How do you pay yourself?

[toejoe2k]

For the Owner/Instructors out there, I have yet another request for your expertise and experience.

My question is, how do you pay yourself from the tuition fees and other sources of income that your dojo receives? Have you figured a percentage? If so, is that percentage based on profit or gross income (for the dojo)?
Or, have you have set dollar figure that you pay yourself?

I'm not planning on trying to make myself rich off this endeavor. Rather, I plan on making the dojo as nice, clean and modern as I can. That will mean that most of the profit will have to go into those improvements. But, I do have a wife that requires that I justify my time away from her with $$$ (c'mon, all husbands have to do this, don't they? :-)). Therefore, I will have to establish some modest income out of this deal and I'd just like to know how the more seasoned veterens are doing it.

Thank you for your responses and consideration.

~Bill Richardson

[gendzwil]

Lessee, I take... $0.

[pgsmith]

Lessee, I take... $0.
You're doing better than me Neil, it usually ends up costing me money. :)

Bill,
You need to provide a bit more information regarding what you are hoping to do, and what sort of dojo you are planning to open. The vast majority of folks have day jobs, and do their martial arts in the evening. Most instructors that I know don't actually earn anything, as overage usually ends up being put into more equipment or dojo improvements. My wife used to get irritated about the amount of time I devoted to practice, but she eventually got used to it, and realized that it helped keep me from overstressing. Now she has gotten to the point that she openly admires my dedication and never complains, although I do skip the occassional Friday class to do something with her. It is also a healthy thing in a relationship for the partners to have outside interests so you have something to talk about. :)

[Douglas Wylie]

My question is, how do you pay yourself from the tuition fees and other sources of income that your dojo receives?

I write a check to the dojo. If I ever see any profit, it will either be reinvested in dojo stuff or pay for some of my expenses (travel/seminars/etc...). If there is ever more than that, I'll be on a plane to Japan. Putting money in my account never enters the thought process.

However, I understand what you are asking. It depends on if you are a sole proprieter/ partnership/LLC/ incorporated. Which are you?

[gendzwil]

The serious answer is that you can't so easily set a percentage. If you intend to make any money, you have to draw up a business plan and budget, and try to figure out from there if it's even possible to make any money.

Of course the kendo culture is such that we don't take anything, but I could easily structure what we charge for equipment and seminars in order to make a few dollars. However, that's after over 25 years of the dojo being in existance.

[Robert Wolfe]

In addition to speaking with a lawyer regarding setting up the structure of the dojo (i.e., sole proprietorship, Sub-chapter S corporation, etc.), you should speak with an accountant regarding the finances. Assuming you can actually generate income, depending on what laws apply in your case you may need to set up a formal payroll (even for one person), tax withholdings, unemployment, and heaven knows what else.

Like our colleagues above, I have yet to reach the point of having to worry about it -- the dojo well into its 15th year and I'm still paying *in* (sigh).

-- Bob

[BlackPaladin]

If you intend to make any money, you have to draw up a business plan and budget,

Bingo.

If you have some Excel spreadsheets with the information, it is very easy to change numbers to see how it will (or won't) work out.

[toejoe2k]

First, I'd like to thank everyone for the very informative responses. They will go a long way towards setting my business partner's (read: wife's) expectations.

Secondly, I'd like to address some questions that have been asked:
1. This will be something that I'm doing after my day job. Actually, work is an interruption of my day. If I could make a living out of training and teaching, I would rather do that. But, this is something that I've always wanted to do. I am a trainer/teacher by trade so this fits nicely with what I love doing anyway. None the less, I'm relegated to the bread and butter 8 to 5 so that I can put food on the table.

2. This dojo is coming to fuition much faster than I anticipated. Consequently, it will be started out as a sole proprietorship. As soon as I possibly can, I'll get it registered as a LLC per the council of my attorney.

3. This is a jujitsu/aikijujitsu dojo that is being introduced into a very uninformed market. My competition consists of two TKD dojangs so I'm hoping that people will want to check out something different. I've been advertising already and have had suprising levels of interest and inquiries.

Many thanks for everyone's responses and replies. I find this forum to be a very useful resource and can only say that because of the kind practitioners who frequent it as much or more than I do. I count myself very fortunate to be in such good company.

In Sincerest Appreciation,

~Billy Richardson

[PictonMA]

For years I taught out of Community Centres / Country clubs etc that paid me a wage to teach their members and I made a modes hourly amount with additional income from merchandise sales (gi, etc). All of these proceeds went into financing my own training and purchasing equipment for teaching.

A little over two years ago I started leasing space from a Community Centre and started running things separate from their programming.

18 mos ago I moved out of the Community Centre and into a ~1000sq commerical space.

Before that one year lease was up I moved us to our current location (~2300sq, better visability, more training space, etc etc).

99% of any profit has gone back into buying equipment for the dojo, advertising, inventory so I don't have to wait on things for students etc etc).

Occasionally I will pull a little profit out to take my wife to dinner, etc but that is the exception, not the norm.

[Douglas Wylie]

it will be started out as a sole proprietorship. As soon as I possibly can, I'll get it registered as a LLC per the council of my attorney.


As a sole proprietor, you ARE your business. Any profits are naturally yours, no need to pay yourself (unless that is how you choose to budget yourself).

The downside is that you have unlimited liability, which means someone can come after your personal assets. As opposed to an LLC, where someone can only go after the assets of the LLC. (of course I am not a lawyer, so the are all kinds of "unless/if/ands/buts" not mentioned).

An LLC is a little complex and you should consult a lawyer regarding your state's laws on LLC Member Operating Agreements, you may or may not need a written Operating Agreement. Short answer is, any way you want but however you choose to be paid should be in your Operating Agreement (if you even need one). Better short answer- Ask a lawyer.

Check out- http://www.medlawplus.com/legalforms/instruct/sample-llc.pdf
and look at "ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS" for an idea on how one sample is written.

[Kayden]

My Kempo instuctors run out of a local YMCA and a near by Collage Rec Hall. They money the school makes from tuition goes to a bank account that is split between the YMCA (50%) for rent (the rec hall is free), and the cheif instructor who has a sole prop. the cheif instructor then uses his half of tuiton to pay the extra liability insurance and one or two other expenses he wasn't quite clear on. After that split he keeps some money for new equipment and some for travel to other dojo's or seminars. What ever money is left over is given equaly to all instructors to help cover the cost of gas getting to class. One of my instructors also co-owns a gym in his own town. He said they keep a general expense fund that is used incase of emergancy, if it is still there at the end of the month the owners take half of it and split it between the three of them.

As always, Good luck, hope to be able to stop in and see you some time.

[Black and Blue]

First, I'd like to thank everyone for the very informative responses. They will go a long way towards setting my business partner's (read: wife's) expectations.

Secondly, I'd like to address some questions that have been asked:
1. This will be something that I'm doing after my day job. Actually, work is an interruption of my day. If I could make a living out of training and teaching, I would rather do that. But, this is something that I've always wanted to do. I am a trainer/teacher by trade so this fits nicely with what I love doing anyway. None the less, I'm relegated to the bread and butter 8 to 5 so that I can put food on the table.

2. This dojo is coming to fuition much faster than I anticipated. Consequently, it will be started out as a sole proprietorship. As soon as I possibly can, I'll get it registered as a LLC per the council of my attorney.

3. This is a jujitsu/aikijujitsu dojo that is being introduced into a very uninformed market. My competition consists of two TKD dojangs so I'm hoping that people will want to check out something different. I've been advertising already and have had suprising levels of interest and inquiries.

Many thanks for everyone's responses and replies. I find this forum to be a very useful resource and can only say that because of the kind practitioners who frequent it as much or more than I do. I count myself very fortunate to be in such good company.

In Sincerest Appreciation,

~Billy Richardson



Pay your self first if you are "sole " owner. Thats what I do. If your "product" is good it will stand on its own. You will make less then if you taught TKD but you expressed you are doing this more for your own satisfaction.So...Good Luck !!
Phil Scudieri

[Chris McLean]

I am not trying to hijack this thread but I am curious of those who do not make any extra income from the dojo. How do you show it on your personal tax records? Do you have it set up as a nonprofit?

[gendzwil]

We just operate as a club under the radar. The YMCA handles all the insurance/liability issues. We just keep a bank account for equipment sales and seminar stuff. Our lawyer says it would only complicate matters to incorporate. Mind you, this is Canada.

[Robert Wolfe]

My dojo operates as a corporation, and any profit or loss is reported on a corporate tax return and also “flows through” onto my personal return. My dojo has in some years shown a profit and when it has taxes were paid, but any actual, accumulated cash was put into the dojo savings account or otherwise reinvested in the dojo. The dojo is not a “non-profit” corporation, but “barely a profit” isn’t too far from the mark. At least so far.

Now, make no mistake, I most certainly am trying to generate a profit -- I would be delighted if the dojo could at least cover the cost of an annual, family vacation, let alone reimburse me for the literally tens of thousands of dollars I’ve invested in this effort.

At the same time, there are other concerns that make for what most entrepreneurs would consider a pretty weird “business model”: we are primarily concerned with the preservation of traditional martial arts; we work only with adults and mature teenagers; and we are selective in the persons admitted to the dojo. Those factors make generating a profit more difficult, but not impossible, and we are constantly searching for the magic formula that will accomplish all four objectives.

[Gakkousei]

If you operate your dojo as a sole proprietorship, whatever is left after expenditures is your take-home. you cannot cut yourself a check via your organization if you are a sole proprietor. All business expenses and taxes become YOUR personal taxes, so you have to file accordingly at the end of the year. This is a potentially hazardous situation, but probably the best option if you intend to run your dojo as a secure business, that is unless you happen to obtain an army of students, then it might be more feasible to look into incorporating it.

[Robert Wolfe]

The biggest reason NOT to operate as a sole proprietorship is liability. As a corporation, only the dojo assets are immediately at risk in case of a judgment. Sole proprietorships, especially in the case of a dojo operating as a business in one's home, do not offer that protection and place all personal assets at risk.

[Jeff Duncan]

I am not trying to hijack this thread but I am curious of those who do not make any extra income from the dojo. How do you show it on your personal tax records? Do you have it set up as a nonprofit?

I am now in the stages of forming as a non-profit. I have been doing it under the radar for a few years, but there is so many tax benefits and breaks, I cant see doing it the same way anylonger. As well as being able to claim the seminars and personal training I attend IE; money donated to the org for continued training of instructors at seminars and travel expenses are covered. The biggest pain will be the detailed record keeping.

Ikei,
Jeff Duncan

[Douglas Wylie]

forming as a non-profit

The only reason not to is that you cannot have exclusive membership.

Meaning,

If some wacko wants to attend, you HAVE to let them. I couldn't agree to that.

[Jeff Duncan]

The only reason not to is that you cannot have exclusive membership.

Meaning,

If some wacko wants to attend, you HAVE to let them. I couldn't agree to that.

Its just too easy to make it so someone doesnt want to be there. The core group self regulates from time to time. Usually its painless, sometimes its not.

[Robert Wolfe]

The point Doug is making is that, as a non-profit, if you do *anything* to preclude or discourage anyone's membership, the person being targeted has legal recourse.

[Jeff Duncan]

The point Doug is making is that, as a non-profit, if you do *anything* to preclude or discourage anyone's membership, the person being targeted has legal recourse.

I understand the point.
I have been running as a non-profit for over two years now. I am just going to do the paperwork to make it legit, and be able to recover the costs of some things.. Such as the dojo that was built completely by the Students and Myself under the direction of one contractor..

Proving that "something" was done is a lot harder than one would think. I will not put specifics on the internet to be pulled up later in life....
Sometimes doing Nothing is doing something, and it self-regulates things that way. Just as others have "rights" so do the people there.