To Contract or Not to Contract: That Is the Question

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Every blue moon (or maybe a little more often), I have a conversation with a school owner that I find important enough to share with other school owners….be it for learning styles/techniques, school tips, money savers, etc…

Today, I had one of those conversations with one of our pick up customers from San Jose, CA. Three years ago he bought an established school from his instructor and has since increased the student base from approximately 75 students to approx. 125 students (with a fluctuation of 110 – 150 students at anytime). For his school to maintain fiscally, he needs a minimum of 85 students (anything over that is “gravy”).

Before he bought the school, they did not do contracts, and he continued the same policy. A few years ago, it became practically standard to make students have contracts, and the few schools that chose not to follow this were considered “small time.” But in today’s economic atmosphere, maybe it makes sense not to “pressure” students into long-term agreements, or to offer them a no contract option.

I learned that this school owner follows these simple rules regarding tuition. There is an enrollment fee and a monthly tuition. If a student decides to go on hiatus, a student may pay 50% of their regular monthly tuition to maintain inactive status. Otherwise, they have to pay another enrollment fee when they re-join. Approximately 50% of his student base has been with him for over 1 year or longer. At least 30-40% of his student base are adults that have contract/work at home type jobs (in his area there are many of engineers, computer programmers, etc). He does offer students incentives, if they want to pay 6 months or 1 year in advance, but most of his students are month to month.

Over the last few months he has continually gotten students coming in who were more attracted to the month to month tuition base that he has – all coming from other martial arts schools that required 1 year or more contracts. The students generally commented that they have plans on continuing martial arts training, but were concerned regarding making those types of financial commitments right now.

So, after all of the discussion on creating contract programs and getting families committed for long term programs, in this economic environment, it is may be wise to have other options.

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