Over the years I have had thousands of business owners call me up and ask any one of a hundred different questions about how to run their businesses:
• What should I charge?
• How big should my space be?
• How many staff should I hire?
They should already know the answers because they should have started with the end in mind, but few do. So how do you go about making good decisions that will affect your future and your income?
First, define the criteria you will use to make your decisions by answering some version of the following questions (the questions will vary depending on your business).
Here is an example of the questions I used to ask when I was consulting with karate schools:
1. What business are you in?
2. How many clients do you want?
3. How big a school must you have to teach that many students?
4. How many employees must you have to teach that many students?
5. How much do you want to NET?
6. How hard are you willing to work? How many hours per week? And I mean really work, not just show up?
As an example, here are the answers you might get to these questions from a savvy karate school owner:
1. I am in the personal development business. I use martial arts to maximize my students’ physical and mental potential.
2. I am aiming for 250 students.
3. I have only 1500 square feet of space.
4. I have only one full-time and one part-time employee.
5. I want to make $25,000 a month and net $12,500.
6. I will work 10 hours a day, five days a week.
Now, based on the above core criteria let’s ask a few questions and use the criteria as our guide in coming up with answers.
How much should I charge?
Given the above criteria (make $25,000 a month from 250 students) you must average $100 per student so, any way you get to that number will work. For instance, $70 tuition, $20 average testing fee per month, and $10 merchandise; or $100 tuition, no merchandise, no testing; or $80 tuition, $20 merchandise, no testing fee.
Let’s take another popular question:
Should I give family discounts?
You can, but if you make them too large you will have a problem.
1. You can lower your average student fee but our core criteria is that it should be $100.
2. If you lower your average student fee, you need more students to hit your numbers. More students means more space and more employees.
Now I am not saying don’t give family discounts, but take into consideration what effect it will have on your overall plan and charge accordingly.
Let’s look at adding an after-school program:
1. It educates my students and helps them develop, so it makes it on those criteria.
2. It brings in over $100 a month from each student who signs up, so it’s a winner there.
3. With that extra income, I really don’t need more space because I get to my financial goals quicker with fewer students.
4. More staff? Maybe, maybe not.
Based on these criteria I could add this sort of after-school program and not break any of my core criteria.
Should I use a billing company for my tuition payments or should I do it in-house?
1. Using one works because the school in question has determined it’s in the personal development business and not the billing biz.
2. It works because billing companies do provide support and motivation to help you grow.
3. It also works because you don’t want to add more staff.
4. It works because they want to help me make more money and, although they charge a fee, it’s more than worth it.
It takes discipline to sit down and design your core criteria, and still more discipline to stick to the plan and use it as your guide when opportunities come along. What it will do for those who have discipline is save thousands of dollars by keeping you focused.
Take the time to write down your goals and the criteria by which you will make decisions to help you reach them.
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