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 agent. Real estate agents make it their business to know about the various neighborhoods they serve. Frequently, they offer a brochure containing maps and demographic information for each space they represent.
If you aren’t using a real estate agent, check the U.S. Census Bureau publications. The Census Bureau conducts a census of the entire population of the United States every ten years. They publish the results, broken down by zip code, in their census books, which are available in your local public library. Statistics are also available on the Census Bureau Web site at www.census.gov.
Often overlooked sources of demographics include real estate ads in the local newspaper. These can give you an idea of what houses are worth in the neighborhood. The local chamber of commerce or economic development office often has not only demographic and economic information for your area but also projections for population growth and economic development. Local shop owners can tell you about their clientele.
How big of an area should you research? That depends on your trading zone. Your trading zone is the geographical area from which you draw most of your business. The size of your trading zone depends on a number of things: what transportation people use in your area, how far they usually travel for goods and services, whether your area is urban or rural, whether it is densely or sparsely populated.
You can use at least three methods to estimate the size of your trading zone. If you are on friendly terms with another martial arts school owner in your city, ask him if you can interview the school’s students. Ask those students how long it takes them to get from their home or work to their martial arts school. Look at how far most of them travel. A few students, of course, are willing to travel great distances to study with a good martial arts teacher. Assume that those students will find you wherever you are located. In your interview, determine how far the majority of students are willing to travel.
If interviewing current martial arts students isn’t an option for you, talk to people in the neighborhood you are considering for your school. Ask them how long it takes them to travel to their grocery store, health club, bank, any place they go two or three times each week. If you are in a rural area where people commonly drive thirty minutes to a grocery store, your trading zone will be larger than if you are in an urban area where people walk to services. Get a feel for the travel habits of people in your neighborhood.
A third method for estimating the size of your trading zone is to begin with the estimate that your students will travel no more than seven to ten minutes by car from their home to your school. That is a ballpark estimate for a typical suburban American school. Ask yourself if your students would have good reason to travel farther. For example, is the nearest martial arts school more than fourteen minutes away from you? Do people travel more than seven minutes several times a week to get to the other stores in your complex? Do you live in an area where people expect to spend a half hour in their car to get anywhere?
Let’s
