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Thursday, 06 June 2013 19:59

Buying A Martial Arts School

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Running a business without knowing how is similar to rolling for the first time with a black belt. You're going to get destroyed!

It might sound like a great idea to buy a martial arts school, but it could turn out to be a big nightmare.

That's exactly what happened to me. I started my own school in 1997, and in 2005, I purchased a Tae Kwon Do school that had 130 students and merged their students into my school. After a few years, there was almost no one left from the school that I purchased! I wish someone knowledgeable about this would have told me the things I'm about to share with you.

#1) The first thing you have to consider is: What is the culture of the school you are thinking about purchasing?

Students in the Tae Kwon Do school I bought earned their black belts in 2.5-4 years. And there were 8 year old black belts. How do you think everyone responded to an average of 10 years or more requirement for a BJJ black belt? Not good. They couldn't get over it.

Even if you are thinking about buying a BJJ academy, is the culture of the school the same as the culture you will have? I recently heard about a BJJ academy that was focused on self-defense, and the BJJ franchise that they belonged to changed their focus to tournament Jiu-Jitsu. They left the franchise. There are definitely different cultures among BJJ schools.

If you are a BJJ teacher, and you are thinking of taking over a BJJ school, you may think that there won't be a problem because it's the same art, but you would be surprised to find out how fussy students are. If the owner was a 160 lb. guy and you are 200 lbs., some students will complain and leave because they liked the little guy game and you have a big guy game. Or vice versa.

Some things to consider:

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Do you and the school you're considering buying have the same affiliation?
Do you have the same attitude and practice towards tournaments? MMA? Self Defense?
Is your billing similar? Is the price similar? Do you offer month-to-month or long term agreements?

#2) How well do you know the students and staff?

If the students and staff at the school you want to purchase do not know you well, they are going to freak out. Absolutely FREAK OUT!

And to be fair, if a student is on a year agreement with the original owner, and then you buy the school and the student still has 6 months left in their contract with you, the student is going to be very concerned about what they are going to be getting. They agreed to pay for a service every month for the next 6 months and then they are going to receive a product that they're unsure of.

Remember one thing about business: people talk. When things are good, people talk a little bit. When things are bad, they talk a lot, and with a lot more enthusiasm. Many people love drama and they love to complain. If you take over a school and you are not careful about how to do it, a lot of people are going to be talking about it, and it won't be good. They will leave your school and take their friends with them.

#3) The best way to buy a school is to have a 6 month to one year transition period.

You need to be teaching in the new school for 6 months. The students need to know you. If you just show up one day and announce that you are the new owner, you won't believe the hell that your business life will become!

And you will get the most amount of resistance from the instructors at the school, and the senior students. If they are upset enough, they may break off and start their own school. And it's almost guaranteed that they will be nearby, and they will take a lot of students with them. They could become your biggest competitor.

#4) How much should you pay for the business?

Get a business broker. They have metrics to value the business so you don't get ripped off. And if they are good negotiators, they can save you a lot of money.

Buying a business can be similar to buying a house. If you find a desperate seller, you can get a big discount. This includes a seller that wants to move out of state, or who has already accepted a job and need to move soon, or who is injured, or burned out. Any situation where the owner is desperate can be a great buying opportunity.

You won't get a deal when you are dealing with an owner that is not desperate and not in a hurry, and they know the value of their business.

#5) Are you paying up front for the business or month to month.

For the seller, it is best for them to get you to pay a lump sum up front for the business. The seller may offer a cheaper sales price to pay for the school in one lump sum, but I highly recommend that you arrange to pay the owner over a few years (unless the sales price is small).

If you have any problems after you take over, it can be really difficult to get any money back from the seller. If you are paying monthly, and you stop paying, they may have a hard time getting money from you. I also highly recommend that you get a lawyer that has a lot of experience with buying and selling businesses. They can save you a lot of money and stress. And if you have a good business broker, they can be a great help here also.

#6) Go through all of the student contracts.

Find out exactly what you are buying. If the seller says that they have 100 students, find out what that means. It may be 85, and 10 of them are not paying (for whatever reason), and 5 of them may be exchanging teaching or cleaning for training. 20 of them may have paid their memberships up front (referred to as "paid in full.")

If you have calculated that 100 students each pay the current rate of $100 / month, which equals $10,000 income every month, you may be shocked when you start operating the business and you are getting less than $5,000 per month. Of the 50 that are paying, many may be paying an old rate because they have been there for a few years.

If you hire a good business broker, you will be able to navigate this much easier.

#7) Do you know how to run a business?

If you don't have a business background, I would recommend that you take some classes at a local community college. Find a way to start educating yourself in the basics of business. I believe the best thing is to work at a successful martial arts school (doesn't have to be a BJJ school) for a while to see how to do it. Even volunteer for a few months.

Another thing I would highly recommend is to join a martial arts business organization, like MAIA (Martial Arts Industry Association.) They will have conferences you can attend, materials you will get with your paid membership as well as lots of other martial arts business related programs you can buy, and lots of opportunities to network with other school owners. The best thing that could happen to you is to find a mentor who runs a successful school that wants to help you. You didn't learn Jiu-Jitsu by figuring it out yourself, so don't do this with running a school. Teaching Jiu-Jitsu and running a school are two different skill sets.

If you don't understand marketing, sales, basic accounting, the basics of internet marketing and website development, it may be like learning to swim by jumping in deep water and nearly drowning.

If that isn't clear enough, running a business without knowing how will be similar to the first time you rolled with a BJJ blue belt or higher and you didn't know anything. You got destroyed! But owning a failing business can be far worse- you will develop debt and tons of stress. If you are in a relationship or married, this will put a tremendous strain on your relationship.

The Bottom Line

You may think that I am being negative and you are not in the mood for having your dream squashed. You may be looking at all the upside- that you can have a great schedule, make tons of money, etc... But I am telling you that the pool that you are about to jump into may not have much water in it. You can benefit from my experience, or learn the hard way. If you are emotionally attached to buying a school and you are not willing to consider the possibility of this being a difficult experience, you may have to learn the hard way.

A lot of people do not like change, no matter what the change is. Even if you are offering a better service, people will complain and leave. They may just personally like the old instructor.

But if you plan ahead, work together with the old owner, be thorough and take your time, it is possible for it to work. Owning a BJJ school can be an amazing experience, but do not kid yourself: it is a job. The blessing and the curse of you being your own boss is that you are in control, but that often means that things do not get done!

Ryan Fiorenzi is a second-degree black belt under Rigan Machado and the owner of Kaizen Brazilian Jiu-Jitsu in Northville Michigan. He has been a full time martial arts instructor since 1997. He is a contributor to Couch to Cage, and owns the blog the BJJ Way.

Read 4227 times Last modified on Thursday, 06 June 2013 21:17
Ryan Fiorenzi

Owner and founder of Kaizen Brazilian Jiu-Jitsu. A Machado 2nd black belt, the first black belt in Brazilian Jiu-Jitsu and the highest ranked in the state of Michigan, black belt in Kung Fu and training in numerous disciplines with over 25 years experience. Author of Brazilian Jiu-Jitsu Training Volume 1: Basic Principles For Success, the informational website: www.TheBJJWay.com, www.Couch2Cage.com, and is the founder of Machado Alliance Midwest.  He is also a  contributor to BJJ Legends Magazine.

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