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Do you want to start karate school business?
Do you want to start a karate school? It is estimated that more than 5 million Americans are currently involved in learning some type of Martial Arts so, evidently, this business has a lot of market. Secondly, you can start this business with lower initial investments as compared to other businesses and can make it profitable, provided that you plan and execute it successfully.
Like all other businesses, the first step towards successful planning of this business is to develop a comprehensive business plan which will not only help in startup but will also form the basis of your company’s future policies.
So, if you are wondering how to write an effective business plan then here we are providing you the business plan for a karate school startup named ‘NewStar Martial Arts Academy’.
Executive Summary
2.1 The Business
NewStar Martial Arts Academy will be owned by Santoshi Takayuki, a Japanese American master of karate. Grand Master Santoshi has devoted his entire life to learning and teaching karate, that’s why he knows everything about opening a karate school.
2.2 Management
The company will hire a staff comprising of trainers, assistants and sales executives, all of which will be trained for one month prior to onboarding.
2.3 Customers
NewStar Martial Arts Academy will be a licensed karate school where people belonging to all age-groups will be taught the highest-level of self-defense by the best trainers of the United States under the supervision and mentorship of Grand Master Santoshi Takayuki.
2.4 Target of the Company
The business targets are to balance the cost of a startup within next 5 years of launch and to become the best karate academy in Manhattan.
Company Summary
3.1 Company Owner
NewStar Martial Arts Academy will be owned by Santoshi Takayuki, a Japanese American master of karate.
3.2 Why the Business is being started
Santoshi has devoted his entire life to learning, developing, and teaching karate and self-defense techniques. His venture is meant to serve the society by teaching them the art of defending themselves while also making suitable profit out of it.
3.3 How the Business will be started
If you are low on investment, you must think about how to open a karate school using minimal resources. Staring everything from scratch is costlier than buying an existing facility that’s why Santoshi will procure and enhance an existing Martial Arts academy.
The costs for of startup are as follows:
The startup requirements are as follows:
| Start-up Expenses | |
| Legal | $75,500 |
| Consultants | $0 |
| Insurance | $62,750 |
| Rent | $22,500 |
| Research and Development | $42,750 |
| Expensed Equipment | $42,750 |
| Signs | $1,250 |
| TOTAL START-UP EXPENSES | $247,500 |
| Start-up Assets | $0 |
| Cash Required | $322,500 |
| Start-up Inventory | $52,625 |
| Other Current Assets | $222,500 |
| Long-term Assets | $125,000 |
| TOTAL ASSETS | $121,875 |
| Total Requirements | $245,000 |
| START-UP FUNDING | $0 |
| START-UP FUNDING | $273,125 |
| Start-up Expenses to Fund | $121,875 |
| Start-up Assets to Fund | $195,000 |
| TOTAL FUNDING REQUIRED | $0 |
| Assets | $203,125 |
| Non-cash Assets from Start-up | $118,750 |
| Cash Requirements from Start-up | $0 |
| Additional Cash Raised | $118,750 |
| Cash Balance on Starting Date | $121,875 |
| TOTAL ASSETS | $0 |
| Liabilities and Capital | $0 |
| Liabilities | $0 |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $0 |
| Capital | $0 |
| Planned Investment | $0 |
| Investor 1 | $312,500 |
| Investor 2 | $0 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $695,000 |
| Loss at Start-up (Start-up Expenses) | $313,125 |
| TOTAL CAPITAL | $221,875 |
| TOTAL CAPITAL AND LIABILITIES | $221,875 |
| Total Funding | $265,000 |
Services for customers
The most important thing to decide before you think about how to start a karate school is the services you will provide to your customers. It is important because all subsequent components of a depend on your provided services for business plan.
NewStar Martial Arts Academy will be a licensed karate school where people belonging to all age-groups will be taught the highest-level of self defense by the best trainers of the United States under the supervision and mentorship of Grand Master Santoshi Takayuki. We will provide training of the following six types of karate:
- Shorin-Ryu
- Shotokan
- Wado-Ryu
- Goju-Ryu
- Kyokushin
- Shito-Ryu
Along with teaching the karate, our trainers will also counsel the members in their fitness programs.
Marketing Analysis of karate school business
Note
he most important component of a karate school business plan is its accurate marketing analysis because it is only after this stage that a good karate center business plan could have been developed. Marketing analysis must be incorporated before developing the business plan of karate school.
5.1 Marketing Segmentation
Marketing segmentation of the martial arts school business plan shows the various segments or groups of our prospective customers. Our target market is the community living in Manhattan at a 30 minutes’ drive from our office. The community consists of all types of people from varying backgrounds. As per the financial position, nearly half of the community has a monthly income ranging from $40k to $50k while nearly 10% people have incomes even around $100,000. So nearly all of the people are well established and can easily afford our membership fees. Our experts have identified following target groups for our services:
The detailed marketing segmentation of our target audience is as follows:
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5.1.1 Children (6-18):
The first group of our customers will be the children living in the vicinity of our karate school in Manhattan. Nearly 62% of American parents send their children to Martial Arts school business plan or karate schools for learning self-defense and improving their health that’s why this target group will constitute the bulk of our customers. These children belong to financially stable families who can easily afford our services.
5.1.2 Adults (18+):
The second category includes individuals who themselves want to learn martial arts school business for any reason and are aged above 18. Their training will differ from other groups and they will be subjected to more strictness.
5.1.3 Professionals:
The last category includes those individuals who have a passion for karate and want to make a career in it by participating in national and international level contests. This group will be trained at a completely different level under the direct supervision of Grand Master Santoshi himself.
The detailed market analysis of our potential customers is given in the following table:
| Market Analysis | |||||||||
| Potential Customers | Growth | YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | YEAR 5 | CAGR | ||
| Children (6-18) | 48% | 22,334 | 32,344 | 43,665 | 52,544 | 66,432 | 10.00% | ||
| Adults (Above 18) | 18% | 11,433 | 13,344 | 16,553 | 18,745 | 20,545 | 13.43% | ||
| Professionals | 34% | 18,322 | 19,455 | 20,655 | 22,867 | 24,433 | 15.32% | ||
| Total | 100% | 52,089 | 65,143 | 80,873 | 94,156 | 111,410 | 9.54% | ||
5.2 Business Target
The business targets are to balance the cost of a startup within next 5 years of launch and to become the best karate academy in Manhattan.
5.3 Product Pricing
We will basically offer three types of packages to our members to choose from:
- Monthly membership for $1000 per month
Strategy
6.1 Competitive Analysis
Our biggest competitive analysis is the leadership of Grand Master Santoshi, who is famous for developing new techniques in karate and has also served as a self-defense instructor for the Tokyo Police department in the 1980s. Our second competitive advantage will be our unparalleled customer service which will maximize the retention of members and reduce the turnover rate.
6.2 Sales Strategy
We will attract our customers towards us by various efforts, such as:
- The school will be advertised as a pro start karate and fitness center in magazines, newspapers and social media
- We will offer discounts on the membership for the first three months of the launch
- We will arrange on the importance of learning self-defense in martial arts school business and the accompanying health benefits
6.3 Sales Forecast
Our sales are forecasted in the following column charts:
The detailed information about sales forecast is given in the following table:
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| Shorin-Ryu | 187,330 | 260,320 | 258,240 |
| Shito-Ryu | 802,370 | 815,430 | 823,540 |
| Wado-Ryu | 539,320 | 770230 | 1,002,310 |
| Kyokushin & Shotokan | 265,450 | 322,390 | 393,320 |
| Goju-Ryu | 1,435,320 | 1,250,430 | 1,762,450 |
| TOTAL UNIT SALES | 3,229,790 | 3,418,800 | 4,239,860 |
| Unit Prices | Year 1 | Year 2 | Year 3 |
| Shorin-Ryu | $140.00 | $150.00 | $160.00 |
| Shito-Ryu | $600.00 | $800.00 | $1,000.00 |
| Wado-Ryu | $700.00 | $800.00 | $900.00 |
| Kyokushin & Shotokan | $650.00 | $750.00 | $850.00 |
| Goju-Ryu | $140.00 | $120.00 | $100.00 |
| Sales | |||
| Shorin-Ryu | $214,800 | $274,000 | $333,200 |
| Shito-Ryu | $120,050 | $194,500 | $268,500 |
| Wado-Ryu | $50,110 | $71,600 | $93,000 |
| Kyokushin & Shotokan | $139,350 | $194,600 | $249,850 |
| Goju-Ryu | $62,350 | $72,300 | $82,250 |
| TOTAL SALES | |||
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Shorin-Ryu | $0.70 | $0.80 | $0.90 |
| Shito-Ryu | $0.40 | $0.45 | $0.50 |
| Wado-Ryu | $0.30 | $0.35 | $0.40 |
| Kyokushin & Shotokan | $3.00 | $3.50 | $4.00 |
| Goju-Ryu | $0.70 | $0.75 | $0.80 |
| Direct Cost of Sales | |||
| Shorin-Ryu | $98,300 | $183,000 | $267,700 |
| Shito-Ryu | $66,600 | $119,900 | $173,200 |
| Wado-Ryu | $17,900 | $35,000 | $52,100 |
| Kyokushin & Shotokan | $19,400 | $67,600 | $115,800 |
| Goju-Ryu | $27,700 | $69,200 | $110,700 |
| Subtotal Direct Cost of Sales | $294,100 | $699,400 | $1,104,700 |
6.4 Sales Monthly
6.5 Sales Yearly
Personnel plan
If you are wondering about how much does it cost to open a karate school, you’d better decide what staff will you be hiring, because a lot of investment/revenue is needed to pay salaries of the staff. That’s why it is every important to develop an accurate personnel plan.
7.1 Company Staff
The company will initially hire the following staff:
- 1 General Manager for managing the overall operations
- 2 Administrators/Accountants for maintaining financial records
- 4 Sales Executives responsible for marketing and discovering new ventures
- 5 Trainers for providing training to members
- 10 Assistants for undertaking day-to-day tasks
- 3 Drivers for providing transportation facility to members
- 4 Cleaners for cleaning the school
- 1 Front Desk Officer for acting as a receptionist
7.2 Average Salary of Employees
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| General Manager | $42,000 | $59,000 | $76,000 |
| Accountants | $85,000 | $95,000 | $105,000 |
| Sales Executives | $85,000 | $92,000 | $109,000 |
| Trainers | $135,000 | $155,000 | $185,000 |
| Assistants | $60,000 | $63,300 | $70,000 |
| Drivers | $63,300 | $70,000 | $76,700 |
| Cleaners | $76,000 | $93,000 | $110,000 |
| Front Desk Officer | $35,000 | $42,000 | $59,000 |
| Total Salaries | $343,300 | $380,300 | $440,700 |
Financial Plan
The last thing to do before thinking about how to open up a karate school is to develop a financial plan outlining the development of company over the next few years. The financial plan of martial arts school business plan is as follows.
8.1 Important Assumptions
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 11.00% | 12.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 26.42% | 27.76% | 28.12% |
| Other | 0 | 0 | 0 |
8.2 Brake-even Analysis
| Brake-Even Analysis | |
| Monthly Units Break-even | 5530 |
| Monthly Revenue Break-even | $159,740 |
| Assumptions: | |
| Average Per-Unit Revenue | $260.87 |
| Average Per-Unit Variable Cost | $0.89 |
| Estimated Monthly Fixed Cost | $196,410 |
8.3 Projected Profit and Loss
| Pro Forma Profit And Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $309,069 | $385,934 | $462,799 |
| Direct Cost of Sales | $15,100 | $19,153 | $23,206 |
| Other | $0 | $0 | $0 |
| TOTAL COST OF SALES | $15,100 | $19,153 | $23,206 |
| Gross Margin | $293,969 | $366,781 | $439,593 |
| Gross Margin % | 94.98% | 94.72% | 94.46% |
| Expenses | |||
| Payroll | $138,036 | $162,898 | $187,760 |
| Sales and Marketing and Other Expenses | $1,850 | $2,000 | $2,150 |
| Depreciation | $2,070 | $2,070 | $2,070 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $4,000 | $4,250 | $4,500 |
| Insurance | $1,800 | $1,800 | $1,800 |
| Rent | $6,500 | $7,000 | $7,500 |
| Payroll Taxes | $34,510 | $40,726 | $46,942 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $188,766 | $220,744 | $252,722 |
| Profit Before Interest and Taxes | $105,205 | $146,040 | $186,875 |
| EBITDA | $107,275 | $148,110 | $188,945 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $26,838 | $37,315 | $47,792 |
| Net Profit | $78,367 | $108,725 | $139,083 |
| Net Profit/Sales | 30.00% | 39.32% | 48.64% |
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
| Pro Forma Cash Flow | |||
| Cash Received | Year 1 | Year 2 | Year 3 |
| Cash from Operations | |||
| Cash Sales | $40,124 | $45,046 | $50,068 |
| Cash from Receivables | $7,023 | $8,610 | $9,297 |
| SUBTOTAL CASH FROM OPERATIONS | $47,143 | $53,651 | $59,359 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| SUBTOTAL CASH RECEIVED | $47,143 | $53,651 | $55,359 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $21,647 | $24,204 | $26,951 |
| Bill Payments | $13,539 | $15,385 | $170,631 |
| SUBTOTAL SPENT ON OPERATIONS | $35,296 | $39,549 | $43,582 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $35,296 | $35,489 | $43,882 |
| Net Cash Flow | $11,551 | $13,167 | $15,683 |
| Cash Balance | $21,823 | $22,381 | $28,239 |
8.5 Projected Balance Sheet
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $184,666 | $218,525 | $252,384 |
| Accounts Receivable | $12,613 | $14,493 | $16,373 |
| Inventory | $2,980 | $3,450 | $3,920 |
| Other Current Assets | $1,000 | $1,000 | $1,000 |
| TOTAL CURRENT ASSETS | $201,259 | $237,468 | $273,677 |
| Long-term Assets | |||
| Long-term Assets | $10,000 | $10,000 | $10,000 |
| Accumulated Depreciation | $12,420 | $14,490 | $16,560 |
| TOTAL LONG-TERM ASSETS | $980 | $610 | $240 |
| TOTAL ASSETS | $198,839 | $232,978 | $267,117 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $9,482 | $10,792 | $12,102 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $9,482 | $10,792 | $12,102 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $9,482 | $10,792 | $12,102 |
| Paid-in Capital | $30,000 | $30,000 | $30,000 |
| Retained Earnings | $48,651 | $72,636 | $96,621 |
| Earnings | $100,709 | $119,555 | $138,401 |
| TOTAL CAPITAL | $189,360 | $222,190 | $255,020 |
| TOTAL LIABILITIES AND CAPITAL | $198,839 | $232,978 | $267,117 |
| Net Worth | $182,060 | $226,240 | $270,420 |
8.6 Business Ratios
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 4.35% | 30.82% | 63.29% | 4.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 5.61% | 4.71% | 3.81% | 9.70% |
| Inventory | 1.85% | 1.82% | 1.79% | 9.80% |
| Other Current Assets | 1.75% | 2.02% | 2.29% | 27.40% |
| Total Current Assets | 138.53% | 150.99% | 163.45% | 54.60% |
| Long-term Assets | -9.47% | -21.01% | -32.55% | 58.40% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.68% | 3.04% | 2.76% | 27.30% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 25.80% |
| Total Liabilities | 4.68% | 3.04% | 2.76% | 54.10% |
| NET WORTH | 99.32% | 101.04% | 102.76% | 44.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 94.18% | 93.85% | 93.52% | 0.00% |
| Selling, General & Administrative Expenses | 74.29% | 71.83% | 69.37% | 65.20% |
| Advertising Expenses | 2.06% | 1.11% | 0.28% | 1.40% |
| Profit Before Interest and Taxes | 26.47% | 29.30% | 32.13% | 2.86% |
| Main Ratios | ||||
| Current | 25.86 | 29.39 | 32.92 | 1.63 |
| Quick | 25.4 | 28.88 | 32.36 | 0.84 |
| Total Debt to Total Assets | 2.68% | 1.04% | 0.76% | 67.10% |
| Pre-tax Return on Net Worth | 66.83% | 71.26% | 75.69% | 4.40% |
| Pre-tax Return on Assets | 64.88% | 69.75% | 74.62% | 9.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 19.20% | 21.16% | 23.12% | N.A. |
| Return on Equity | 47.79% | 50.53% | 53.27% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4.56 | 4.56 | 4.56 | N.A. |
| Collection Days | 92 | 99 | 106 | N.A. |
| Inventory Turnover | 19.7 | 22.55 | 25.4 | N.A. |
| Accounts Payable Turnover | 14.17 | 14.67 | 15.17 | N.A. |
| Payment Days | 27 | 27 | 27 | N.A. |
| Total Asset Turnover | 1.84 | 1.55 | 1.26 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | 0 | -0.02 | -0.04 | N.A. |
| Current Liab. to Liab. | 1 | 1 | 1 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $120,943 | $140,664 | $160,385 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.45 | 0.48 | 0.51 | N.A. |
| Current Debt/Total Assets | 4% | 3% | 2% | N.A. |
| Acid Test | 23.66 | 27.01 | 30.36 | N.A. |
| Sales/Net Worth | 1.68 | 1.29 | 0.9 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
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