**Martial Arts Business Financial Control**

For most people, selling is best learned by first hearing/seeing a presentation and then role playing it over and over. On this page, you'll hear and see a variety of presentations including some actual info calls where you're hear some good and some not so good calls.

#### Financial Control

Financial Control - Introduction

Would You Sell Stock in Your School to Your Family?

Revenue Stats to Track

What is the Value of One Student?

Tracking Attendance

Working Backwards

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Once that appointment is set and the prospective student shows up, are they taking a first intro class? Or, do they want to look around and think about it for a while? If it's the latter, you should ask yourself whether the student manager is setting solid appointments, or whether something about your presentation and first impression is turning them off? Stats give it to you in black and white.

If this stat is hurting we go back and role play the entire meet and greet process and videotape some intros to review.

**Industry Standard**

Eighty percent of your appointments should result in a first intro class.

Staying with the funnel analogy, after the top of the funnel is opened up by the number of info calls, it shrinks in the next phase based on the number of appointments set and then again by the number of appointments kept.

In my stat sheet, at the end of the evening the student manager records the number of new appointments set that day. This number is compared to the number of info calls to see if they are being handled correctly. If four appointments were made from four information calls then that is a 100 percent call to appointment ratio and a job well done.

In the next box the number of appointments that were set for that night are recorded with a slash followed by the number that actually showed.

A phone call is only as good as the person handling it. If they cannot set an appointment then the call was a waste of money. Even if they set an appointment, I want to make sure it's a solid appointment.

Some people can recite a script well enough to get an appointment, but they are not able to get a good appointment and the person never shows. Audio-taping them handling calls is the most effective way of adjusting tonality and conveying warmth. Many times the student manager says the right words but without any feeling.

**Industry Standard**

Eighty percent of your phone calls should result in appointments either to view or take your trial course.

Are they coming back for the second class? If the first intro is designed to motivate the student to return for the second, I want to know if that is happening. Be sure to videotape your intro instructor to ensure they are staying on target.

Reality is a deceiving. I think that’s why most owners don’t track stats. For those of you who are not statistically minded, here is a very simple set of numbers to track that will really gauge the potential of your school.

Keith Hafner of Ann Arbor, Michigan was the first guy I know of to focus on the correlation between these numbers. He is a great success story, so it’s well worth paying attention to why these three numbers are important to track closely.

1. Tuition Per Student Per Month

2. Number Of New Students Per Month

3. Drop Outs Per Month

**Tuition Per Student Per Month**

This is an area of great concern and confusion among owners. In my book, *The Truth About the Martial Arts Business*, I devote an entire section, The Core Dynamics, to explaining the common and predictable mindset of the martial arts professional. One of those mindsets is a fear of charging a fair price for tuition.

Most of us are raised with negative money belief systems, which make it difficult to “ask for the check.” Regardless of your belief system, here is the reality. You can be the best or you can be the cheapest. People don’t expect you to be both.

In today’s market, regardless of your location, if you are charging less than $100, you are sending a signal to your market that you are not the best. I encourage you to join HYPERLINK "https://new.martialartsteachers.com/"MATA and get HYPERLINK "https://new.martialartsteachers.com/index.php?page=Books"*The Truth About the Martial Arts Business* and find out how to raise tuition without a student revolt.

A raise from $80 to $100 is an instant increase of 20%. If you have 100 students, you’ve just added $2,000 per month to your gross without any increase in expenses. Will you lose students? Maybe a couple will revolt and leave. On the high end you might have five that walk. That still results in an increase of $1,500 per month or $18,000 per year.

If you are really concerned about losing students, start the increase with the new students as they join. This is why keeping a consistent base standard of new students coming in is important.

**Number Of New Students Per Month**

If I have at least ten new students per month coming into the school at the new tuition rate, my gross should increase each month. Simply put, if I have a lot of students coming in, but I’m getting a low tuition amount, I am going to have high administration, staffing and management challenges for little reward.

Conversely, if I have high tuition, but few students joining, I’m going to have less admin and management stress, but little reward for my efforts. Both of these numbers have to be strong and consistent for growth.

At the very minimum, you want ten new students per month. The most successful schools set that minimum at thirty and you can too, but let’s build up to that. Of course, if you are losing as many students as you are enrolling, then you will be spinning your wheels and living in a state of frustration, which is, why tracking your drop out rate is so important.

**Dropout Rate Per Month**

Typically when working with a school, we like to tighten down the sales procedures and plug the holes in retention to reduce drop outs. The formula for measuring retention is simple, but can be deceiving. The range of time you measure will significantly affect the outcome. Let me illustrate.

We define active students as those who have attended in the past two-weeks.

1. Start with the total number of active students as of the end of last month.

Let’s say that is 100.

2. Add to that number the new students who have enrolled in the current month.

The sum of last months’ active and this months’ enrollments would be 100% retention. Let’s say you enrolled 10 new students. 110 active students would be 100% retention and a 0% drop out rate.

3. Count the number of active students you currently have in the school.

Divide the current active count by the 100% number in #2. That is your retention rate as a percentage.

The difference between that percentage and 100% is your drop out rate. Let’s say your active count is 105 at the end of the month. 105 divided by 110 equals rounds off to 95%, which is a 5% drop out rate. At a 5% drop out rate, you will finish the year with 133 students.

The longer period of time you calculate this formula for, the lower the retention rate and the higher the drop out rate. In order to stay on top of this number, measure it monthly and try to keep your drop out rate under 5%.

To get an idea of how much a difference a few percentage points represents, with a monthly retention rate of 91% (a 9% dropout rate) you will finish the year with 101 students, just one student more than you started the year with.

So, rather than look at the retention rate focus on the drop out rate number and try to keep it under 5%.

**Summary**

These three numbers are easy to calculate and their impact on the growth of your school will be obvious. Low tuition equals high management / low reward. Low enrollments equals high stress. Low retention/high drop out rate equals a dying school.

Your school will grow to the degree you keep these numbers strong and consistent. Like a performer spinning plates, work to keep your enrollment, tuition and drop out rates spinning under control rather than out of control.

Typically when working with a school, we like to tighten down the sales procedures and plug the holes in retention to reduce drop outs. The formula for measuring retention is simple, but can be deceiving. The range of time you measure will significantly affect the outcome. Let me illustrate.

We define active students as those who have attended in the past two-weeks.

1. Start with the total number of active students as of the end of last month.

Let’s say that is 100.

2. Add to that number the new students who have enrolled in the current month.

The sum of last months’ active and this months’ enrollments would be 100% retention. Let’s say you enrolled 10 new students. 110 active students would be 100% retention and a 0% drop out rate.

3. Count the number of active students you currently have in the school.

Divide the current active count by the 100% number in #2. That is your retention rate as a percentage.

The difference between that percentage and 100% is your drop out rate. Let’s say your active count is 105 at the end of the month. 105 divided by 110 equals rounds off to 95%, which is a 5% drop out rate. At a 5% drop out rate, you will finish the year with 133 students.

The longer period of time you calculate this formula for, the lower the retention rate and the higher the drop out rate. In order to stay on top of this number, measure it monthly and try to keep your drop out rate under 5%.

To get an idea of how much a difference a few percentage points represents, with a monthly retention rate of 91% (a 9% dropout rate) you will finish the year with 101 students, just one student more than you started the year with.

So, rather than look at the retention rate focus on the drop out rate number and try to keep it under 5%.

**Summary**

These three numbers are easy to calculate and their impact on the growth of your school will be obvious. Low tuition equals high management / low reward. Low enrollments equals high stress. Low retention/high drop out rate equals a dying school.

Your school will grow to the degree you keep these numbers strong and consistent. Like a performer spinning plates, work to keep your enrollment, tuition and drop out rates spinning under control rather than out of control.

Is your phone ringing and your door swinging? If so, what advertising is making it ring? This is a very simple stat to track but does it ever pack a wallop! Info calls can be compared to the top of a funnel. At the top, you pour advertising money in and at the bottom students come out. The more calls generated by your advertising money, the wider the opening at the top and the more students come out of the bottom.

You can track calls with a simple little pad that lists all advertising avenues across the top and the date down the left. When a call comes in, the student manager simply checks the source of the call.

For instance, if they see your website and send an e-mail, web gets marked. At the end of the day, week, or month, you can determine with a glance how my advertising is doing.

Also track walk-bys and referral in addition to that little monster, unknown. You then determine how much paid advertising came in versus unpaid.

Also, by dividing the cost of a specific ad by the number of calls, you can determine the cost per call. Don't mix paid and unpaid numbers for this equation. In other words, if you get 50 paid calls and 30 unpaid in a month, the $1,250 in advertising is divided by 50, not 80.

This tells you that each call has already cost you $25 and it better be handled well. The $25 cost only applies if they enroll. If they don't enroll, the call cost me the $3,000 the prospect may have invested with us, not counting referrals, retail and special events.

If a call is worth that much money, don't you think you better keep track of it?

**Industry Standard**

20 to 30 paid calls a month is a good average to shoot for. Try to keep your cost per call in the $20 - $30 range though a fudge factor exists for highly qualified calls. Paying $40 - $50 per call is not a good habit but if it has a high response / high quality response, it is justified. Overall, keep your advertising down to the 8 - 10 percent range of your total gross.

Are these people becoming new martial art students at your school? If so, how many intros does it take to get the 15-or 20-a month you want?

While an off number in this area may be indicative of a poor enrollment conference, the root cause of the problem is usually the intro teacher not pushing the right buttons. Be sure to review both if this number is suffering.

**Industry Standard**

80% of your intros should result in an enrollment.

This is easy enough to track. You simply create a master sheet with blocks for all the students testing for a new belt and count record them as the tests are conducted.

In previous chapters, I stressed the importance of student progress for retention. The day a student feels the most progress is test day. You want to make sure everyone is testing and progressing to their next belt or getting the necessary feedback on the adjustments they need to make to ensure it happens next time.

**Industry Standards **

If you have 100 students, how many should test every month for a new belt? This figure is reached by dividing the total active students by the number of cycles (stripes) in your belt system.

For instance if you have three cycles then one third of your students, 33 - 35, should test each cycle. If you have four cycles in your testing system then 20 - 25 should be testing.

However, this can be rare. If you have a couple of months of slow or high enrollment, that will affect the numbers on subsequent tests for at least a year.

The measuring stick is number of examinees per full testing cycle. Every three or four months, depending on the cycle system, all students should have tested for a new belt, not stripe. Students missing or failing the first or second will still show up on your test count in the quarter.

The students that miss the third test are going to affect the numbers a bit, but even then you'll have a clear picture of how your students are progressing.

This one of the most important stats you should track. In most successful schools fully half an instructor's bonus comes from these numbers.

Every day we need to know where the receipts are coming from. Whenever you receive any payment, record it in the sales log.

The sales log has 5 columns. The first column is the name of the student who paid. The second column is the amount paid. The next box has seven letters. ‑M for Merchandise, ‑B for Billing, N for New Student, U for Upgrade, R for renewal, E for Exams, BP for Birthday Parties, and P for Promotional Events. Circle the appropriate letter for the payment received. In the next box circle if the payment was made by check, cash or credit card. The staff member receiving the payment is to record their name in column 5.

**Tuition**

At the end of the day, total the amounts for each of the seven letters in the Daily Sales Log and put the totaled amount in the appropriate box. Next, go to the previous day and add the total amounts to date with the total amount for today to give you the total amount to date for today. For example, if you took in $200 for New Students, $1500 in Upgrades, $300 in Renewals and you received a Billing check for $500 you would add $200 $1500 $300 500 = $2500 for today's tuition receipts. Now go to the previous day and find the Total Tuition to date, let's use $5000 for this example. Adding the two **numbers together **you would have $2500 $5000

$7500 for total tuition to date today.

**New Billing**

The next number on your Daily Receipts is New Billing. This is the total dollar amount added to Eagle Billing today.

For example: two people sign up today on the SmartPay Program. They sign electronic draft agreements for $75 each. This would give you $150 for this area as $75 $75 = $150 for the day. To calculate the total amount to date you would add the total amount to date from yesterday, let's say that was $350 to today's $150, so $350 $150 = $500 total billing to date.

**New Contracts**

This is the total dollar amount attributed to signed contracts for that day.

Even if you don't use contracts, this is an important stat to track.

Over a given period, what percentage of the contracts that you write become actual tuition collected? This will tell you, for projection purposes, the amount of tuition you can anticipate. If you are collecting 80% of the contract value, then you can anticipate, based on the contract you're writing now, what the next quarter or two should average for tuition collected.

If you don't use contracts, you can still project what 100% of tuition collections would be and ratio that to the actual amount you collect.

**Industry Standard**

A top school will collect 80% to 85% of the paper it writes.

One of the advantages of good stat tracking is that it allows you to work back toward setting a goal for the school. Let's say you want to enroll 20-students next month. A review of your stats reveals that you are enrolling half your phone calls. If 80% of the calls become appointments, 80% of the appointments take the intros and 80% of the intros enroll, that will equal about half of the phone calls.

Now, your ad tracking sheet from last year during this month indicates your TV ad generated about 20-calls and this year is the same. Your website pulls another 10 and you average 5-walk bys and another 5-Yellow Pages per month. You can now see how to generate the 40-calls you need to achieve your goal. Though a very simple example, this working backward technique can apply to every aspect of your school.

The key is to know what to expect. If you want a certain gross figure for the year, then knowing what percentage of your contracts you actually collect gives you a huge advantage in making accurate projections. In order to have that gross figure you have to have a certain contract amount based on your collection ratio. In order to have that contract amount you have to renew and enroll a certain amount of students. In order to enroll those students you have to generate a clear number of phone calls and maintain a certain retention rate. All this is possible only with good stats.

Without statistical tracking, you're playing the game but not keeping score, which means you have no idea if you're winning, losing or in a perpetual financial and growth draw.