Review: Small Dojo Big Profits, Michael Massie
Review: Small Dojo Big Profits, Michael Massie, c2003-2007
In the book Small Dojo Big Profits, Michael Massie makes the case that it is not only possible to make a significant amount of money running a small neighborhood dojo, but it is actually easier to do with a small school than with a larger one. He also seeks to provide a straightforward guide to allow potential and current instructors to mimic his financial success with a small martial arts club.
Massie contends that a small club (defined as 2000 square feet of space, with about 200 students), can be quite profitable for its owner, due to its small size and relative ease of managing. By contrast, Massie uses the law of diminishing returns (which basically states that at a certain point, additional investment in a venture will fail to produce significant improvement in the outcome) to show that a larger club can double your time investment and hassle quotient, without significantly improving your bottom line (due principally to increased costs associated with larger schools).
So, how “profitable” are we talking here? Well, Massie throws around some pretty impressive numbers: following his instructions, a club owner would theoretically be able to take home in excess of $120,000 a year from a club of only 180 students, in a rented space of less than 2000 square feet.
I’ll say this for Massie: he’s no liar. He does in fact lay out a rather simple plan and some easy to understand cost and revenue analysis that supports his contention. He’s done a good job of convincing me that bigger is not necessarily better, but it is a whole lot more work. For example, in the area of staffing: if you are only offering one class at a time (as you would in a small space), you only need one other person besides the chief instructor on staff – someone to answer the phone, take attendance and do all the admin stuff while the chief instructor is on the floor. In a larger club, you would need more instructors, plus probably more admin staff to handle the needs of several hundred more students, plus people to clean and maintain a larger space. And with the increased costs for rent, utilities, payroll and all that eating in to your profits, a larger club starts looking pretty unattractive.
Having read a pile of business books over the last few years, I did find Massie’s approach refreshing, because his advice and guidance are very specifically aimed at the care and feeding of a martial arts dojo. Most small business books work on a model either of a retail business or a professional service type enterprise (such as accounting or web design). Although it is quite possible to make some use of the information in those books, it’s great to finally read some advice on issues specific to our industry. From finding a suitable location, to sales techniques, insurance and potential legal issues, Massie lays out relevant and useful advice well worth reading by any club owner.
Another thing Massie does right: honesty. He doesn’t have much patience for bait-and-switch sales tactics, and is a strong advocate for truth in advertising. I nearly cheered when I read his instructions to always take a new member through the details of a contract, specifically the payment amount, length of term, and an explanation of any additional fees, all in person and in plain English, just before they sign it. If more schools took two minutes to do this with each new member, I think we’d all be better off.
I also agree with Massie’s argument that martial arts are undervalued as a recreational and fitness activity. Especially when looking at activities for children, most martial arts school rates are shockingly reasonable when compared to other types of training, such as gymnastics, golf lessons or dance.
All that being said, I did find some of Massie’s ideas to be unrealistic, or at the very least extremely difficult to accomplish. For example, Massie tells instructors to get their start by teaching at recreation centres and rented spaces to build up a clientele. Only after gathering enough students to cover the expenses of renting dedicated space should the instructor make the jump to opening their own school. In this way, you can achieve Massie’s ideal of opening a school with no initial capital investment. Yes, this is an excellent plan and one worth following, but the likelihood of having zero expenses in opening a new space is unrealistic, in my opinion.
Almost any type of commercial space is going to require some type of renovation, remodeling or at the very least, decorating, to make it suitable for martial arts, so there are always going to be startup expenses. You may have some large capital outlay for equipment, if you have to purchase your own mats instead of using the recreation centers’ mats, for example. If you are going to have a pro-shop, you are going to have to stock it. In any case, a zero-cost startup is not impossible, but should not be counted on by any means. But, as this is the method Massie advocates, he does not factor for any loan repayments in his monthly expense analysis. Debt retirement can be a hefty chunk of change that eats directly into a schools profit margin, and especially in those first difficult months and years building up a club, it can be financial suicide not to prepare for it. Many a good club has gone under because they were undercapitalized and couldn’t keep up with the bills until they got big enough to be profitable.
I also find his plan to be more commercial than many school or club owners would be comfortable with. I don’t think that commercialism is a bad thing in itself, but it can get out of hand. As I said before, Massie does show how one might make a pile of money with about 180 students training twice a week. According to the examples given in the book, this can be accomplished by running 6 or 7 classes every weekday evening, with no class being longer than one hour. In Massie’s model, the students are about 85% children and teens, so there are plenty of half-hour and 45 minute classes on the grid, with the longest class being one hour (Note: I checked Massie’s home dojo website and he follows this model himself: his longest class is 50 minutes). For this, he advocates charging no less than $100 per month. As a parent, I find this pricing outrageous – there is no way I would sign up my four year old for two half-hour classes a week and pay $100 a month for the favour. As an adult who trains as well, this pricing is out of line with the rates charged by some of the best and most respected clubs in my area: I think it would be difficult to justify this pricing in the average market.
In addition to the pricing issue, Massie is a big fan of contracts, strongly suggesting a minimum term of one year even for children. This is a full-stop issue for me personally; I would not sign myself up for a year of anything, let alone my kid. I can understand offering a discount or perk for people to encourage them to sign up for a year, but only doing business on that basis cuts out a lot of potential clients.
My eyebrows went up at one particular line in Massie’s revenue model: proceeds from belt gradings. I have no objection to charging a fee for a belt grading (we do so at our club), but in Massie’s financial example he shows an monthly income from grading fees applied to about one third of his students. So, each student is grading about once every three months in order to make that work. Either Massie is suggesting charging for belt stripes, or he’s actually grading people four times a year. In a typical six or eight belt system, this promotion rate would take a student from white belt to black belt in under two years. Hmmmm.
So, if you sum it all up, a club following Massie’s plan would have about 200 students, with 85% children and teens, so there would be around 30 adult students. Students would pay $100 a month for a minimum of 12 months, for training between 30 minutes and one hour, twice a week. Each student could expect to grade once every three months. See what I mean about the commercial aspect? I’m not sitting on a high horse here; most of us are in this business to make money after all and Massie certainly can show you how to do that, but in order to follow this plan, a club owner would have to be very, very comfortable with the money-making character of the club.
Some of Massie’s advice is spot-on for a specific segment of the martial arts industry, but doesn’t fly so well with other segments. For example, I found that Massie’s marketing recommendations were best suited to a school or club teaching traditional martial arts. Massie suggests advertising in local newspapers and from my own personal experience, you have to really consider who is reading the newspaper and whether your style of martial art will appeal to those readers. You might do well with tae kwon do, karate or aikido, but your average MMA-heads probably aren’t cruising the community paper looking for the next event at the library or church bake sale. He also suggests joining the local Chamber of Commerce to find new members; a move also well-suited to a TMA club. If you can claim your art will provide stress relief and low-impact fitness you will find many clients among the middle-aged businessmen that frequent Chamber events. Again, if you are offering something a little more hardcore, you won’t find many takers. Although, I also advocate joining your local Chamber but for very different reasons: you can probably get a good discount on your merchant account fees, insurance, and some other services by being a member. Plus it’s a great place to shop for the business professionals you will need such as an accountant or a lawyer, and they frequently offer seminar series featuring local business gurus, so you can pick the brains of some high-priced help for the price of a business lunch.
At the end of the day I’d say Massie’s program is a good read, and it provides some straightforward and useful advice for nearly every martial arts club. It’s especially useful for someone who plans to open in a club in the next few years and wants a clear roadmap on how to do that in a methodical and logical fashion, while keeping an eye to the eventual revenue potential of the club from the start. You will get the most benefit out of it if you happen to teach a traditional martial art style and plan to teach a lot of children, and somewhat less if your art is not popular among children and their parents.
PS - Thanks to Samuel Browning for edits and Ming Loyalist for wording suggestion.