Staff Compensation Strategies
Once you break past about the 150 student mark, it becomes necessary to consider hiring an assistant instructor. Initially, your leadership team can carry much of the load and then you may have to go to a part time instructor who actually gets paid.
It’s when you have to start considering full time instructors that you will need to have a compensation plan in mind that keep the instructor motivated, but also keeps your school highly profitable.
Paying your staff is a bit like a balancing act. First, you’ll need to take into consideration the amount of income that your studio nets. Then, you will want to pay your staff enough to motivate them to perform quality work without breaking the bank.
By the same token, martial arts school’s prosperity is directly linked to the number of new students gained each month, as well as the number of students that choose to stay.
A student’s decision to return to class can depend greatly on how he or she feels about your staff.
Is their training satisfactory? Do they feel as though they are being treated well? These are important questions, and the answers often depend upon the behavior of your instructors and office staff.
Therefore, you might consider motivating and rewarding your staffs’ good behavior with a monetary reward or commission, so to speak. That is to say, that in addition to an instructor’s base pay, they receive a percentage of the gross revenues collected for that month.
Up to $8,000 – Instructor gets 15 percent of gross revenues.
$8,001 – $9,000- Instructor receives 20 percent of gross revenues.
$9,001 – $10,000- Instructor brings home 25 percent of gross revenues.
$10,001 and above – Instructor receives a special bonus.
Here’s another way to reward your instructors…
Let’s say that your studio has 175 students. When your enrollment rises to 200 paying students, your instructors will receive a $350 bonus plus an extra $15 per week. Then, for every 10 active students over 200, their pay would increase an extra $15 a week.
In this fashion, an instructor’s pay is a direct result of his helping you to promote your program, sell lessons, and working hard to keep the students you already have.
Motivating A Large Staff
If you have several instructors, the method for motivating and rewarding them will be essentially the same… except for one thing.
If you have just one additional instructor, it’s easy to reward them for their individual efforts. If, however, you have several employees, it becomes difficult to determine who is really responsible for the increased sign ups or the increase in gross receipts.
Even if you have formulated a way of tracking how many students a particular instructor has signed up, and compensating them for each one, you may end up with a situation which many customers find distasteful – that of being attacked by a “commissioned” salesman.
Once your instructors get into that frame of mind, it quickly becomes a dog-eat-dog world, and they care little about whether the customer is receiving exactly what they want or need. The instructor simply wants the customer to sign up fast, so that they can get the commission for that sale.
In an effort to avoid that situation, you may want to adopt a “teamwork” mentality. Basically, you’ll reward your staff members equally.
Let’s say that you have
- An active student base of 253 students.
- 24 new students sign-up for that month.
- 5 students quit your program.
- A net gain of 19 students.
That means that 19 students at $90 would increase your revenue by $1710. At 20 percent, the overall bonus for your staff would be $342. Divide that amount by the number of staff members.
If you wish, you can differentiate the bonus amounts depending upon seniority or position.
Calculating Your Incentive Program
As you might have guessed, the figures above are simply examples of a formula used by many successful studios. Your figures may differ according to your demographics, including how many staff members you have, how much you charge for lessons, what your area is like economically, and so on.
One method of determining how much you can afford to compensate your instructors is to figure out what your net income would be from signing up 10 new students. Let’s say, 10 students multiplied by the $90 tuition fee would equal $900.
The average overhead on a well-managed martial arts school runs about 50 percent of the net profit, which equals $450. Therefore, the net profit from these 10 new students would be $450.
If you pay your instructor an additional 15 percent a month, that will be an additional $67.50 in his paycheck each month, or $16.87 a week.
Keep in mind, as we have said, up to 150 students, you can get away without staff by creating an excellent leadership team. You always want to be, “training staff,” you just don’t want to be in a rush to hire them.