Stay The Course!

Clear Thinking and Focused Action Will Steer you Clear the Negative Economy and Interfering Legislators

The Worst Economy Since the Great Depression!?

Is that really true?

More about that later. What is true is that SOME schools will THRIVE and MANY will die during the coming months and year. Which will you be?

Everywhere you turn you see NEGATIVE headlines on the economy!

Unemployment Up!
The Stock Market Down!
GDP (Gross Domestic Product) Down!
Housing Prices WAY Down!

I notice that the headlines the other day were about President-Elect Obama’s description of our economy as being the worst since the Great Depression (ignoring, for whatever reason, that the unemployment rate is 6.something% today compared to 25% during the 1930s!); and all of the commentators telling us about how bad things are looking.

By the way…Thanks a lot for that! All of the studies show that a DROP in consumer confidence proceeds a recession.

What’s next? A drop in consumer spending. All of these comments and speculation comes just in time for the HOLIDAY shopping season, when a huge percentage of annual retail spending is transacted.

It really is rough times ahead, clearly exacerbated by the Election year rhetoric. You know it’s growing worse when just about everyone asks me: “Will this economy hurt your Karate schools?”

To all of them, I should be saying, “Geez thanks for the little extra ‘negative programming,’ as if I couldn’t read enough in the newspapers and magazines, hear on the radio or view on the television…gee, I can’t even watch Boston Legal without being reminded about how scared I should be about the economy!

In the meantime, guess what? The rich get richer…the poor get poorer.

Now, I know, as usual, my take on this will annoy some. Before you write a letter, let me finish my explanation and show you how you can be in the Rich-get-Richer category. Those who study and learn maintain their business while gaining market share or skyrocketing to the top. What do I mean by rich? In our context, I mean, in part, the following: School owners, who through many years of trial and effort, extreme personal education and focused implementation, have learned EVERY aspect of their chosen profession: Being the deans of their martial arts schools, the CEOs, marketing directors, CFOs, as well as truly the “master teachers.” If you have learned…and continue to learn every aspect of your chosen profession, then you can thrive while others die. You can be the rich (in resources or knowledge) who get richer, rather than the poor who get poorer.

I firmly believe that most instructors and school owners in our industry prefer to remain ignorant of the business details of their chosen profession. Many steadfastly refuse to join NAPMA; explore franchise opportunities; visit the business section of their local bookstores; or take accounting, administration, marketing and sales courses at their local college or junior college.

Some of those individuals who focused only on the technical aspect of their martial arts survived, some even achieved mediocre results during BOOM times. During our past U.S. economy, under Reagan, Clinton and then most of Bush’s administration, EVERYTHING was BOOMING. Now, there’s trouble on the horizon, and those who chose ignorance will DROP LIKE FLIES.

In my case, we just added regional developers for many areas, including likely New Zealand, the UK and Miami, Salt Lake City and possibly Knoxville and Ft. Lauderdale! We’re gearing up a Northern Virginia Mile High Karate training center, and even talking to my instructor Jhoon Rhee about working with us at Mile High Karate.

My schools? Well, record intro numbers. Certainly some of the parents are “concerned” about losing their job or the effects of all of this “economy stuff.” Frankly, most of our school owners and regional developers who will likely make more than $250,000 SHOULD be worried about the tax increase that Obama and the Democrats plan to inflict upon us. On another front, I noted that the media said not a word about the cost of a barrel of oil DROPPING to $63 a barrel or OPEC being lead by IRAN, worrying about cutting production, due to falling demand to keep the price stable! Wasn’t the recent crises de jour about $150 a barrel oil, and how that would kill us all?

Anyway, back to running martial arts schools in today’s economy.

Thriving in a Scary Economy First, protect yourself and your staff from the influence of the media and the “Mediocre Majority.” Either filter this crap well or turn off the TV until it’s over. You’ll be told we’re coming into the next Great Depression. During the depression, unemployment was at 25%. Now, it’s between 6% and 7%.

The politicians are busy running around, trying to prop up stupid corporations that loaned money to people who couldn’t afford to pay their mortgages on homes that were massively overvalued.

They are trying to prop up over-inflated home values. It’s much like trying to prop up the price of “Webvan” and other Dot.Com speculative-era stocks. Foolish and dangerous. In many areas—South Florida, most of California, Boston, etc.— home prices had hit points that were unsustainable, given the median incomes of the populations of those areas.

In California, for instance, a huge percentage of homeowners were on interest-only loans; others were exploring 50-year amortizations on their loan or adjustable-rate mortgages that increased in three or five years to unaffordable levels.

Who’s to blame? Is it the Republicans or the Democrats? Is it Wall Street or Main Street?

Well, the unfortunate truth is that it’s everyone. The Democrats forced lenders to loan money to just about anyone who wanted to own a home, including those with low incomes and incomes below the “median” for any given area. Then Fannie May, Freddie Mac and other lenders packaged and sold mortgages as securities (with little or no hope to collect the money). No one tried to regulate those securities or raise a red flag about them (i,e., The Republican administration).

Then, the general public started obtaining money so easily that they used their home as an ATM and were committed to adjustable-rate mortgages that they couldn’t afford. Bet on home prices to continue to escalate at unsustainable rates. So, everyone’s to blame.

Take no pity on the failing financial institutions, their stockholders losing their investments and the CEOs out on their butts.

The only possible shining light is that like the S&L bailout there is underlying value to all of the mortgages secured by property. It may be 75% of face value (even less), but, regardless whether it’s private money (see Warren Buffet jumping WAY in on this one) or the government, there will likely be profit at the end of the rainbow. The government may spend $700 trillion and make back $900 trillion. It’s unlikely, only because, well, it is government doing it. I guarantee you Warren Buffet and others with the deep pockets that are stepping in will make a huge profit on the deal.

How does this affect you?

Well, if you are trying to sell a $400,000 home that you thought was worth $650,000, then you are in trouble, if you expect $650,000, or have a mortgage of more than $400,000. Also, there’s a temporary “credit crunch” that means you may have trouble raising money from traditional sources for your business expansion.

Other than that, you are mostly battling fear and perception. So, don’t buy into the pundits who are telling you that your business should be failing. Keep growing, and avoid the TV news.

You will be bombarded with messages this winter about how scary your world is.

Second, “Raging Thunder lizard Evangelists!” What is that you may ask?

Well, the first thing you must do to insure that you thrive is to turn every student that you enroll into a RAVING fan. I borrowed the term above from Guy Kawasaki who was a member of the first Macintoshâ„¢ development team with Steve Jobs, and then wrote a number of books on the subject of marketing and business start-ups.

If you want to really grasp the subject, then I’d recommend that you read his books and a couple of others: The Culting of Brands and Customer Satisfaction is Worthless. If you wish to thrive, and not just survive, then you must make sure that your students are thrilled with you and your school. Make sure they immediately become huge fans, instant “converts” and evangelists for you.

You can look at many different products and brands. While many (Dellâ„¢ included) suffer in the current environment, Appleâ„¢ keeps hitting records sales numbers and stockpiling ridiculous amounts of cash. Why does Apple thrive while others suffer?

Well, a personal example. I need a new laptop for a variety of reasons. I’ve mostly used a MacBook Proâ„¢, but some software we use for NAPMA only works on a PC. Now, I’m in a quandary. A perfectly reasonable solution is the Dell laptop that I saw at Best Buyâ„¢. It was around $800, and will do everything I need. My other alternative is a new MacBook Pro, which is $2,500. Now, it’s probably not comparing apples to apples (no pun intended), but which I am more likely to do? Spend $800 for a tool that will fix my problems or $2,500 for what I really want?

Well, I’m sure you already know the answer! There’s a car commercial on TV that compares a Hyundai with a BMW. I’m sure the ad works for some. Who doesn’t it work for? Anyone who owns a BMW!

The reality is that although a Hyundai may compare favorably for a lower price, few BMW loyalists will jump ship for the savings!

So, make sure that your students are all “Raging Thunder Lizard Evangelists.”

Third, keep your prices where they are or raise them with much higher value added. Now’s not the time to “try to make it up in volume” because our industry just doesn’t work that way. You must really focus on high value from each student. Some students and parents may be looking to cut their budgets. You must be so good and so anchored into their world that it’s just not an issue that you’ll be on their budget-cutting lists.

Fourth, increase your marketing budget AND your marketing efforts. Now’s not the time to be cheap on your marketing. Expand your efforts and budget to attract new students.

Stupid businesses cut back on marketing when it’s more difficult to attract new customers. That’s backwards. Others find their marketing and training budgets easy places to cut expenses. Don’t think that way.

Finally, increase your training budget. Go to more seminars. Buy more books. Read more about marketing, service, administration and teaching methodology. Now is the time to invest more in your staff and yourself. Don’t cut back. If you’re not a NAPMA member, then join right away…you can even try it for free at NAPMAFreeOffer.com. Make sure you’re registered to attend the 2009 NAPMA Quantum Leap, March 20-22, in Denver, Colorado. It will be very worth your while. Visit NAPMAQuantumLeap.com.

Interfering Legislators Alert!

NAPMA has learned that Joseph J. Roberts, Jr., Democratic New Jersey state assemblyman and president of the state assembly, is sponsoring Bill 2164, which is the known as the “Fitness Professionals Licensing Act.”

This bill would affect any “exercise facility,” including “martial arts studios,” and any individual who is a “fitness professional,” “group fitness instructor” and “personal trainer,” as defined by the bill.

This bill would establish a State Board of Fitness Professionals and impose the following:

• Educational requirements imposed by the Governor-appointed Board, including 150 hours of Board-approved course work.

• Certification from the National Board of Fitness Examiners.

• Clubs employing fitness professionals must register and pay an undetermined fee every two years.

• New applicants for licensure, following SB 2164’s enactment, must complete 300 hours of Board-approved class work, including 50 hours of an unpaid internship, or possess a degree in a related field. (In comparison, a CPA (certified public accountant), doing business in New Jersey, is only required to complete 120 hours of professional course work every two years.) You can read a synopsis of this bill at njleg.state.nj.us/2008/Bills/A3500/3356_I1.HTM.

NAPMA is joining with other professional associations, such as the International Health, Racquet and Sportsclub Association (IHRSA), American Authority on Fitness (ACE), and others to promote opposition to this bill.

NAPMA agrees with IHRSA’s reasons to oppose this bill, as adopted below for our industry.

1. The bill ignores the many martial arts professionals that have embraced accreditation, as a responsible means of self-regulation to ensure consumer safety. Many years ago, NAPMA developed the American Council on Martial Arts (ACMA) Certification Program, in conjunction with The Cooper Institute for Aerobics Research.
2. Nominating a single certifying body ignores the high accreditation standards set by the ACMA.
3. The bill establishes eligibility requirements that would inevitably lead to a dramatic increase in the cost of martial arts training in New Jersey, thereby decreasing the number of people pursuing the benefits of such training in that state.
4. The bill’s education requirements are arbitrary, unworkable and wholly detached from current industry practice. The bill represents an extreme departure from industry practice by requiring New Jersey martial arts professionals to complete an educational prerequisite equal to roughly seven college courses. It is unclear why such a requirement would be necessary for a non-clinical vocation. It is also important to note that such a course does not currently exist.
5. Licensing requirements could have an especially devastating effect on New Jersey martial arts instructors. The additional costs that the Fitness Professionals Licensing Act would impose on these instructors would undoubtedly have a prohibitive effect on the number of individuals willing to engage in the practice.
6. A professional registry for New Jersey martial arts professionals, as envisioned by this legislation, requires meticulous oversight and maintenance, and may too easily be neglected due to its significant budgetary impact. Considering the difficult budget constraints currently facing the state, an unequivocal, long-term commitment of personnel and tax revenue to the oversight and maintenance of the registry is hard to foresee.

NAPMA has also adopted a form letter prepared by the IHRSA that you can customize and send to New Jersey governmental and legislative leaders. It will only take a few minutes, and will show your support for your fellow martial arts instructors and school owners in New Jersey. Your state may be next!

Please visit this legislative alert page here!