Second, you will need a business plan if you want a business loan, whether from a bank or a private lender such as a family member. You will need to persuade your investor that you know how to make your business a success. Your business plan is your most important tool in convincing lenders that you know your business, that you can make money, and that you can and will repay a loan.
Third, it provides focus anytime you need to express your goals to a professional such as an attorney or accountant. You must know where your business is going before you can get effective help in getting it there.
Fourth, it allows you to see before you start spending money whether your business ideas are likely to succeed. It’s easy to dream great dreams. It’s harder to finance those dreams. Do you know how much money it will take to keep your dream school afloat? Do you know how many students you will need to support it? Do you know where your students will come from? Do you know how you will be advertising to them? If you make specific plans and run the numbers before you start spending money, you can decide whether your dream is likely to become a reality. Furthermore, in spending time with your business plan, you’ll see if you have the skills and temperament you’ll need to run your business well. Did you hate putting together financial projections and marketing plans? Did you find yourself procrastinating when it came time to put together cash flow projections and balance sheets? Then maybe you want to be a martial arts teacher, not a martial arts business owner.
Fifth, a business plan helps you keep track of your goals and what it will take to meet those goals. How will you know you’ve “arrived” as a business if you didn’t know where you were going in the first place?
The Layer Approach
One way to put together a business plan is in layers. Especially if you’re still in the process of growing your martial arts school from scratch, you will need to compile a layer of foundational information first. You can fill in the details as you are able to do the necessary research.
The first layer is the dream stage. Go through each point and sketch a qualitative picture of what you would like to see for each point. In other words, don’t spend a lot of time thinking about the numbers at this stage. Without doing any serious research, get a rough picture of what you would like your school to look like.
The second layer is the planning stage. Do some preliminary research, and get estimates. Check out the martial arts schools in town to see what they look like and what they charge. Research your market, and decide who it is you want to teach. Investigate how much an appropriate facility will cost you, how much your monthly expenses will be. Set a tentative tuition rate and calculate your break-even point. Go through each point in the business plan, and do some research. In stage two of the process, you will say things like, “to reach my target market, children and young families, I will locate my school on the north side of town between 5th and 15th Avenue. In that neighborhood I can get a space that will meet my needs for $3,000–$4,000 per month.” This layer of your business plan is for you, no one else. It’s a tool you use to educate yourself about what it takes to make your dream a reality.
In the third layer you nail down your estimates and do a reality check. At this stage you need to be certain in your own mind that you have an accurate picture of what it will take to start and run your business. At this stage you want to know exactly how much money you will need to start up. You need to have a specific space picked out, and you need to know exactly what that space will cost you. You will know, to within 10 or 15 percent, what all your monthly and annual expenses will be. You will have well-researched financial projections for income and profitability. You will have a clear idea of what will be involved in advertising to your target market. In other words, the third layer is a detailed and accurate projection of what your business will look like. Put these projections together as though the life of your future business depended on them. It does.
The fourth layer is for other people to see. These are the plans you show your lender, the SBA, your attorney, your business advisors. By this time, you must be willing to stand by your numbers. If you tell the SBA you will need $8,000 for inventory for a pro shop, don’t expect to change your mind a couple of months later and say you want $10,000. At this point in your business plan, other people need to be able to rely on your estimates.
The fifth layer comes into play after you have started your business. Your business plan at this point in its development includes not only projections but also real statistics about cash flow, actual expenses, actual income, and other figures. This is the plan you need to steer, adjust course, grow a new aspect of the business. Revisit your business plan every six months. Have goals—financial and otherwise—that you want to meet within six months, a year, five years. If you put them in front of you in writing, you will be more likely to make them a reality.
Anatomy of a Business Plan
What information goes into a business plan? Frankly, far more information than can be covered in any detail in a single chapter. If you want to create an effective business plan, you will need to find some more help. The SCORE program specializes in just such help. Books and computer programs are also widely available.
Double-Check Your Plan
A business plan is not something you can put together an hour or two before meeting a loan officer for an interview. For it to be convincing, you need have specific, accurate information, and you need to make your plan persuasive. Look at it from the perspective of the person who will be reading it. Does it help the lender see your business like you see it? Does it say “good risk” to your prospective lender? Make the plan look neat and professional. Be descriptive and complete, but edit sections until most are two pages or shorter. Then, before you bring your business plan to the lending agency, have a friend or business associate, preferably one with business background, look at it. Listen to suggestions with an empty cup and try to incorporate those things that will strengthen your presentation.
Running a martial arts school requires more than just teaching skills. To run a successful school, you must learn to think like a small business owner. Assemble a team of advisors. Then start working on your business plan. Doing so will greatly increase your chances for success.
CHAPTER FOUR:
FIND A LOCATION THAT WILL WORK FOR YOU
Choosing a location is one of the most crucial decisions you will make. The location, the layout, and the appearance of your school can bring in—or chase off—customers. Given that your rent will be one of your largest fixed expenses, doesn’t it make sense to find a space that will work for you not against you?
Find a Space That Will Work for You
Choose a Good Location
Where you locate your school depends in large part on your marketing identity, especially on your image and target market. If you’ve chosen an upscale image—providing the best instruction for those who are willing to pay for it—you need to start your business in a neighborhood where the prospective students are wealthy enough to pay your tuition and fees. If your image is a place for singles to meet, it doesn’t make sense to put your school in a neighborhood with mostly young married people. Is your target market children? Put your school in a family neighborhood near schools or playgrounds.
How do you find out whether the neighborhood you’re considering matches your target market? The information you need is called demographics, and it is the product of various censuses. One of the best sources for detailed demographics is your real estate