sharing with you that there is more to running multiple schools that being good at running a school. As a multiple-school operator, you must be a systems designer, people developer, and staff supervisor.
Seven Steps to Take Before You Expand
Ok, so I haven’t scared you away from the concept. Maybe you’ve watched Ernie Reyes, Bill Clark, Jeff Smith, Tiger Schulmann, me, or some other chain operator and want to move in that direction. How do you get started?
- 1) Make sure your first school is very profitable.
- 2) Learn the WHY’s of how things work effectively in your school. What makes an exciting class? What’s the exact structure of your enrollment process? How can you systematize your marketing?
- 3) Become systems driven. Make sure your first school can continue to run profitably with you gone for a week or even for a month.
- 4) Learn to teach and coach your staff—not just your martial arts students. Go to work developing your people to be effective marketers, sales people and teachers. Coach them on how to interact with different types of students and parents. Teach them to work through service recovery and out-of-the-ordinary situations.
- 5) Become extremely goal-focused in your school with all staff. Set daily, weekly, and monthly objectives for improving your school in every aspect. Start “holding their feet to the fire” on achieving your weekly and monthly objectives.
- 6) Create enlightened self-interest in your staff by establishing effective commission structures based upon results. Make sure that all key full-time staff members have a solid financial incentive and a real career opportunity to share in the success of your school.
- 7) Create a “no excuses” environment for your staff. Make sure they are accountable and responsible at all times in their areas of responsibility. If you have people who are frequently allowed to miss work, make excuses for failure to accomplish objectives, or who are not truly held accountable, then your problems will multiply when you are off-site.
If you’ve done all of these things, you will probably begin to see a dramatic improvement in your school’s results.
Where to Put Your Second Location
Now if you still intend to open a second school, it’s time to start looking for locations. There are many factors in this determination, but one that few people think about is this: It should be as close as possible without taking away market from the first school, and it should be in a location where much of your marketing efforts can benefit both locations. Do not go across town or across the state for your second school. Look to the next significant neighborhood and find a way to locate a second school that is geographically close but which still pulls from a different neighborhood.
Frequently Asked Questions
Why do most second martial arts school locations fail to increase profit?
In 95% of cases the first school drops from $20,000 to $15,000 a month while its expenses climb from $10,000 to $15,000, and the second school eventually breaks even at $15,000 gross against $15,000 of expenses. Combined net profit lands at zero with three more full-time staff on payroll.
What should I do before opening a second school?
Make your first school very profitable, learn the reasons your systems work, become systems driven so the school runs without you for a week or a month, develop your staff as marketers and teachers, set daily, weekly and monthly goals, tie commissions to results, and build a no-excuses environment.
How far apart should two martial arts schools be?
As close as possible without taking market away from the first school. Look to the next significant neighborhood rather than across town or across the state, so much of your marketing benefits both locations.
How do I keep key staff when I expand?
Give every key full-time staff member a solid financial incentive and a real career opportunity to share in the success of the school. Commission structures based on results create enlightened self-interest.
What skills does running multiple schools require that running one does not?
You have to be a systems designer, a people developer and a staff supervisor. Being good at running a single school is not the same skill set.
