When a students wants to drop out of classes and stop paying, in reality, there is very little you can do to make them keep paying you, even if you have a contract. A better way may be to put them on a Rank Maintenance program where they pay a small amount each month to keep their current rank, and avoid having to pay another enrollment fee when they come back to class.

The money earned from people who do not use a service but continue to pay for that service is called “Breakage“, and the fitness industry has made a fortune on Breakage for decades. Did you know that 95% of people who pay for a fitness membership don’t show up each month to the gym they pay.  

The formula that makes breakage work includes a small recurring amount that is collected automatically each month. Studies have shown that $49 and under seems to be the “magic” price point for a person to allow an automatic payment to continue even when they are not actively using the service.

As you know, most fitness centers charge between $20 and $49 per month to keep their dues low enough that members will not stop paying when they stop coming. Oh, and if you think they count on contracts making their members pay, think again. Not too many people these days are worried about a “Fitness Club Membership” ding on their credit report that can often be wiped away with just a phone call and dispute letter.

A good amount for Martial Arts schools to charge for Rank Maintenance would be $14 per month. You can structure it any way you want, but I recommend allowing what they pay to accrue over a period of time, with maybe an expiration date at some point. In other words, whatever they pay in maintenance counts towards their tuition when they return.

Some schools have successfully used a Rank Maintenance program for years, and in the process, have built a very solid passive income stream.

If you take credit cards as a form of ‘recurring’ payment for your monthly tuition, you must follow very strict rules concerning the storing and handling of those credit card numbers. Your billing company must follow even stricter rules, and comply with something called Payment Card Industry Data Security Standards (PCI-DSS).

If your billing company processes Visa or Mastercard payments and is not certified each year under PCI-DSS, they may be in danger of huge fines, or worse, they could have their authorization to process your credit card payments revoked.

This is not a matter to be taken lightly, but unfortunately some of the billing companies currently processing credit card payments in our industry are not listed on the approved Visa or Mastercard list.

If you would like to know more about billing company credit card compliance and how it could hurt you, go to www.SideKickBilling.com and click the information link.