You Had Zero Renewals Because You Talked to Zero People

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Grandmaster Jeff Smith is the first PKA World Light-Heavyweight Kickboxing Champion, a seven-time world champion, and Director of Instruction for Mile High Karate. This column is drawn from the weekly school-owner call he leads for Martial Arts Wealth Mastery.

The month I look at first

I want to talk about September, because September is the month that tells me whether a school owner is running his business or watching it.

September is the last month of the third quarter. It is the last opportunity you have to save that quarter. Whatever the third quarter is going to be, it gets decided in the next thirty days, and after that the number is the number and you can’t touch it. Most owners don’t think that way. They wait until the end of the year, they do their yearly numbers, and then they say, well, we had a bad year.

No. You had a bad first quarter, and nobody looked at it, so you had a bad second quarter, and nobody looked at that either.

Each quarter is designed to control your success over last year. That is what a quarter is for. It is not a calendar convenience. It is four chances a year to catch yourself before the damage is permanent.

What “doing your stats” actually means

When I ask an owner for his numbers, I don’t want a feeling. I get a lot of feelings. “We’re doing okay.” “It’s been a little slow.” That is not a number.

Here is the comparison I want, and I want it on one sheet:

Last year’s monthly average, for every category
January through December of this year, month by month
A first-quarter total, a second-quarter total, a third-quarter total, a fourth-quarter total

And the categories on the left of that sheet are the ones that actually move a school: leads, appointments, first intros, second intros, enrollment conferences, enrollments, renewal conferences, renewals, gross, active count, dropouts.

Now — how do you know whether you are winning? You compare four ways, in this order.

1. This quarter against the same quarter last year

Am I on track for the third quarter to match up with the third quarter last year? Am I beating it? What do I have to do in the third month of this quarter to beat what I did last year?

Two months into a quarter you can already do this. Add the two months, divide by two, and that is your quarterly average so far.

2. This quarter against last year’s overall average

Your yearly monthly average is the line you are trying to stay above. That is what the first column of the sheet is for.

3. This quarter against the first and second quarter of this year

Take three months in the first quarter, divide by three. Same for the second. Now you have a monthly average for each quarter, and now you can see the shape of your year.

4. The direction

Is the school going up? Was the first quarter up, the second quarter down, the third quarter up again? Because that is how you know what to change. That is how you alter the course of your school’s success or failure — by knowing whether you are trending up or trending down while there is still time to do something about it.

One of our schools ran 74, then 86, then 103 across the first quarter. I look at that and I know the school is doing what it is supposed to do. January was bad. February they did better. March they went over a hundred thousand — because they had worked out that they needed to average about 84 a month to be a million-dollar school, and they had a January deficit to make up. So they made it up.

Now run it the other way. 74, then 64, then 54. What does that tell me about the school? Obviously something is not right. But more to the point, what does it tell me about my staff? It tells me we are not learning from our mistakes. And that is when I take my foot and I put it somewhere useful.

We learn from our mistakes and we learn from our failures — but only if somebody is looking at them in February, not the following January.

The gross is the big whale

Somebody on the call answered “enrollments” when I asked for the most important number. Enrollments matter. But the most important number is your gross income, because gross is what pays the bills.

And gross is a signpost. Once I see whether the gross is higher or lower, I go to the other numbers to find out why. My gross is down — okay, why? My enrollments were down. Why were my enrollments down? My leads were down. Which means my marketing was down. See how that works? The gross points you at the number you actually need to fix.

Now, a warning that trips people up every time: gross is not contract value. If you write a $100,000 agreement this month, you did not gross $100,000. Your gross is what you actually collected. The rest is receivables. Master Moody put it plainly on the call — otherwise you would be double counting everything, because when they make that payment next month it shows up again in your billing.

The four sources of your gross

There are four, and only four, and if you control the four you control the whole number.

Enrollments. Down payment plus first month’s tuition. If you are charging a proper down payment and monthly, call it $500 minimum, then ten new enrollments is $5,000 more in gross than last month before anything else happens.
Renewals. When somebody signs up for black belt club or leadership. A renewal is more valuable than an enrollment, and we will come back to that, because this is where most schools are leaving the money.
Paid in fulls. One of our owners took a paid-in-full last month and it moved his gross by ten thousand dollars on its own. He went from the high fifties to seventy-two. He described it as a lifesaver.
Miscellaneous. Retail, summer camps, testing fees if you still charge them, uniforms, gear, special-order equipment. We used to pull an extra fifty or sixty thousand dollars in a summer out of camps alone.

So: enrollments, renewals, paid in fulls, miscellaneous. Four dials. If your gross moved and you cannot say which of the four moved it, you are not running the school, you are just opening it.

Net enrollment, and the arithmetic nobody wants to do

This is the number that tells me how fast a school is really growing, and it is the one most owners skip because it is the one that stings.

Net enrollment is your total enrollments for the month minus your dropouts. That’s it. But watch what it exposes.

On the call we looked at a real school. April active count: 224. In May they enrolled ten. So we should be sitting at 234. The May active count came back at 223.

Ten came in. The count went down by one. That means eleven went out.

That is my math that I learned in college, and honestly it is my math from elementary school. But you have to actually do it, every month, or you will keep telling yourself you had a good month because ten people signed up.

Here is the part that should make you sit up. Take the first six months of the year. Add up all your net enrollments — the pluses and the minuses together — and divide it out. If that number is plus one a month, or minus two a month, then that is very likely what the next six months are going to look like too. Because if you have not fixed it in six months, one of three things is true: you are not aware of it, you don’t care, or you knew and you didn’t do it.

A positive net means your active count is climbing. A negative net means it is falling. A zero net means as many walked out as walked in, and you spent a whole month running to stand still.

And I will tell you what Master Oliver wants, which is a dropout rate of one or two percent. Do the arithmetic on that. Twenty new students a month is 240 a year. Say you have 200 active and you are losing ten a month — that’s 120 out. You still went from a 200-student school to a 300-student school in twelve months. That changes what kind of business you own, and I have written elsewhere on this site about exactly what 300 students at the right student value is worth.

Zero renewals, zero conversations

I went over a school’s August numbers the day before this call. Thirteen enrollments. Not bad. I’d like to see more, but not bad.

Then I looked at renewals. Zero.

So I asked the obvious question: how many people did you talk to about renewing?

Zero.

Well — that’s not much of a mystery then, is it. You had zero renewals because you talked to zero people.

One of the owners on the call said he was trying his tail off to get renewals and couldn’t get them. And another owner answered it in two words before I could: ask for them.

Write that down. You ask them. That is the whole technique.

This is exactly why our stat sheet has two columns that most sheets don’t: EC and RC — enrollment conference and renewal conference. Not enrollments. Not renewals. Conferences. The number of times you sat down with a human being and had the conversation.

Because if the conference number is zero, the renewal number was never going to be anything else, and no amount of studying your gross will tell you that. You have to count the conversations, or you will spend a year blaming the close when the problem is that the meeting never happened.

My own minimums, when I was running schools: twenty enrollments a month, minimum. Ten renewals a month, minimum. Some months we did fifteen or twenty renewals because we ran a renewal blitz. Some months we did thirty enrollments because we had a live event or a school program driving traffic. But those were the floors, and everybody knew them.

What are yours? If you cannot answer that in a number, you don’t have a goal, you have a hope.

Why renewals are worth more than enrollments

Let me be blunt about the structure of this business.

You cannot have a renewal without an enrollment — if nobody signed up, there is nobody to renew. But where the gross of your school starts doubling, tripling and quadrupling is when you have people on a program they are going to be on for three, four, five, six years. Not twelve months.

If I look at a school that has a twelve-month program and nothing after it, I will tell you now: that school will never be a million-dollar school. It is almost impossible. Every year you rebuild the entire student body from scratch, and you spend everything you make on marketing to replace the people who timed out.

The renewal is not an upsell. It is the thing that turns a school into an asset.

Setting the goal, and setting it early

When I ask an owner what his goal is for the month, I get answers like “to do the most I can.” That is not a goal. That is a mood.

A goal is a number, it is realistic, and it has stepping measurements along the way so you can tell whether you are on track. Wanting to be a million-dollar school is a fine ambition when you are starting out. It is useless as a monthly target unless you have broken it into what this month has to produce.

Once you have one full year with us, you have something to beat. Now the goal writes itself: last year, plus something. Ten percent is a reasonable low goal. Twenty percent is a reasonable high one. Some people set bigger. That’s up to you.

But understand what compounding does here. If you are doing a million and you take ten percent, that’s about ten thousand dollars a month more. Next year it is ten percent on that. Then ten percent on that. That is how schools quietly end up over a hundred thousand dollars a month without any single heroic year.

And you can have a bad month and still have a great quarter. That is the whole reason to track quarterly. The school I mentioned had a lousy January and still put the first quarter over the line, because March was built deliberately to cover it.

What this looks like on a Friday

Every weekly staff meeting we ever had, we went over these numbers. Every one. Not to punish anybody — to find the thing we needed to improve before the month closed and it was too late to improve it.

When I see a school whose numbers are climbing like that, it tells me nobody there is sitting around waiting for things to happen. They are taking control of the growth of the school by adjusting what has to happen this month to hit the goal they set for the year.

The alternative is what I call autopilot, and you do not become a million-dollar school on autopilot. You might as well put a bucket on the front desk and ask people to drop money in as they walk past.

Your homework, and it is not optional

Build the sheet. Last year’s monthly average in the first column, then every month of this year, with quarterly totals. Leads, appointments, first intro, second intro, EC, enrollments, RC, renewals, gross, active count, dropouts.
Fill in September before September ends. Not October. September is your last chance at this quarter.
Do your net enrollment for every month this year. Add the pluses and minuses, divide it out, and look honestly at what that predicts for the next six months.
Count your renewal conferences. If that column is zero, stop reading about closing and go book conversations.
Write down two minimums — enrollments per month and renewals per month — and tell your staff what they are.
Put the numbers on the agenda of every weekly staff meeting, permanently.

None of this is complicated. It is a spreadsheet and about twenty minutes a week. What makes it hard is that it tells you the truth on a schedule, and most people would rather find out in January.

Find out in September instead. You still have a month.

Frequently asked questions

What is net enrollment in a martial arts school?

Net enrollment is total enrollments for the month minus total dropouts for the month. If you enrolled 10 and your active count fell by 1, you lost 11 students. A positive net means your active count is growing; a negative net means it is shrinking; zero means you ran all month to stand still.

What counts as gross income for a martial arts school?

Gross is money actually collected in the month — billing plus everything that is not billing. It is not contract value. A $100,000 agreement written this month is receivables, not gross; the payments count in the months they are collected, or you would be double counting.

What are the four sources of a school’s gross income?

Enrollments (down payment plus first month’s tuition), renewals (black belt club or leadership), paid in fulls, and miscellaneous — retail, summer camps, testing fees, uniforms and gear. Every dollar of gross comes from one of the four.

Why did my school get zero renewals last month?

Almost always because zero renewal conferences were held. Track renewal conferences (RC) as a separate column from renewals. If the conference count is zero, the renewal count was decided before any closing skill mattered.

How often should a school owner review statistics?

Daily for collections, monthly for the full sheet, and quarterly against both the prior quarter and the same quarter last year. Reviewing only at year end means every correction arrives eleven months late.

What is a realistic annual growth goal for a martial arts school?

Ten percent is a reasonable low goal and twenty percent a reasonable high one, measured against last year’s actual numbers rather than an aspiration. Compounding at ten percent is how schools cross $100,000 a month without a single heroic year.

Grandmaster Jeff Smith earned his black belt under Grandmaster Jhoon Rhee in 1969 and served as Senior Vice President of the Jhoon Rhee Institute from 1970 to 1985. In September 1974 he won the first PKA World Light-Heavyweight kickboxing title and went on to become a seven-time world champion. From 1981 to 1991 he coached the WAKO World Champion United States team to ten consecutive world titles. He is Director of Instruction for Mile High Karate and a coach with Martial Arts Wealth Mastery.