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Cash Outs. Good or Bad?

by | Offline Marketing & Sales

Setting Expectations for Martial Arts Students Upfront

Authority is highly influenced by emotion.

While your staff and students may intellectually understand that you are the boss and master instructor, they have to feel it, not think it.

It’s the emotional connection that anchors your authority on a deep level.

If there is one powerful moment in your role as a professional martial arts instructor, it’s in the enrollment conference.

While the parents may see you as the master black belt, they usually don’t have an authoritative reverence at this early stage.

The enrollment conference is a seminal moment for you to establish your authority and gain the respect and gratitude of the family you’re dealing with.

Presenting the programs and their cost to parents can be tense at times. Some parents want to negotiate. Others might object to the agreement. Some want a safety net in case their child wants to quit.

While it’s important that you are prepared to overcome any objections, it’s when the bottom line is signed and the initial investment is completed that you have a critical window to demonstrate your authority.

Many owners complete the transaction and gush with statements like, “Awesome. It’s great to have you on board. Johnny, you did an awesome job tonight. High five! Thanks Mrs. Jones it’s great to have Johnny as part of our family. Let me know if I can help with anything.”


Who has the role of authority here? Mrs. Jones and her credit card. That was a missed opportunity.

Let’s try again. You would adjust this script to the age and circumstance, but here is an authority template for the enrollment conference.

Mom has just enrolled Johnny into the program.

You, “Johnny. You want to learn Empower Kickboxing, right?”

“Yes sir.”

“Good. I want you to understand that your mom just enrolled you into a six month program. You are going to learn a lot of great skills and lessons. It’s going to be fun and sometimes it’s going to be hard. That’s the good part because that means you’re learning. So you have to pay attention and practice at home 20-minutes a day when you don’t have class.

Are you going to work hard and practice?”

“Yes sir.”

“I’m glad. Your classes are Monday and Wednesday at 5pm. When are your classes?”

“Monday and Wednesday at 5pm.”

“Good. You’re a smart guy. That means that you have to be ready to come to class by 4:30 on Monday and Wednesdays so that you’re not late. Will you do that?”

“Yes sir.”

“No matter what you are doing, you will be ready by 4:30, right?”

“Yes sir.”

“Good. The first lesson is integrity. Integrity means that you do what you say you are going to do. You keep your promises. You promise to work hard and be ready for class, right?”

“Yes sir.”

“No matter what you’re doing. Right?”

“Yes sir.”

“Great. We’re going to be so proud of you. Your mom just enrolled you, so please turn to her and say, ‘Thank you mom.”

“Thank you mom.”

“Alright. When someone does something good for you, you always say thank you. That’s called gratitude. What’s it called?”


“Correct. So you’ve learned two important lessons today. Integrity and gratitude. What does integrity mean?

“Keeping your promises.”

“Yes. What does gratitude mean?”

“Saying thank you.”

“You got it! You are going to do great, I can tell already.”

“Remember, your class is…”

“Monday and Wednesday at 5pm.”

“When will you be ready to come to class?”


“You have a good head on your shoulders Johnny. You’re going to be good at this.”

“Because you’ve showed your mom gratitude and you’re going to keep your promises, here is a school t-shirt for you to wear. Every time you put it on, I want you to think of integrity and gratitude. Will you do that?”

“Yes sir.”

“I just gave you a shirt. How do you show gratitude?”

“Thank you sir.”

As taught in the MATA Certification program, it’s also a good idea to let mom know that it’s important that she control what Johnny is doing around 4:30 which is the agreed upon to be ready for class.

If Johnny is playing with his friends or deep in a video game, it’s going to be harder to get him to get ready than if he is cleaning his bedroom or something he’d like to leave to go to class.

Keep in mind that mom is watching this happen before her eyes. What have you done to establish your authority?

  1. You’ve provided her with a language pattern that both her and Johnny understand. This is huge.
  2. You’ve given mom the “integrity” framework to deal with any reluctance to go to class.
  3. You’ve provided her with a strategy to engage Johnny in less fun activities so that going to class is an easy decision.
  4. You’ve laid out when Johnny should get ready for class without complaint.
  5. Before her eyes, you taught her son important lessons with real world examples. No doubt, your authority sky-rocketed in her eyes and in her heart.

Look for places where you can make these kinds of strong emotional connections.

Demonstrate true authority and leadership. That will last much longer than a trite, shallow compliments like “Awesome! Good job.”

This will help your students to understand how and why they are training with the best school.

There are different schools of thought about having students pay in full (PIF) for their classes versus monthly billing. 

Let’s establish the fundamental difference between PIFs and monthly billing. When someone PIFs a program, you owe them the unused portion of their program. If he gave you $1,200 for a 12-month program, that equates to $100 per month. If he is in his third month, he has used $300 of the program. At that point, you still owe him the balance of $700. 

That $700 is a liability on your books. It’s like a loan or a mortgage that you pay each month with lessons. The money is not completely yours until the student uses up all the lessons. If he has a medical situation arise or gets transferred, he may justifiably request a refund. 

So, in order to protect yourself, it’s important to handle PIFs carefully. You must have a clear, signed agreement outlining the arrangement and what the grounds for a refund would be. A smart owner will take the PIF and put it into a special account designated for this purpose. Each month, you can withdraw the equivalent of one month’s tuition for each student in the account. This money becomes an emergency fund and, in a good mutual fund, can grow over time. This is one way of using a PIF to build value in a business. Usually, because of their liability, PIFs diminish value in a business. Who would want to buy a school where all the students have already paid and the money has been spent?

If you can discipline yourself to follow this system with a special account, selling PIFs may be a good strategy for you. Be warned, though, PIFs can have a long-term effect on your school’s growth. 

Each month, we have enrollments and renewals. Enrollments and renewals are what we drag back to the hut to feed our family.  Our daily job is to create and keep students. The danger is if we PIF too many people, we are vulnerable to a downturn in the market. 

If you have a school full of people and no tuition coming in because they all paid in full months ago, you are faced with a financial crisis if the phone stops ringing for a period of time. You still have to pay rent, staff and all the other expenses regardless of your income. The students are still owed the lessons, so you have to perform or you face a possible class-action suit if you fail to live up to your part of the PIF bargain. This is why you must resist the temptation of spending the PIFs when you get them. If you can’t maintain that cash flow discipline, then your focus has to be on building your monthly tuition amount. Monthly tuition gives you consistent cash flow throughout the year. By having a large and growing series of checks coming from your billing company, EFT bank, or in-house collections each month, you’ll avoid the sharp spikes and drops in income each month. 

As you sit down to make your projections and goals for each quarter, you have to be able to depend on a certain level of income. You have bills to pay and wealth to build. You can’t be dependent on the hope you can PIF some people out next month to meet your obligations. You have to know what’s coming in. 

Then, if on top of that, you have some PIFS, that’s great. But it can  be dangerous to put your school in a vulnerable position financially for the short-term gain.

PIFS can be an example of short-term gain for long-term pain. When you have a school populated by people who paid you off a long time ago demanding that their classes be taught each month, and you spent their PIF on rent eight months ago, you are in a precarious position. However, if you can keep a steady stream of new students coming in and not spend the PIF money as it comes in, there is nothing wrong with this strategy. These are two very critical “Ifs” though.

On the other hand, the short-term pain of not getting that PIF versus the long-term gain of building a huge monthly check can be the recipe for financial stability and growth. Especially if you are not yet attracting a steady stream of students and your ability to manage cash is still in need of some discipline.

PIFS are dangerous to the degree that you:

1.Spend the money before you’ve earned it. 

Remember, open the special account we described and let it build to offset the liability of the lessons you owe. Your liability account should never drop below the amount of outstanding lessons you still owe. That’s always a good rule of thumb in financial planning. Never take on debts you do not have the assets to offset.

 2.Have inconsistencies in your enrollments.

If you have months where you enroll 20 people followed by months of enrolling just five, then you cannot rely on PIFS. Obviously, in the months you enroll just five people, your income is going to take a huge hit. Your other PIF students are no longer sources of real income. You’re totally dependent on new PIFS coming in and if they don’t, you end up scrambling to meet your obligations. 

Low enrollment months hit you like a one-two punch combination. The month of low enrollments creates a chain reaction of low retail and miniscule renewals. For a PIF school, this is disaster. For a school with a healthy check coming in from the monthly tuition each month, it is simply a bad month in which income will drop slightly.

In the final analysis, PIFs are part of our business. But they must be taken seriously and handled with discipline. In combination with a growing base of students on monthly tuition, PIFS can contribute to the bottom line without risking the school’s balance sheet. But if you rely on them as the sole source of your tuition income, PIFS can spell disaster.

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