6.2.2 Doing the Math

Successful Moo Duk Kwan Studio Ownership

6.2.2 Doing the Math

Defining your pricing for programs starts with understanding your costs, clearly understanding the local market for similar services, finally working out your target profit margin. Don’t be fooled – this exercise is more art than science (and math), but you do you clearly need to understand the data and facts as the foundation of the pricing strategy.

You need to define your monthly costs by noting all the areas listed in Managing the Pu0026amp;L section:

* Rent/Mortgage

* Utilities

* Taxes

* Insurance

* Advertising

* Supplies (cleaning, light bulbs, paper towels, air fresheners, etc.)

* Cash Discounts (if applicable)

* Internet u0026amp; telephone

* Shipping

* Postage

* Maintenance u0026amp; repairs

* Legal u0026amp; auditing

* Enrollment expenses

* Your personal savings

* Etc.

After you understand the monthly costs you need to understand the local market for services. You should look into competitive gym pricing in the area, other martial arts studio, cross-fit, etc. This tells you what the local market for services is to compare with yours.

Next you should define what your programs and services (See How to Define Your Programs) are. When you look at your services and programs from an independent point of view, how do you stack up against the competition and what would those services draw for pricing on their own?

Most services organizations do well with a 45% profit margin for the services delivered. After you have your costs understood, and you have a projected headcount, you can determine what the pricing will be based on the programs you’ll deliver. It’s important to create several models based on fluctuation of your headcount and overall growth to clearly understand how your business will operate.

The following is a simplified view of the math: