Masterclass 2: The Financial Structure

Here we are for our second masterclass. Firstly, I just wanted to thank the audience we had for our first class — thousands of people watched, showing that people in Jiu Jitsu are really starting to be interested in delivering a better service for their students, something that we didn’t really have in our era. We did what we did without a lot of information about the technical side of business management, so I’m really happy to be able to share with our Jiu Jitsu community what I’ve learned up until now.

Today is a special day as well (23rd oct) I’ve been a black belt for 30-years; it’s a path that has brought me a lot of happiness. Normal birthdays where you just get older aren’t that much fun! but when you celebrate your black belt birthday it’s a huge satisfaction. This is the last year I’ll be a black belt, because next year I’ll hopefully be getting my coral belt — it’s a been an incredible journey — this life within Jiu Jitsu has been a lot of fun.

I’ve been a competitor, a teacher, a coach of really high-level athletes (I think I’ve done almost everything within Jiu Jitsu) but what motivates me at the moment is to be able to share a little of my experience with people that want to “Live off Jiu Jitsu.” The slogan of this product isn’t a mistake, it’s because I really believe people can live off, and live “well” from Jiu Jitsu. Lots of people survive from Jiu Jitsu, but seeing people really thriving and earning good salaries is what really motivates me to share with you what I have learned.

In our first Masterclass we talked about the technical structure — about the products within Jiu Jitsu and how to divide the group levels etc., which is really important for you to know if you want to deliver a better product to your students. Today, we’re going to talk about the financial part, also an important part because if you don’t have any financial return it’s going to be difficult for you to continue for any length of time. You can do Jiu Jitsu out of “love” only for a determined length of time and this happens a lot in Jiu Jitsu. People fall in love with it, they want to become teachers, but then comes a point when there are bills to pay and they end up having to do something else — they end up leaving Jiu Jitsu. I always had it in my head that this wouldn’t happen to me, that I would dedicate myself so I could do this for the rest of my life. I wanted to earn a good salary from Jiu Jitsu and to be comfortable without having to do other work. Obviously, it wasn’t an easy process, it’s not easy for anyone but it’s very possible.

I’m going to try and show you a little of this path and how you can do it in the same way.

First, let me start with a question:

Do you have a Job or a Business?

The majority of Jiu Jitsu teachers have a job. What does this mean? You’ve been a good athlete and want to start giving classes; you start giving classes, put together your academy with few resources and start gaining students who pay their membership fees. However, this money that comes into your gym starts getting mixed up with personal expenses, so you end up using this income to go out for dinner with your girlfriend, to buy açai, to buy another kimono, to travel — everything is lumped into one account. What happens with this? Your business without you isn’t worth anything, because everything depends on you. The money that’s left over (maybe a lot, or a little), is what you give yourself as a salary — this is the wrong way to do it.

If we think that in the academy, there are teachers and business managers, and sometimes it’s the same thing, so the teacher is the manager and thinks it’s ok to take everything. He doesn’t pay himself a set salary and he doesn’t separate this issue of salary from what the business generates. What happens with this? When you finish your peak as a teacher and start to decline (which happens to everyone) things start to change. I have always tried to look at the generation in front of me and ask, “what are these guy’s doing?” “who is successful and who isn’t.” If you think today of the teacher aged 60-years-old still giving lots of classes, they’re hard to find because it requires a huge amount of energy to give that volume of classes. Master Jacaré continued teaching up until age 65, he went to the very end! but a moment comes when it doesn’t work. There comes a time when it’s impossible. If you don’t have your business structured well, what happens? It will go under.

I was always worried about this and when I saw people ahead of me sinking in this way, I knew I wouldn’t follow that same path. I would have to try something different, so I started to study ways I could transform my academy. All the mistakes I talk about, I also committed them; I used to mix up my business account and personal account and make the same mistakes everyone else did, but I wanted to know how I could transform my academy into a real business and not to simply depend on that model where whatever money is left over is my salary. This is really harmful for any kind of business.

Now we’ll come to another question:

Should I have lots of different activities in my academy? or just focus on what I know how to do?

In my opinion we should just focus exclusively on the activity that we know, which is Jiu Jitsu. Why do I say this?

Because what about for example, Muay Thai? When you have a huge demand and packed classes? Obviously, if your primary classes are Muay Thai, then keep it as Muay Thai, but what happens when you start to diversify a lot? Firstly, you’ll have serious problems in your timetable. Like we talked about before, how will you maintain the division of classes, or maintain your volume of beginner classes if you have other activities within your academy?

There’s another serious point, one which I know about because I used to have Muay Thai in my academy. One day that teacher just left, and obviously I don’t know how to give Muay Thai classes. I was at the mercy of that teacher, my students also. I tried to get a substitute, but it wasn’t the same so the class diminished. I decided it wasn’t worth making that mistake again because actually you let your students down because you can’t deliver what they signed up for and the consequences are obvious — your students will leave your academy.

If you just focus on one activity (Jiu Jitsu) it means you can offer many more products, consequently reaching more people, and more profiles of people. You can start to have a strong Centre of Jiu Jitsu or Muay Thai, Karate, Judo, or whatever but when you mix these things up the tendency is you don’t do anything well. You know that expression: “a duck can swim, run and fly, but he can’t swim well, run well or fly well!” we don’t want to be like a duck — we want to be the person who best does the activity we’re selling.

When you have this temptation to add another activity especially when you’re struggling to pay the bills or at certain times your tatami is empty and you want to optimise the space, the solution is not to put in another activity, it’s to add in a Jiu Jitsu class for another profile of person. The argument will be, “I’ll have to work the whole day!” No, you’ll have to hire people to work. As we talked about, it’s not your job to give all the classes in the academy, but you’ll start being the manager of your business where you’ll give a certain number of classes. This is important because you’re the name of your academy, but you’ll hire people to help you. Instead of adding other activities into the timetable which leave you at the mercy of others, you’ll coordinate your team of teachers, which obviously isn’t easy but it’s what needs to be done so you can give for example 500 classes per month. In this way, you’ll have a Centre of Jiu Jitsu. When people talk about Jiu Jitsu in your city, people will want to go to you because they know they’ll find the training times they need and the group they need — you’ll be the reference in your area. When you dilute this because you have other activities in your timetable you start to compete with other academies that also offer everything. Let’s think of it like this — do you think you have the structure to compete with a “Body Tech” gym? — it’s difficult right? Their facilities are huge, they offer everything. But how come they can’t compete with our work? Because they don’t specialise in anything, they’re the “ducks” — they do everything more or less. How do I compete with them? By offering the best Jiu Jitsu and specialising in something.

When you try and blend what you do, you end up competing on equal footing with these bigger gyms, and obviously their size or structure is likely to be better than yours, so consequently you’ll end up with problems. When you see academies today, there isn’t a lot of security for their owners — a guy makes an investment in weight-lifting machines etc, then a Smart Fit opens next door, and the guy’s finished. But in Jiu Jitsu we’re not impacted by this and neither will we be because the Smart Fit gym can’t deliver what we can. Imagine two weight-lifting academies — a high end and a low-cost gym, would you pay R$500 or R$79? I imagine you’re going to pay R$79, because the equipment is the same, but when you specialise in what you know well, you protect yourself.

Another very delicate issue which I’d like to point out is how to price your academy.

How do I price my academy?

Obviously, this will vary depending on region, on the city, on the size of your facility, but in the majority of cases, what do people do? they base their price simply on the surrounding market. So, I’m here in Sao Paulo, in Vila Olympia, the guy over there charges R$300, so I’ll charge R$280 to be a little more attractive but you don’t know why you’ve calculated that price — you’re not taking into account your costs. There are two different scenarios: one where you’re starting from scratch and the other where you already have an established academy. With the latter, (where you already have an academy) and you have an established price, it’s a bit more complicated. You’re going to have to work with other sources of income where the average spend of your student can pay the bills, but when you’re starting with an academy from scratch, it’s your chance to really set that price at what it should be.

When we think about pricing, what do we need to take into consideration? The first thing is, my student is comfortable training in a space of 5m2 per student. In a room of 100m2 I can comfortably fit 20 students per group, and when I assemble my timetable in an intelligent way, I can reach the maximum capacity in my school. Once I’ve done this, I have my maximum earning, and 30% of this income is profit. I’ll explain the details in a little bit but just so you understand this, imagine you want to work with Jiu Jitsu in a way that generates 30% profit. The question is this: This profit that you now have, is that what you’d like to earn? Imagine that you’re going to work really, really hard, will you still be satisfied with that amount? If so, that’s great and you’ve found your price. If not, you’re going to have to make some adjustments.

To be continued..





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