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.

Karate School Business Plan - 3 Years Profit Forecast

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:

Karate School Business Plan - Startup cost

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 business plan depend on your provided services.
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

The 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 karate studio 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:

Karate School Business Plan - Market Segmentation

The detailed marketing segmentation of our target audience is as follows:

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 academies 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 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 CustomersGrowthYEAR 1YEAR 2YEAR 3YEAR 4YEAR 5CAGR
Children (6-18)48%22,33432,34443,66552,54466,43210.00%
Adults (Above 18)18%11,43313,34416,55318,74520,54513.43%
Professionals34%18,32219,45520,65522,86724,43315.32%
Total100%52,08965,14380,87394,156111,4109.54%

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
  • Semi-annual membership for $5000 per six months
  • Yearly membership for $8000 per year

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, martial arts and the accompanying health benefits

6.3 Sales Forecast

Our sales are forecasted in the following column charts:

Karate School Business Plan - Unit Sales

The detailed information about sales forecast is given in the following table:

Sales Forecast   
Unit SalesYear 1Year 2Year 3
Shorin-Ryu187,330260,320258,240
Shito-Ryu802,370815,430823,540
Wado-Ryu539,3207702301,002,310
Kyokushin & Shotokan265,450322,390393,320
Goju-Ryu1,435,3201,250,4301,762,450
TOTAL UNIT SALES3,229,7903,418,8004,239,860
Unit PricesYear 1Year 2Year 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 CostsYear 1Year 2Year 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

Karate School Business Plan - Sales Monthly

6.5 Sales Yearly

Karate School Business Plan - 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 1Year 2Year 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 NewStar Martial Arts Academy is as follows.

8.1 Important Assumptions

 General Assumptions   
Year 1Year 2Year 3
Plan Month123
Current Interest Rate10.00%11.00%12.00%
Long-term Interest Rate10.00%10.00%10.00%
Tax Rate26.42%27.76%28.12%
Other000

8.2 Brake-even Analysis

Karate School Business Plan - Brake-even Analysis

 Brake-Even Analysis 
Monthly Units Break-even5530
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 1Year 2Year 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/Sales30.00%39.32%48.64%

8.3.1 Profit Monthly

Karate School Business Plan - PROFIT MONTHLY

8.3.2 Profit Yearly

Karate School Business Plan - PROFIT YEARLY

8.3.3 Gross Margin Monthly

Karate School Business Plan - GROSS MARGIN MONTHLY

8.3.4 Gross Margin Yearly

Karate School Business Plan - GROSS MARGIN YEARLY

8.4 Projected Cash Flow

Karate School Business Plan - Projected Cash Flow Diagram

 Pro Forma Cash Flow   
Cash ReceivedYear 1Year 2Year 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
ExpendituresYear 1Year 2Year 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   
AssetsYear 1Year 2Year 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 CapitalYear 1Year 2Year 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 1Year 2Year 3Industry Profile
Sales Growth4.35%30.82%63.29%4.00%
Percent of Total Assets
Accounts Receivable5.61%4.71%3.81%9.70%
Inventory1.85%1.82%1.79%9.80%
Other Current Assets1.75%2.02%2.29%27.40%
Total Current Assets138.53%150.99%163.45%54.60%
Long-term Assets-9.47%-21.01%-32.55%58.40%
TOTAL ASSETS100.00%100.00%100.00%100.00%
Current Liabilities4.68%3.04%2.76%27.30%
Long-term Liabilities0.00%0.00%0.00%25.80%
Total Liabilities4.68%3.04%2.76%54.10%
NET WORTH99.32%101.04%102.76%44.90%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin94.18%93.85%93.52%0.00%
Selling, General & Administrative Expenses74.29%71.83%69.37%65.20%
Advertising Expenses2.06%1.11%0.28%1.40%
Profit Before Interest and Taxes26.47%29.30%32.13%2.86%
Main Ratios
Current25.8629.3932.921.63
Quick25.428.8832.360.84
Total Debt to Total Assets2.68%1.04%0.76%67.10%
Pre-tax Return on Net Worth66.83%71.26%75.69%4.40%
Pre-tax Return on Assets64.88%69.75%74.62%9.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin19.20%21.16%23.12%N.A.
Return on Equity47.79%50.53%53.27%N.A.
Activity Ratios
Accounts Receivable Turnover4.564.564.56N.A.
Collection Days9299106N.A.
Inventory Turnover19.722.5525.4N.A.
Accounts Payable Turnover14.1714.6715.17N.A.
Payment Days272727N.A.
Total Asset Turnover1.841.551.26N.A.
Debt Ratios
Debt to Net Worth0-0.02-0.04N.A.
Current Liab. to Liab.111N.A.
Liquidity Ratios
Net Working Capital$120,943$140,664$160,385N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales0.450.480.51N.A.
Current Debt/Total Assets4%3%2%N.A.
Acid Test23.6627.0130.36N.A.
Sales/Net Worth1.681.290.9N.A.
Dividend Payout000N.A.