You have to make money to spend money

We are probably all familiar with the phrase that you have to spend money to make money. However, I’d like to talk about the less well-known version of the phrase: you have to make money to spend money.

Martial arts clubs often struggle with their finances. This is especially true when the clubs are not being run like businesses or when the leaders want to make it as cheap and accessible as possible right now (without planning for future financial stability for the club).

Many self-employed people will also struggle with similar problems, and people who have recently opened their first business. If you are not yet convinced of the worth and value of your time and skills, you will tend to under-price yourself. Also, if you are scrabbling to win every possible sale, then it’s all too easy to start discounting and slashing prices.

In this article, I would like to talk a little more about the making of money so that martial arts clubs have better finances in order to be able to spend money to achieve whatever goal.

Spending money to make money

First, let’s take a quick look at the more normal version of the saying. What it means is that to make a lot of money, or to make a healthy amount of money, you need to be willing to spend money in order to buy the right tools, hire the right people, arrange the right venue, do your marketing, all that sort of thing.

Generally, people are happier to spend a bit more money on something that they perceive is better value, and tend to be less happy about spending less money on something that they perceive to have little value or quality. People might be happier to pay a higher attendance fee for the club if it means that they can practise in a nicer venue or if they can receive better quality tuition.

You can’t charge a high price if you don’t provide a high enough value or quality of experience, and therefore, if you want to charge a high price (“make money”), you need to be willing and able to pay what it takes (“spend money”) to achieve the necessary quality and value for people.

• Low price (cheap) and low quality (low costs) might sometimes be acceptable.
• High price (expensive) and low quality (low costs) are almost never acceptable.
• High price (expensive) and high quality (high costs) are quite often acceptable.
• Low price (cheap) and high quality (high costs) are rarely sustainable for any length of time!

Clearly, there needs to be a healthy balance between how much you charge and how much you spend in order to be able to continue charging that.

Making money – understanding your budget

Do you know what your regular outgoings are for the club? How do you make sure that they are paid every month without leaving anything to chance?

The fixed costs have to be met, every single month, without fail – otherwise the club goes bust. A generous club leader might subsidise the club for a little while until it becomes able to pay its own way (and repay those personal loans), but the club does need to get to a stage quickly where it can stand on its own two feet and meet its expenses.

After that, there are irregular costs. These might include insurances, equipment purchases, repairs, software subscriptions, etc. Although you might not need to pay these costs every single month, you need to have some income every month to be able to cover these irregular expenses when they do appear. It can make a lot of sense to build in a little buffer to your budget every month, so that irregular costs do not come as a sudden shock.

Making money – recurring revenue

One of the best ways to be able to predict what your income is going to be in any given month is for members to be paying a predictable attendance fee every single month.

Although people often seem to dislike contracts, having people commit to a set number of lessons and then pay for them at predictable times is one of the most helpful things for any club’s finances. If you know what all your expenses are going to be, and if you also know precisely how much money is guaranteed to come in during the month, then you will find it so much easier and less stressful to manage the club’s finances.

Is there some way that you can make a win-win situation, so that club members feel that they are getting a good deal by paying predictable, regular, monthly attendance fees? If it is a win-win situation then everyone is going to be happy and there will not be anything wrong or immoral with the arrangement.

Making money – the issue of discounts

It might be tempting to offer discounts when people commit to attending multiple sessions. However, if you have built your budget around people paying full price, then offering discounts will undermine that model and you will find yourself without quite enough income.

Instead, I recommend working out your finances, understanding what the minimum would be that you can charge per person, and making that your discounted rate. Therefore, to work out your normal rate, add 10% or whatever multiplier to your minimum rate, so that the normal rate is higher. For example, if you need 10 people paying £5 each to cover the cost of the hall, let £5 be the discounted rate for people who commit to attend several sessions, and raise the standard or drop-in rate to £6 or £7 per session.

Doing it this way means that you can offer discounts to people (compared to the standard rate) and still balance your books at the end of the month. Furthermore, people who are not willing to commit to the club can contribute slightly more to the club bank account so that the club can make more discretionary purchases.

Making money – what to spend it on?

The obvious options are things like more equipment or perhaps even wages for instructors – but there are some other good choices as well, although perhaps a bit less sexy.

Buying better quality equipment and renting a nicer venue (perhaps in a more favourable or easier-to-access location) can make the whole experience that much nicer for everyone. Along these lines, buying things that make the venue nicer or that make the training more enjoyable can also be beneficial – perhaps climate control machines, or supplementary training tools, or even just some artwork to make the place look a bit nicer and more welcoming.

You could also invest in your instructors so that they receive more training themselves. It can be hugely beneficial to everyone in the club to fund the instructor to make a trip to another club, to get some new input and ideas to bring back to the club. Other training can also be beneficial, such as for first aid, child protection, accounting and book keeping, basic website literacy, or even just fundamentals of sport coaching.

If you know that your costs are going to be covered every month, you could even offer “scholarships” or deeper discounts to people who might be unable to pay the full rate, improving the accessibility and inclusiveness of your club.

Once you are able to cover the must-have and cannot-avoid expenses every month, you can start purchasing from your would-be-nice-to-have list. If you can manage your finances well then you might even begin to work from your in-an-ideal-world list!

Conclusions

At the end of the day, the solution for any club that is having financial problems is quite simple: just make more money. When a club makes more income, it can spend more on the necessities and perhaps even the luxuries. A club that is capable of spending more without going bust is probably going to be a better place for people to spend time.

Of course, actually making more money can be quite difficult, especially if the club has been operating on a tiny budget for a long time. Raising prices might result in losing members and that is never pleasant. However, failing to raise prices means that the club will continue to struggle every month and will never be able to become any better than it currently is.

Once you have plenty of money to play with, the rule is generally that you have to spend more money to make more money. However, before you get to that stage, you have to make some money in order to be able to spend any money.

A club with healthy finances can be a wonderful place to spend time, for everyone, and it can become a huge power for good in people’s lives. There is nothing bad about this state, and therefore, nothing bad about a club making income and profit. It is a crying shame to see clubs limping along without enough income to achieve stability, just because people don’t want to “make a profit” or treat it like a business.

Thinking about your club, what simple efforts would allow the club to make slightly more income while still achieving a win-win situation for everyone?

If you would like to have a discussion with me about this topic, I would be delighted to arrange some online coaching to share my experience. Please do feel welcome to get in touch and let’s see what I can do to help.