12 Revenue Streams
Here are 12 different revenue streams that your school can generate.
Not all of these revenue streams will be for you. That’s why the Core Dynamic of Finding Your Own Voice is so important. I personally helped create many popular trends in this industry but I also made it clear what programs I would never teach, even though I developed and sold them.
What is good for me may not be good for you. Know what you like, and why you are doing this for a living, and then build strong revenue streams around those core programs.
Revenue Stream 1
Down Payments on New Student Agreements
Also known as a registration fee, this is the initial investment a student makes to join your school. Typically, this is at least two months’ tuition. For instance, a program is $199 down payment ( includes the first month) and $99 per month for 12 months or ongoing.
Revenue Stream 2
Down Payments on Renewing Agreements
This is the initial investment a student makes in order to renew or upgrade in your school. The best strategy for this has been the Black Belt Club. If you do not have a solid system for upgrades and renewals, this stream is currently dry for you and is something you should consider exploring.
Revenue Stream 3
This is the lifeblood of your school. As you grow your school, your monthly tuition should grow as well. Ideally, your monthly tuition would cover your base operating expenses each month. For instance, if all the monthly expenses, including your salary, totaled $12,000, your monthly tuition collections from your billing company would cover that amount. In that very healthy scenario, these other streams are 100 percent profit. Mind you, this is not easy to accomplish, but even 75% of expenses paid from your billing check would be good.
Revenue Stream 4
Consider your retail shop as though it were a separate business. Open a separate business checking account for your retail, and deposit all gear sales revenue into that account.
Use an American Express card or any other credit card that requires pay-off each month to pay for equipment purchases. When you place an order, pay for it with your credit card. This gives you up to 30 days to sell the equipment to your students. As they pay for the equipment, deposit the funds into the retail account.
When the credit card bill for the equipment is due, pay for it with a check from the retail account. Since you are usually doubling your money, this retail account will grow fast. Your credit rating will grow, as well as your rewards for using the card. Ideally, you will build a large cash reserve and save money on plane tickets and vacations, too.
Increase profitability by using MATA-approved vendors, so you can get the maximum discount. You can more than pay for your MATA membership with the savings our member discounts provide for equipment and other staples of school operation.
Revenue Stream 5
Even if you don’t charge for testing, you will want to host at least one special event each month for your student body. These can range from nunchaku seminars to board-breaking or even “Fear Into Power” seminars.
These are not only pretty easy to manage, but they are a lot of fun. My nunchaku seminars were always packed with 30 to 50 students and would
generate around $500-$1,000 per event. The fee of $25 included two rubber nunchaku to use in the class, so it was almost pure profit.
Let me tell you, I have an excellent Introduction to the Nunchaku one-hour seminar in me. I say one hour because, if I had to do 90 minutes, I would be in big trouble. Everything I know about the chucks can be taught in one
My point is that you don’t have to be an expert to teach one of these special seminars. You have to know enough to keep the group interested, challenged, and having fun for one hour. Notice the title was Introduction to the Nunchaku, not Advanced Nunchaku.
Birthday parties would also go under this category. A two-hour $250 birthday party is not only a revenue generator but also a lead generator.
Some schools have at least one birthday party per week, so it’s a proven winner. However, I personally have never done one nor would I. Kathy Marlor conducted all the birthday parties in our school and taught most of the kids’ classes.
Revenue Stream 6
I didn’t include these with Special Events, because exam fees are a little different from special events. Most exams for stripes occur in class, and they usually don’t require a fee. The main graduations on the weekends require additional work and staff, so it’s reasonable to charge for these events.
Typically, exam fees range from $30 to $50 and increase with rank. Black belt exams can be as much as $200 to $300 but, to justify this higher fee, it’s a good idea to provide additional prep classes for the black belt candidates.
Some schools are large enough that they rent auditoriums to showcase their graduating black belts or to conduct the exam. The exam fee should cover these additional expenses.
Revenue Stream 7
Fast Track Testing
This is a touchy subject and has to be handled carefully. The idea is simply that some people are willing to invest more money to get through your belt system faster and are more talented than others.
Fast Track Testing is a special program where a student pays a premium, such as $199, to take a six-hour, a one-day intensive workshop specifically on these requirements. At the end of the day, they take the belt exam. Before you throw this lesson across the room, let me make a point here: I have never done this, but that doesn’t mean it’s good or bad.
I think this can work well for certain belts but not so well for others. Accelerating a dedicated student through the orange belt to green belt will not make much of a difference. However, I can’t see accelerating someone through brown belt to black belt unless they were super talented.
If you consider trying Fast Track Testing, please start with your lower ranks. Many ranks are really half-ranks anyway. For instance, orange belt broke up the time between white and green belt that traditional schools used. Orange belt is a retention rank. Gold or yellow belt is the same. These ranks break up white to orange, so accelerating someone through certain ranks is an interesting and not altogether unreasonable proposition.
You could make it available only for certain ranks, to ensure your students learn one of the key qualities of a good black belt: patience.
Revenue Stream 8
Cash Outs or Paid in Fulls (PIF)
At its most basic level, a PIF is sold as a discounted membership. The student pays in advance for a period of time or a set amount of classes and receives a 20 to 30 percent discount for doing so. Some schools have made this their primary focus with new students. They offer significant discounts for paying in full.
The VIP Pass program adds an additional $100 off the cash-out price if the student uses it within the first few days.
As attractive as this may be – and let me tell you, some schools are racking up some amazing gross numbers doing this – there are some dangers that you must be aware of. Other schools have nearly gone out of business following the PIF strategies because they did not follow these important realities about PIFs.
Cashing students out works to the degree you:
1. Deliver what you sold.
2. Keep a steady flow of new students coming in.
3. Are not a bloody fool with the money.
Any bloody fool can spend money. When you first start doing lots of cashouts, you may be making more money than you ever have, and there is the temptation to buy a Mercedes or a new Presidential Rolex. But remember, if you have some slow months and everyone has cashed out, you will still have to pay the bills. Save the money and work toward buying a building for your school, rather than an expensive toy for your ego.
Have an upgrade stream, so you can continue to offer new programs to current students who may have already cashed out on other programs. For instance, a student who cashed out a New Student 100 Class Program may do the same with Black Belt Club, Masters’ Club, Leadership Program, or Career Development Program.
Revenue Stream 9
Renewals and Upgrades
Black Belt Club and Masters’ Club are the most popular and proven renewal programs. They are covered in depth on MATA in our Renewals and Retention section, so be sure to research how they work there. For now, we want to focus on the renewal as a revenue generator.
Common practice has been to upgrade someone to a BBC or MC and replace his New Student agreement or program with the more expensive BBC or MC program. In most cases, the renewal had a registration of $299 or so, and tuition increased $10-$20 per month.
Another popular strategy is to keep the student on her current tuition plan, but charge her a one-time or annual fee to upgrade to BBC or MC. For instance, a student is paying $110 per month for her current program. A BBC or Masters’ Club upgrade is presented as an annual upgrade for $500.
Revenue Stream 10
Discounting a Past-Due Contract
Say a student is halfway through a 12-month agreement at $100 per month and stops coming to class and paying. You can offer the student the opportunity to make the agreement good by letting him buy out the balance at a 40-percent discount.
In this example, he has $600 left, so a 40-percent discount would be $240 off, leaving a new one-time balance of $360. He would be allowed to return to class with all privileges and will also avoid having the billing company breathing down his neck (good motivation).
You may have to send a portion of that to the billing company (they will usually take it as a credit on your next check), but it’s worth it. You got money that you most likely would not have, and your student is back in class and appreciative that you were willing to help him through a jam.
Revenue Stream 11
Discounting an Active Agreement
You can use this discount strategy on a few students each month to boost your gross. Be careful you don’t offer it to more than just a half-dozen students. If you overuse this stream, it will dry up along with your monthly receivable stream.
Call the student and tell him you have an opportunity for him to continue training at a significant discount. If he is interested, set an appointment to meet. Don’t name the price right away, as he may reject you on the phone. Be prepared to do a little selling in person – just a little though.
Tell him to bring his payment method, as you only have a few of these to offer, and once you reach your number, it’s gone. If you decide to do this, you need to do it right away, as we have only three of these. This is a true statement because you want to offer this to only about six guys, of which three will probably go for it. If he asks why just three, you can honestly tell him, “Occasionally, I pick a few guys I know are doing good in classes and are here for the long haul. I think you are doing great, so I thought you would appreciate the opportunity to train at a discount. Of course, this is all confidential, but if you want to go over it real quick, we can do it before you come to class tomorrow/tonight.”
If the student wants to do it but can’t quite swing the payments, make it a 20- percent discount with as few payments as the student will agree to. If he has a $1,000 balance and can’t cut a check for $600 today, but really seems hot for the idea, tell him you can offer him a short-term payment plan for $800. Ask him how much he can put towards the $800 today.
Whatever he pays, work out the shortest time frame for the balance. He may say $300. “OK, how long do you think it would take to finish it?” (“Finish it” sounds easier to do than to “pay off the balance”). Try to get him done in the next two months. You can explain this is designed for 90 days, which would be $250 per month for the next two months. Then he is finished with this program and can focus on his training.
This option may not be 40 percent, but $800 is still $200 less than $1,000. You can, of course, increase or decrease the discount level, depending on your situation.
To whom do you make this presentation? Depending on the situation, this may work best with a drop-out-risk C student. If a student is going to drop out, they may see this as a chance to “get out of the contract” at a discount. For you, it may present a chance to collect far more tuition than you would have had the student just dropped and stopped paying.
This is especially good for December when new enrollments are slow but typically jump in January. December is a good month to offer students the opportunity to cash out the balance of their program for a discount. I used 40 percent in this example but that may be more than you need to offer. As usual, the market will tell you what that figure is.
Revenue Stream 12
An after-school program that is well run and compliant with local law, can be your strongest stream of revenue. According to CARE.com, the average family with children spend $328 a WEEK for childcare after school.
Families need after-school programs and will clearly pay a premium for a good one. There are complexities such as providing transportation and dealing with regulations regarding child care and having food in your school, so this is not for everyone, but I know at least three schools that only run an after-school program. They open at 2 pm and close at 6 pm after teaching just one class a night.
Action Steps: What to do now
1. Review the six revenue streams covered in this lesson and decide if there are any that you will implement and take action to do so.
2. Review the six revenue streams and if you’re already doing them, look for ways to improve the results you’re currently getting and implement updates to increase your revenue.