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’.

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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
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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 
Research and Development$42,750
Expensed Equipment$42,750
Start-up Assets$0
Cash Required$322,500
Start-up Inventory$52,625
Other Current Assets$222,500
Long-term Assets$125,000
Total Requirements$245,000
Start-up Expenses to Fund$121,875
Start-up Assets to Fund$195,000
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
Liabilities and Capital$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
Planned Investment$0
Investor 1$312,500
Investor 2$0
Additional Investment Requirement$0
Loss at Start-up (Start-up Expenses)$313,125
Total Funding$265,000
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    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


    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:

    Karate School Business Plan - Market Segmentation

    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 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%

    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


    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.

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    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:

    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
    Kyokushin & Shotokan265,450322,390393,320
    TOTAL UNIT SALES3,229,7903,418,8004,239,860
    Unit PricesYear 1Year 2Year 3
    Kyokushin & Shotokan$650.00$750.00$850.00
    Kyokushin & Shotokan$139,350$194,600$249,850
    Direct Unit CostsYear 1Year 2Year 3
    Kyokushin & Shotokan$3.00$3.50$4.00
    Direct Cost of Sales   
    Kyokushin & Shotokan$19,400$67,600$115,800
    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
    Sales Executives$85,000$92,000$109,000
    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 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%

    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
    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
    Direct Cost of Sales$15,100$19,153$23,206
    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%
    Sales and Marketing and Other Expenses$1,850$2,000$2,150
    Leased Equipment$0$0$0
    Payroll Taxes$34,510$40,726$46,942
    Total Operating Expenses$188,766$220,744$252,722
    Profit Before Interest and Taxes$105,205$146,040$186,875
    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
    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   
    Accounts Receivable$12,613$14,493$16,373
    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
    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%
    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    
    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    
    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.

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