Greg Dwyer

Answer: He lost all his students after he flipped out on Johnny. Without students, he couldn't pay his bills.

Greg Dwyer

Answer: Kreese strangled Johnny, after the latter lost to Daniel. This proved just what kind of teacher, as well as person, Kreese is. His students after seeing this, realised just what Cobra Kai puts in their head, as well as just what kind of person and teacher Kreese is. Specifically, after seeing Kreese strangle Johnny, they thought, "I WON'T be your student, if you're gonna treat me like that!" Therefore, they left, and Cobra Kai went out of business.