SUCCESSION PLANNING FOR YOUR MARTIAL ARTS SCHOOL
New Focus on Business
I recently interviewed Jackson Rudolph, during which we discussed a myriad of topics related to Sport Karate. One of the more intriguing comments he made was that his writing is increasingly focused on the new generation of martial arts school owners. He observed that many school owners in their 50s or 60s are often too set in their ways to consider ideas that could enhance their businesses—especially if those ideas might dilute their traditional teachings.
When I asked how he believed this mindset could be addressed, Mr. Rudolph expressed his belief that time would naturally resolve the issue as older school owners begin to retire. According to him, this generational shift—where ownership passes to a modern group of talented instructors who understand the nuances of today’s business climate—is essential for the industry’s long-term survival.
As a semi-retired business consultant and financial planner, I understand the necessity of planning for retirement. After devoting three or four decades to a career or business, there should be a reward—whether it’s slowing down or trying something new. As a Certified Financial Planner, I always advise business owners to include succession planning as a key part of their overall financial strategy, particularly where their business is concerned.
While I’ll leave the detailed planning to your accountant, financial advisor, or professional organizations like MAIA Elite, there are several high-level areas of succession planning that every martial arts school owner should be aware of. In many cases, depending on your age and retirement goals, the sooner you start, the better.
What Is Succession Planning?
At the 2022 MAIA Academy Intensive, the recurring mantra—especially from Cris Rodriguez—was to plan everything and document those plans. While her focus was on marketing and event planning, this principle applies equally to succession planning.
As part of your overall personal financial plan, you must first determine your retirement objectives. Before deciding what to do with the business you’ve built, you need clarity on your post-retirement life and how you will fund it. Will you sell your business outright? Retain partial ownership for continued income? Transfer it via trusts, shares, or other mechanisms?
Any martial arts school owner thinking of retirement should create three interconnected plans:
- Retirement Plan
- Define your post-retirement goals: golfing, traveling, further education, etc.
- Address health-related matters and major life decisions.
- Create a realistic budget for living expenses and leisure activities.
- Estate Plan
- Draft a comprehensive will.
- Establish any necessary powers of attorney.
- Consider setting up trusts to manage assets.
- Succession Plan
- Decide how you’ll exit your business.
- Determine if the successor will be a family member, student, or outsider.
- Plan the transition of ownership, possibly involving trusts or equity arrangements.
Succession planning is a process—not a one-time event. It requires thoughtful preparation, often more mental than financial. One of the first steps is determining your business’s value, which may differ significantly from what the market is willing to pay.
Valuation Methods for Martial Arts Schools
There are three primary ways to value a private business:
- Fair Market Value – Based on Comparable Sales
This approach works best in urban areas with a sufficient number of comparable schools.
- Investment Value – Based on Value to a Specific Buyer
Often relevant when selling to a family member or long-time student. Be careful—underpricing or overpricing can trigger scrutiny from tax authorities (IRS or CRA in Canada).
- Liquidation Value – Value of Tangible Assets
Less applicable to martial arts schools, as their physical assets (e.g., mats, used gym equipment) have limited value. The real worth lies in the student list, brand reputation, and operational systems.
Typically, a martial arts school is more valuable as a whole entity than the sum of its parts.
Aligning with Modern Values
Today’s professionals seek purpose and alignment with their personal values—not just income. This evolving attitude is reflected in the growing field of Behavioral Finance, which recognizes the emotional component of financial decisions.
If you’re running a traditional school, preparing it—and yourself—for the transition is crucial. Successors must see potential not only in the current state of the school but also in its future prospects. This means demonstrating that the martial arts industry remains a viable, rewarding career path.
Why Succession Planning Matters
Succession planning preserves the value you’ve built, supports business continuity, and aligns your business’s future with your personal goals. It’s especially vital in complex business environments, where legal and tax implications can be significant. Always consult with your accountant and legal advisors before making final decisions.
Beyond financials, succession planning brings stability. It charts a future for your school that can be adjusted over time and helps ensure you leave behind not just a legacy, but a thriving institution.
Choosing a Successor: What to Consider
In my banking career, business loan evaluations focused on three areas: Industry, Management, and Financials. When choosing a successor, management (the human element) is paramount—especially in a personality-driven industry like martial arts.
I recently read Cris Rodriguez’s excellent book The Best-Known Dojo, which outlines how digital marketing is reshaping the martial arts business landscape. It signals the rise of a new kind of school owner—one who is proactive, data-driven, and forward-looking.
If your legacy includes strict adherence to traditional methods, ask yourself: Will that help or hinder your school’s future? Your true legacy is creating a sustainable future for your school and its next leader.
In the corporate world, leadership grooming often spans years, with high-potential individuals rotating through departments to gain diverse experience. You can apply a similar model:
Three Steps to Selecting a Successor:
- Define Leadership Needs
- Clarify skill requirements.
- Identify future business vision.
- Define key responsibilities.
- Evaluate Your Talent Pool
- Broaden your list of potential candidates.
- Align candidates with your business goals.
- Prioritize essential leadership qualities.
- Develop Leadership Programs
- Create individualized development plans.
- Consider internal and external candidates.
- Use the Leadership “E’s”:
- Experience: Gradually increase responsibilities.
- Exposure: Involve them in all aspects of the business.
- Expectations: Align goals with rewards and growth.
- Education: Encourage learning and forward-thinking approaches.
Remember: today’s leadership needs differ from tomorrow’s. Understand your school’s Future Mode of Operation (FMO) and align succession plans accordingly.
And when assessing the cost of retaining top talent, don’t focus solely on salary—consider the potential cost of losing a strong future leader.
Conclusion: Time for a Generational Shift
When we look back, it’s easy to romanticize our early martial arts experiences—the instructors, the lessons, the traditions. But the business landscape has changed, and so must our perspective.
If you’ve built a successful school, you deserve a fulfilling and well-earned retirement. That starts with thoughtful succession planning. Whether you pass your school to a family member, a trusted instructor, or sell to a larger franchise, the key is making the decision that best serves both your future and the future of your school.
During my interview with Jackson Rudolph, I asked him how we might bridge the divide between traditional and sport karate. His answer?
“The answer is a generational shift… Over time, it will get better.”
Having been involved in karate since the early 1970s, I can say the martial arts have certainly evolved—not better, not worse, just different.
When I retired from the corporate world, I knew it was time to let the next generation lead. Perhaps the same can be said for many martial arts schools. If you’ve enjoyed a career in this industry, perhaps now it’s time to allow others that same opportunity.
As an old 1970s TV show once said: “You’ve done well, Grasshopper—it is time for you to go.”
Just make sure your plans are in place before you embark on that new chapter you’ve earned.
Pruim Shihan has regularly travelled to Japan in order to train with one of the world's foremost Karate masters, the late Kanazawa Hirokazu Soke (10th Dan Shotokan Karate) and his present instructor Shuseki Shihan Manabu Murakami (8th Dan).
Pruim Shihan also attended the International Budo University, located in Katsuura, Japan on several occasions for advanced Budo training where he was introduced to Atarashii Naginata.
Andries Pruim has written several articles over the past 30 years, with his most recent work focusing on the business side of the Martial Arts Industry.
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