Table of Content

    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

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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  
    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

    Any questions? Get in Touch!

    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

    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 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 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
    • 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.

    Any questions? Get in Touch

    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 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

    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 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

    Karate School Business Plan - 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

    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 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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