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Consolidation: The Future of the Independent School Owner? Part 3

marketing mentor May 29, 2020

IS STAYING INDEPENDENT AN OPTION?

 

There are still many school owners who choose to remain independent. Their reason – whether fully justified or not – is that by remaining independent, they will avoid teaching a “watered-down” style, or teaching solely for profit.  

These independents feel that by not affiliating or franchising, they have more control over what is taught in their curriculum and how it is taught. Many schools that teach traditional styles remain independent to avoid modernization.

However valid their opinions on franchises may be, many school owners also have business reasons for staying small and independent. Many of them have realized that economies of scale do not always work out (i.e.: more/bigger schools for bigger profits). Simply put, bigger is not necessarily always better.

These successful-but-small martial arts school owners have figured out that in some industries getting bigger does not always means more money in your pockets. In other words, once you get past a certain number of students, then you find that you will need to hire instructors or office managers, which takes up the bulk of the additional revenues you are bringing in with the increased number of students.

The main success factor for these profitable small martial arts schools is business ambiance (professionalism) and customer service. Not just standard ‘call center’ customer service but something unique to the business. These schools treat all students/members like family and ensure the community feel is front and center within their business model. In addition, they provide the same level of service to their own staff. Although they have fewer staff, they make sure to treat them well both financially and emotionally.

By not expanding beyond a certain size does limit potential revenue and net income; nevertheless, this doesn’t seem to be problem for these unique entrepreneurs as they see profit to be just one of the benefits of their endeavors.  These small business owners are very community centric and take huge enjoyment of being part of the local community. Sometimes, it’s not just all “dollars and cents.”

Nevertheless, as with any successful business, there has to be constant growth for success. However, an independent school owner can control this growth in a way that allows it to thrive but remain small – think of a bonsai tree. The controlled small growth can provide good-quality financial return, and provide key staff members with opportunities to improve themselves both financially and professionally (e.g.: taking on new leadership responsibilities).

However, the coin of independent ownership has two sides. Having a smaller school means sharing martial arts with fewer people. Many independent school owners have to work second jobs, or rely on a partner or spouse having a stable income to provide a majority of the money for their family. Independent schools don’t have a parent company (like a franchise or affiliation) they can turn to for support in times of financial crisis.

It was written in a MASuccess article that the reason to open a second school should not simply be for profits (as it is not a great way to garner addition revenue) or ego purposes (never a good reason for any decision), but to provide your growing instructor base a place to go (and grow). Otherwise, some staff may not wait around for you to retire and will have no other recourse than to stagnate, leave, or even open a competing school.

Conclusion? No matter your model, tap into support!

As stated at the beginning, I wrote this analysis before the COVID-19 pandemic changed today’s business paradigm. Almost all martial arts schools had to close and some may never reopen. So, no matter your current business model, considering today’s customer-centric (and very litigious) society, not to mention the likelihood that these COVID-19 incidents may be repeated in the future, it is obvious that you need to tap into as much support as you can.

Affiliations and, to an even greater degree, franchising will provide a better chance of success for your business. Even if you are determined to stay completely independent, use nonaffiliated support groups like MAIA. During incidents like the COVID-19 pandemic, it is these well-established support mechanisms that will ensure your business’s survival.

The martial arts industry must decide how its future will evolve to ensure its existence in 20 years. Are we going to the way of other similar business models (e.g.: financial planners) and start consolidating, or is the industry to remain fragmented which, when considering how many children are now involved in martial arts, could eventually result in some type of mandatory governmental oversite?

The martial arts industry is home to many amazing people – but there have also been many unscrupulous characters throughout its history. The efforts of organizations like MAIA, Kovar Systems, Premier Martial Arts, etc., have been able to professionalize the industry somewhat to the public eye. However, my concern is that the fragmented and personality-based majority of martial arts schools will cause a number of lawsuits over the next few years which could either cripple the industry or put us under tight regulatory scrutiny.

Consolidation of our industry can be our choice, or it could be forced upon us. It should be our choice and we must remember to be professional about our decisions. The recent COVID disruption means that for most schools, survival will only be possible with the assistance of a support network, whether it be a franchise organization, an affiliation’s concentrated effort or leveraging the amazing effort of industry organization like Century, MAIA, Kovar Systems or even someone like “yours truly,” a longtime business consultant (and ex-banker) who simply wishes to ensure all those dedicated martial arts school owners survive ... and eventually prosper!

 

 

Andries Pruim is a 6th-degree black belt in Shotokan karate with over 45 years experience training in his home country Canada as well as in Japan. A former martial arts school owner, Pruim has 38 years of corporate financial and business management experience. He is a Certified Financial Planner, and continues to renew his CFP designation and update his financial knowledge and skills. In the martial arts world, he is currently a Senior Instructor at two karate schools in Langley, British Colombia, Canada. 

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