Black Belt Banter: Martial Arts Business Podcast
Welcome to Black Belt Banter, the best martial arts business podcast for instructors, school owners, and entrepreneurs who want to increase their profits and generate substantial revenue. Whether you're running a single studio or scaling a multi-location empire, we break down the strategies, stories, and systems behind profitable martial arts businesses. From student retention and marketing hacks to leadership, curriculum, and community building, we cover it all. Tune in for weekly insights from Master Chan and Master Jimmy Hong, who’s been in the trenches and come out kicking.
Email us at jimmyhong@blackbeltbanter.com
Black Belt Banter: Martial Arts Business Podcast
#11 | Fight or Fold - Martial Arts Lessons During Economic Downturn
Economic uncertainty looms large for martial arts school owners, but surviving—even thriving—during downturns is possible with the right approach. Master Lee shares battle-tested strategies that have helped him navigate three major economic crises since 2001.
At the heart of recession-proofing your martial arts business is delivering exceptional value that makes your service indispensable. When families scrutinize their budgets, you must ensure they see your training as essential to their child's development. Master Chan emphasizes creating genuine excitement in students while demonstrating clear developmental benefits to parents. This combination of enthusiasm and tangible results makes families reluctant to cut your program, even when finances tighten.
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In this episode, our topic is Black Belt Strategies for Surviving a Bad Economy. Welcome to Black Belt Banter, the best podcast to help your martial arts school increase in profits and generate substantial revenue. I'm Jimmy Hong and my co-host is Master Chan Lee. Master Chan has over 2,100 active students with multiple locations. He is well-renowned and highly respected by his fellow peers for his business acumen in operating martial arts schools. Master Chan, what are these strategies and how do we survive in a bad economy that's coming, if it's not already here?
Speaker 2:In the words of Christopher Walken it's very important that we have more cowbells like birthday parties, more birthday parties. I'm just kidding. Someone remarked like you guys talk a lot about birthday parties. Anyway, I hope that broke the ice Every episode.
Speaker 1:I think we mentioned one.
Speaker 2:And what do we? More birthday parties. What's the secret? More birthday parties? You got bad staff. Have more birthday parties.
Speaker 2:Anyway, under the seriousness of this, we're probably facing a pretty significant economic downturn. I think some of you guys are feeling it right now. I think a first quarter, a few of our locations, about half of our locations, have felt a little bit of a downturn here and so forth. So I've been through several of these economic downturns. The first one I went through was in 2001, right after 9-11, and it rolled into 2002. And that's kind of what started this huge decrease in interest rates across the country and there was a huge economic boom right after that. And then there was another crash in 2007, 2008, right with the housing crisis and so forth. And I went through that and then, more recently, went through COVID. We went through that the whole thing with COVID and navigating that difficult time for all school owners in the country, and then we rebounded after that.
Speaker 2:So now we're kind of going through another interesting weird run of economic downturns, with the president enacting tariffs and high recession. Was that not recession? Was that the inflationary type things that are going on in our economy? And people are feeling it in their little bit. So I just wanted to give you some ideas that I use to get through the other things and what I've said to my staff and so forth.
Speaker 2:If, more than ever, you need to look at your better business practices, give out better service, provide more value, and when families sit down to see what they need to cut out of their budget, you need to really make sure you're providing the value that you asked for, and what I mean by that is that the kid has to be excited about coming to class and the parents have to really, really understand why they're taking their kid to your class. It's not just another activity. It's something that's helping Johnny become better, becoming more confident and also having Johnny become a lot more disciplined in their life. And you've got to be making sure that the kid is following through and you are exhibiting your level of leadership and having that child do that type of things level of leadership and having that child do that type of things Also just making sure that kid is inspired to like test or get to the next belt or go to the next tournament, and he's always training towards something. So just making sure you're providing that type of attentiveness and service to the people that are there.
Speaker 2:The other thing, too, is that it's super important at that time is to have a little bit more empathy for your student base. Like I remember, at one of the economic downturns, this family came in and they said, hey, we're going to have to quit. I lost my job and we don't know what's going to go on and I just don't think it makes financial sense for us to keep coming. And I said what, why don't you keep coming for free? And when you guys are back on your feet, we'd love to just make it up on tuition and we'll figure it out later. So the last thing I want to do as your teacher is provide additional stress in your life. This should be a stress-free environment. So keep coming.
Speaker 2:I've had people cry in my office, thank me profusely, and I want to be on the good side of that. Just yeah, I understand the stressfulness of losing a job and going through economic hardship. Help them out. Help them out and they, in turn, will be really, really appreciative students on the long term. And I just can't stress to you enough that that simple act of kindness has paid back. Later. I remember this family ended up paying back, you know, wrote me a check for the back tuition and then later on upgraded to the next program and then referred four people from their neighborhood. So that's not why I do it, but I'm just telling you it's just one of those things that you want to be working with your students in, that in that timeframe Sometimes they just need tuition modification. Hey, in the short term, you know, I may be losing my job or whatever and then I'll just simply ask what's a tuition that's good for your budget right now, and so we will reduce the tuition for them and help them out if they need it, and I think that's a really important key element of making sure that they're still involved with their program and they're going to help out in other ways in the school.
Speaker 2:The last thing I really want to talk about is you've got to market more. There is going to be a segment of the population that they're struggling to make rent slash, mortgage payments and things like that. They're probably not fit to be in your school. Now, if you do find someone like that that is struggling financially and their child still wants to be there, I work something out with them $10 a month and they help out at our picnic or something like that, or $20 a month. They help out at an event that we're doing Just something and we work with them in some aspects free. So you have those elements of the population that they're going to bring their child. They just are having a hard time and so forth. But there's a fair amount of the people in the population where you could triple the price of eggs and it's not going to bother them. You could $20 a gallon in gas and they'll be fine.
Speaker 2:There is a population of people that one of our students had a boat and it was a really nice boat and we all went out and he was taking us out and he had to fill up the boat with gas. And this is circa 1997 or so 1998. So talking about gas prices back then, well, to fill the boat was $550. So I can tell you how big the boat was and I was like, hey, should I pitch in for the gas? That was a lot of gas. And he looked at me and goes Mr Lee, you don't get a boat like this if you can't afford the gas. And I was like we're just on different levels. Thank you for taking us on the boat ride. He just sat down with me.
Speaker 2:You know, and I say that is because there's people out there that they just they're they're financially doing. Well, whatever they're doing, and and if you give good service and it's something that their kids want to do and something that they're doing, they're just going to roll with it and keep paying their tuition and be with it. So the trick is, how do you find more of those people? So you've got to market to those events and so forth. One of my favorite kind of hidden marketing tools is I find out huge events in the city. There's a diabetic society of your city or sickle cell anemia fundraiser or breast cancer survivor events or so forth. So there's a lot of events that are being held in your town and when those events are being held, I send three or four gift certificates for them to auction off for a month of lessons and a uniform valued at $200. And they get to auction that off and they get to keep the proceeds. So I auction off birthday parties very simple thing, but once again, using the boat guy. We need to find more boat guys like that and they're out there, but you just got to work a little harder to find them and so forth. So you're going to find all spectrums of the people that you need to market to and it's important that you work with all of them in whatever issues they have, as they're getting going in your program. But especially, like I said, during the economic downturn, you're going to have to work a little bit harder in your marketing and have a little bit more empathy in working with your student base.
Speaker 2:Remember, you have a number to hit. That's your budgetary number. You need to hit that number, whatever it is, and just get there. How you get there is doesn't matter, just get there. And you have many different strategies to get there. And then you have a profit level and you just got to get there and you have. You have a lifestyle requirement that you need to hit. You need to make a house payment or requirements for you to live. Make sure you guys get there. I mean that's that's incredibly important, but many different ways to get there, but make sure you are there.
Speaker 1:Well, I remember during the COVID five years ago, to what COVID two, three years? I remember what you said. It was because obviously, covid affected all of us. But you said that COVID made you change your business and your schools lean. You made it so lean, you cut the bloated budget, you cut your payroll, you cut your staff and you just made that school so lean. That was one of the benefits, advantages, of coming out of COVID. And now you're even operating better because of the changes you made and you had to adjust from that last economic downturn.
Speaker 2:Yeah, so plug for ASSA, reckitt Sabadim Association do. Our annual conference and that was my big talk last year was I call it the one person show. I run our academies. Basically it's one person and a lot of part-timers that help us run the school and it's a better model and I kind of followed it off of Starbucks.
Speaker 2:I looked at Starbucks and I said, man, how is Starbucks running from 5 am in the morning and then they run till like 7 o'clock at night? It's not one barista, there's no one barista sitting there at 5 am and then he's there till 7 o'clock at night closing down the spot and they have three different types of managers that work there and all these different managers take shifts and there's a team of 25 different part-timers that work at that one Starbucks at different timeframes and so forth. So that's kind of the model I have is that I'll have one person running the school and then I'll have 10 to 15, sometimes 20 helpers and volunteers and teachers helping us out in that time. So that was kind of our big shift in helping our schools run a lot leaner during those times.
Speaker 1:When we came out of COVID and slowly got back to business as usual, did you keep that lean shift or did you go back to your previous?
Speaker 2:No, 100%. We kept it this way and we made our procedures a little easier. Anybody can enroll anybody. It's not like, oh, you just got to talk to the headmaster about our tuition and so forth, so our enrollment procedures are a lot easier. It's like we talk openly about our tuition. It's not like, psst, come here, I need to talk to you, can you, jones, can I talk to you in my office this way? And then all the parents in the background are like, ooh, he's going to talk to you about money.
Speaker 1:Yes, I remember when you said that because you had, it was years ago you said every time you talked to a parent to go back to the office, all the parents in the lobby knew what that meant. It meant that they were going to go in there either for an upgrade or enrollment or whatever. So you start changing it up, you would invite the parents back there but then, instead of talking about upgrade, you would just talk to them about their kids, their progress, how they're doing what they need to do and that kind of changed the culture of parents didn't always associate going back to your office as a, as a enrollment set up, as a money time. It changed them into oh, it could be this, it could be that. And I remember you said that was a big change that you did and adjusted to that.
Speaker 2:It was huge. I mean because, like I said, you're like how many times can you say can I talk to you in my office? Can I talk to you in my office? Do you have a second? Can we touch base? There's just so many ways you can do that, and now, with being able to send payment links online, being able to write an email and do follow-up, you can do enrollment, you know, anywhere. I think recently one of my guys did some tuition over online and so forth on a Sunday and you know it was just very easy and we weren't even open. So it's a great way of running the school. People are used to making payments online and doing stuff.
Speaker 2:So these are all very important things that you need to add to your policies and procedures and be a little bit more streamlined as a business. But there are things that I think that, if you haven't done this, you should really sit down and say what do I clearly need Right? Do I need more people on the floor? Yeah, that would be great to have through. Like, people don't even know what they need right now, so you need to write. Do I need three people on the floor? Do I need a front desk? Do I need someone helping me with beginners, what? What do I need? So you should really sit down and say this is what I need and then you kind of have a job description for each of those and saying, okay, this would be a volunteer, this would be a paid person, this would be a paid teenager, this would be nice to have a sophisticated adult to run this. I have an adult that works for us who's one of our black belts Great guy. He used to run a dental office and so helping us at the front desk is easy peasy. It's a type one of school, it's not that difficult and he does a really good job. I have another lady that works for the Milwaukee County Courts and awesome. She has a really awesome job of teaching on the floor. She is also a really good administrator, and that's.
Speaker 2:Another thing is make sure your part-time people don't work more than two days a week. Make it fun. Don't be like I need you five days a week for six hours each time after you did your first full-time job. Don't don't. It should be fun, like I want them to be there and they want, like they're happy to be there to help out and they're they're in their happy place. It doesn't feel like a job. And so making sure that your, your, your volunteers, your helpers and that's another thing, I, one of my rules, is that I don't have any of my people work more than two days. To me, I think anything more than that. They, they don't, they're not as fulfilled. I mean, it's like me hanging out with you, jimmy. I can't do more than like a day. You know anything more than a day with you. It's just like second day is diminishing returns.
Speaker 1:And the third day is like why am I even here in the same room with you?
Speaker 2:And that's not a week, it's like a day a year. So people are like he's so mean, he's so mean.
Speaker 1:Why is he such a jerk? Well, going back to that, going back to the part-timers, you have to understand that these senior rank high belts, they are sitting on the sidelines wanting to go in, wanting to be part of the staff, wanting to be part of the team. So it's not like you're going there, hey, can you help me. You're honoring them by saying, hey, look, I I see your potential, I think you could do this great. Well, how would you like to be part of the team? It's, it's an honor for them. So they don't see it as a second job or part-time. They, they, they see it like oh my gosh, I can't. I'm finally, after all these years, I'm finally getting part asked to be part of the team. I remember one time time I had a Senior Bell teaching class and I got busy in the office or something. I forgot what it was, and that instructor it wasn't even an instructor, he was a Senior Bell.
Speaker 2:Come on be honest, he was just no, no, no, no, no. There's something that's wrong with this story.
Speaker 1:You weren't busy in the office, you were playing Minecraft.
Speaker 2:Minecraft and Roblox, the two big 12-year-olds that instructor Wait wait, this is back in the day it was Angry Birds.
Speaker 1:Angry Birds. That instructor was supposed to only teach the warm-ups and then it was. But then it got. He was 45, no, I'm sorry, 80 to 90% through the class. And then I came in because I had to finish. So right now I came in to teach the last 20% of their class, which I did. And then after the class he came.
Speaker 1:He's like, oh my gosh, I was like why, what's wrong? So sorry that you had to handle the class. He's like no sir, no sir, I almost, I was almost able to do a whole class by myself and I realized, oh, he was looking forward to teaching that whole class. He never done the whole class himself. He was almost there and I interrupted him. So that was the mindset. My mindset was like, oh, I didn't want him to do the whole class, but he was like so honored that he almost got to do the whole class and next time that's what he wanted to achieve was be able to start and finish the whole class himself. And that was to your point of the mentality of these part-timers wanting to come in. They're enthusiastic about being part of the team. It's not a job for them at all.
Speaker 2:And let me be clear you can't just throw them on the floor. We're like oh, you've been with me for five years. What did you class? That is the worst thing. You've got to have a leadership class and what drills that you're going to be teaching and you work out with them and they have a clearer idea of how to communicate. Some of these sophisticated adults are going to be way better than you Like.
Speaker 2:A while back in one of my locations we had an attorney who was witty, loved Taekwondo, taught really good classes. Everybody enjoyed their time with this person. So you'll have people that are there. Another one of my locations had once a week. We have a master who teaches two classes a week and she's been in Taekwondo over 40 years. She's been in Taekwondo longer than I have and she is amazing. She's a really good teacher. She's a teacher by nature and then she has done enough classes that I can just give her hey, this is what we're working on this week and put together a lesson plan, and she's one of the most popular people on our floor.
Speaker 2:So just making sure you give them some direction and and that's another great way I was talking earlier about giving better service. Imagine, if not, that this is going to happen. But imagine if you were able to give one leader, one helper per student and they're all learning their stuff and getting motivated and understanding what they need to do for their next rank. Wouldn't that be just over-the-top service? And then, on top of that, every instructor checked in with the kid and like, did you make your bed or were you good in school and not able to interrupt classes? Or making sure that the kid followed through on what he needed to? Not because you were by yourself, but you've had a team of people that you've assigned the helpers to that they can also follow up with these students and helping them reach their goals. That's another layer of great service. So just making sure once again, if you're going to go through an economic downturn, it's just a matter of you to look at what can I do to make my place just a little bit better in all areas.
Speaker 1:Do you, master, sean, do you do anything in terms of preparing, in terms of money management expenses or costs in preparing for this downturn economy, or do you wait until that situation arises and then you adjust accordingly?
Speaker 2:is one you should, if you can get a line of credit just to cover your expenses and that's kind of your oh crap fund, so that keeps everything rolling and I think that's important. The second thing is you should have at least 60 days of expenses covered in your accounts. Ideally should be six months, but 60 days. That gives you that, so you have a layer of cushion with that. Third, cut out the unnecessary things. I think those are very, very important.
Speaker 2:We are making internal discussions right now to pre-buy uniforms before these tariffs hit. So we're looking at that, looking at opportunities of savings. I like last January, I bought a boat ton of boards and I can buy $10,000 worth of boards because we break boards in our academy and we've got them at a discount. I think the person was trying to finish out the year strong and gave me a deal. So, making sure you get good deals that way. So just making sure you are looking at potential deals for yourself and and and doing it.
Speaker 2:Um, I've been looking at a car, uh, for the longest time maybe since 2020, since the pandemic and and kind of been like is it a good time to buy, is it? Oh, and these car, the car prices have just been crazy and we've, we've, I. I just found a deal on a plug-in hybrid car last December and the guy just gave us a great deal at the end of December. And my point being is there are going to be opportunities, if you can, to buy things at a better cost, because everybody's going to see this economic downturn. If you can do it, do it, and I think that's a very important thing. So that's a great point, master Hong. Master Hong, you're a good money manager. What advice would you give a school owner?
Speaker 1:I would say the line of credit. I absolutely agree. It's important to secure funds when you don't need it, then during the time you need it, because then you have the time to submit the docs, the application, work with the banks or whatever. You're working to secure the funds, even to a point of, if you have equity in your house, do a HELOC. But you have to have the discipline to not touch that HELOC. So if you can't secure funds through your business, then you have to look creative as a HELOC or something, but make sure you don't touch it unless it's an absolute dire situation. You can't open up a HELOC and say, oh look, I have $100,000 now I'm going to go buy that car I wanted for the last five years. So whether it's a line of credit, a loan or whatever, you got to secure it now in preparation, and if you don't need to use it, hey, that's even better. You don't have to use it, but knowing that it's there, it's going to keep your mind, your mentality, and you're going to be able to sleep at night, not worrying about making rent and payroll for your business If the downturn hits or if it hasn't, if it affected you already. A lot of people say cash outs, but cash outs, you have to be disciplined. With cash outs you can't cash out a certain percentage of your students to pay for expenses because you're just going to cash yourself out of business If you don't have.
Speaker 1:I have learned in the decades that we're in this business there's all sorts of types of martial arts school owners. There are college-educated MBA degrees. Who has the acumen and the discipline from financial management to business management to somebody who barely finished high school doing this fly-by by the night and fell into Taekwondo because A they loved it, but also they didn't have any other career path. That's as good as this. So their knowledge base is limited in terms of what they. And then once they get a hold of a chunk of money, they don't know what to do with it. They just use it they don't even pay themselves in a proper way from their business and just use it for their personal expense and they get themselves into a dire situation.
Speaker 1:So there is no one type of school owner. There's this spectrum of school owners from very dangerous don't know what they're doing, don't know how to manage their finances to the other end. And if you don't know how to manage your finances and you don't believe in yourself and you're not disciplined. You haven't been doing it all your life. You're not going to start now. So don't cash out, don't get a line of credit just too monthly, and save and try to survive that way. But if you are able to be disciplined in your finances separate from business to personal then yes, these are the recommendations that I would do Cash out a certain percentage of your student base, but then use a portion of that cash out and pay for marketing to ensure that you're replacing that student's back, not just cashing out to pay yourself.
Speaker 2:And cashing out. You're meaning paid in fulls to members, and I think I talked about this in the previous podcast but if you're getting 10 new students, you should only do paid in fulls on like 30% 30% of those people. You shouldn't be doing 90% paid in fulls. That's my opinion. There's other people that believe in different right, but you're right, it really has to do with the discipline.
Speaker 1:So the cash outs. Having said that, you've got to be careful with the cash outs. If you use leverage and cash outs, it could be a very effective tool, powerful tool during this economic downturn, for instance, along with your monthly tuition, and we should have. We're definitely going to have a talk about cashing out students, because we could talk about that forever, but we're going to do a whole episode of that. That's in the pipeline as well. But just real quick numbers Along with your monthly tuition, if you're cashing out, let's say hypothetically, you're charging $200 as your monthly tuition.
Speaker 1:If you're cashing out, let's say hypothetically, you're charging $200 as your monthly tuition you cash out one of your students for 18 months. That's $3,600, 200 times 18. That's $3,600. You do that for just four of your students. Four of your students is almost $15,000, $14,400 to be exact. So you have $15,000 in your reserves. That is going to along with your, if you're able to get a line of credit or a loan or a HELOC or whatever, and you have this chunk of money, including that $15,000, saved for emergency funds on your bad economic downturn. You're going to be sleeping very well at night and that's the power of cash out If you can't secure a loan through your business. If you can't, if you don't have enough what's the word I'm looking for in your house equity in your house for a HELOC then the cash out could be something that you could leverage and as a tool to have a blanket as the economy turns downward.
Speaker 2:And it's important though. I mean the money management part is a very important piece of this. If you overplay the paid-in-fulls right, then you don't have any recurring income coming in and that's not a good spot to be in. So the biggest thing is making sure that you're having students coming in and having new business to cover the people that you've got for paid-in-fulls and so forth. And I know it's a big. It's a controversial kind of topic in our industry about paid-in-fulls or not doing paid-in in fulls and so forth. Um, I think you have to have a little bit of both. I think that's a very it's. I think that's very evident that if a lot of the schools I know have a good kind of balance in the paid in full, bit things to monthly recurrent income and so forth. So you know, once again, the big wild card is the number of new students that are coming in through the doors.
Speaker 1:Right. And a last thing about the pay-in-fulls is that you don't need to significantly discount your tuition to get a pay-in-full. Let's say that number $200 a tuition times 18 months. You're asking, oh, the parent to come in and be like look, I know you've been with me for a year. You want to make sure that you are upgrading the students that are have been with you, because then they know you, they trust you, they understand your program, they understand the value of your program, so you don't need to give them a significant.
Speaker 1:Look, pay me in full for the next 18 months and I'm going to give you 40%. You don't need to do that. Think about a whole extra month. Be like, look, give them a month or add a month or two months to that pay in full. So if you pay in full with me for the next 18 months, the benefit is that we're going to add two more months into your program. So you're going to be paying full for 18 months but you'll be here for 20 months. But to them, 20 months means $400. That's $400 in savings and you don't need to discount heavily for your pay in fulls. And it's a win-win situation. And your parent gets additional two months of revenue that they already know equates to $400 in value.
Speaker 2:Yeah. One last thing I didn't realize. We're going to go into this whole pay in fulls discussion, but you got to have that in reserves to pay back too. So for some reason they move or they're just dissatisfied with what you're doing and so forth. So you just got to make sure that you guys you're hedging a bet a little bit here. So it's not good to do a lot, but just enough. So it's not good to do a lot, but just enough.
Speaker 2:And the last thing is the other thing I don't know is how good are you teaching? How good is your retention? So if you're not teaching classes, or you're just having some unqualified person teaching a very bad class, or your classes are not good, then you shouldn't be doing paid-in-fulls at all. You're going to be destined to going out of business. So there's an undercurrent of making sure you understand this and I said at the beginning of this podcast is that you have to give great value and great service and that in turn translates to better retention. So the magic is done on the floor. The magic is not done in the office. All right, not talking to anybody. You've got to teach an amazing class.
Speaker 2:And another master that I really respect Grandmaster Berlow, master Chris Berlow basically said he goes what did you do as an instructor to earn the right to be the person in front of the class, right, right and. And so there's some wisdom there and saying is that, as a teacher, are you training, are you are you learning things? Are you, are you doing all that? I think that's a very important part thank you, master chan.
Speaker 1:Let's conclude here. If you are enjoying our show, go ahead and rate and review our podcast or youtube channel. Our goal is to make our show as successful as possible and your review will help achieve that. Have a great week everybody. Enjoy your Taekwondo, martial arts, karate, kung fu, jiu-jitsu whatever you teach your style. Have a great week and I look forward to our next episode.