Student Enrollment/Cancellation Policies

Denise had an excellent question appear in the comments of our group here, and I think this is a great area for discussion.

"The main questions are 1) should students have an option to cancel an agreement and 2) what, if any, should the penalty be? I am interested to hear your responses."---Denise

Okay... in fairness, it's safe to say, that not all martial arts schools and programs are created equal here. Some are full tilt entrepreneurial efforts to make money. Some are ones where the owner would LIKE to be able to offer instruction to those who perhaps cannot afford 'going rates', but are restricted by their business overhead. (i.e. paying the rent and utilities on a good location) Some are programs that are 'hobbies' or 'community outreach' deals, where profit-motive is just WAY down on the priority list.

So... bearing that in mind... I think it's fair to say, that we'll get a lot of different answers to Denise's questions, and that each is just as valid as the other. The real questions being, "What is your vision for your school? What can you afford to do, while still making what you want to make, and keeping your cash flow squared away?"

On the issue of contracts in general... I will say this... if someone asks me about signing up for a martial arts school, the first thing I tell them, is if the contract doesn't have an acceptable escape clause for the INSTRUCTOR and the STUDENT... then it's probably a contract you don't want to fool with.

I've researched the idea of taking flight lessons, and one thing that a flight instructor told me about shopping around, was to remember that all working flight instructors are qualified to FAA standards. The real question for me to answer is whether or not I, as a student, connect well with them, and learn optimally within their teaching style. Is my learning style compatible with their teaching style? Can I find out by experience, without being 'stuck' in a less than optional instructor/student relationship?

One thing that research experience taught me, was that escape clauses are good to have, for instructors and students alike. If you are the instructor, and you start working with your student, and over time, you come to realize that their attitude is horrid, and that they truly are an incorrigible drag on the morale and welfare of your school... you NEED to be able to sever that relationship. You don't want your own contract putting you in a stranglehold!

Well... respect works both ways, and so do contracts... students really DO need to have a fair option for contract cancellation, if you want to play things on the level with them. Perhaps the student likes you as an instructor, and likes your style of martial arts... but perhaps your instruction style and their learning style aren't so great of a match. It happens in martial arts, the same as it happens at flight schools, and the same as it happens even in public schools! Why shouldn't the student be able to have a GRACEFUL means by which they can terminate the relationship, while making sure you're fairly compensated for services rendered??

For that matter... if a student runs into brutal financial times... they definitely don't need a martial arts school contract ADDING to their financial woes. Even great and responsible people can slam into the financial rocks.

Think otherwise?

Remember your business planning class? When you were warned that the start-up costs of a business, are usually HIGHER than you originally estimate, and that 'surprise costs' DO come up, that can throw your cash-flow out of whack?

It happens to private citizens as well.

A lot of businesspeople will tell you, "But that's not your problem!"

Those are the same people who'll tell you to raise your prices and pass your extra expenses on to your customers. (BTW... your rent is NOT a problem that belongs to your customers!*lol*)

The key word in 'business relationship' is RELATIONSHIP.

The funny thing about relationships... either you get two winners... or two losers. When one wins and the other loses in the relationship... even the winner loses something that offsets what they won.

A contract establishes the ground rules of a business RELATIONSHIP. It should protect your interests, as well as your customer's interests. Well written contracts leave both parties some fair wiggle room to address the unexpected... and well written contracts provide both with a fair and reasonable way to end the business relationship early IF that is what is the best thing to do.

Ethical business practice almost demands that we give our customers what they pay for. And, it provides that we should be paid for services and products rendered to the customer.

Nowhere in that, does the concept of "They signed the contract, so whether they come or not, they have to pay X dollars for 1 year or 2 years" appear.

That's the kind of thing that represents unethical behavior in business. It's almost 'predatory' in nature... and frankly... the last person that a customer should ever feel they got hosed by... is a martial arts instructor who is supposed to be setting an ethical example to his or her students.

Think about it... you get paid, even if the customer does not get the services rendered to them in reply? How would you feel, if you paid for a new suit, and then, didn't get the suit, or decided you didn't want the suit, yet were still out the cash anyway?

There are a lot of towns right now in the USA, where martial arts schools have operated on the 'mandatory contract terms' where customers keep paying even if they're not going, and beat those customers over the head with those contracts, padding their bottom line, but NOT winning any hearts and minds within their communities.

Those schools flourish a bit for a time... perhaps they make a decent chunk of change... but then, once enough people have went away with a bad taste in their mouth... word spreads... the owner's reputation slowly and surely goes into the toilet, and before long, they realize that they've got all the money they're going to get, and they close up shop.

That's just not a good way of doing business. Cutting one's nose off to spite their face, will never qualify them for the school owner's hall of fame.

So... my advice to any school owner, is to really think a contract through, from your side, as well as your customer's side. Your reputation over the long term, is worth a lot more than a little bit of money in the short term. Make that contract fair and balanced... so that the contract serves you and your customers fairly, and gives you both room, to keep your business relationship positive and completely above-board.

On contact lengths... Frankly... 1 year is about the limit of what I'd go with on contract terms. One year is a LOT of time. A lot of things can happen in a year. A twister could level your school. Your student's house might catch fire. Sudden illness may strike. Someone might get a new job and have to move. (You OR your student). So knowing all that... I can't imagine having a 2 or 3 year term contract.

Heck... you might get a new location in a year and a half, that causes you to have to change the way you do business. Or a new law could appear on the books, that forces you to change the way you do business. If you and your students aren't reviewing your business relationship every 6 months to 1 year... you and they both could be caught flat-footed by one of these changes!

Flexibility isn't just good for martial arts... it's also nice to have in business. Just like in martial arts, too MUCH flexibility can be bad news for the business, the same as it could be for your joints.

So I would suggest sticking to contracts no longer than a year optimally, and two years at MOST. Having a 6 month contract that can be extended isn't a bad idea at all, and you may even find doing a 3 month contract that can be extended isn't bad either.

Even if you do a monthly contract that's renewable with payment and signature of owner and student... it STILL rates an escape clause that protects the student's interest AND the owner's interest in a fair and equitable way.

How MUCH of a 'fee' should you charge for early cancellation?

That really depends on how your business is set up. The questions that tell you if your 'fee' is proper, are as follows.

1.) Is the student getting what they paid for, in full?
2.) Am I being fairly compensated for what the student got?
3.) Can the student and I both walk away, feeling that our score is even, or as close to even as we can make it?
4.) Can I look at my reflection in the mirror, judge myself HARSHLY, and still be able to say, without rationalization, "I did the right thing by my customer, and myself, and can therefore sleep without guilt?"
5.) If this entire business transaction were laid out for the whole world to see every detail of it... could I stand before good and honest people and KNOW that I would not be looked on as a charlatan?

If the answer to all the questions is YES... excellent... that's where you need to be.

If the answer is NO... or MAYBE to any of those questions... it can't hurt to review your policy, and look for places to improve it. (HINT... times and situations change. A policy that is great today... might need to be revised next year because it's no longer serving you and your customers well. AND.. seldom are policies so perfect, that they can't be improved. In fact, each year that you're in business, you may learn something new, that HELPS you look at your policies with an eye to improving them!!)

Those are my thoughts... I'm looking forward to seeing what other, more experienced and learned folks have to say.:)

Denise... that was a great question!!