How Often Should I Raise Teaching Rates?
It’s that time of year when we all start updating our policies! I hope that you’ve had a chance to read about “How to Move to a No Makeups Policy.” You will be so glad you did!
So maybe you’ve already determined that you are charging a fair and competitive rate for piano lessons. We are going to talk about all of these things in the upcoming webinar: “The Best Stress-free Business Practices for Your Studio!” But for now, I hope you are asking the next question:
How often should I raise teaching rates now that I have a reasonable rate?
In general, the answer to that question is:
Music teachers should raise their rates every year!
Why should I raise teaching rates a little every year?
It’s important that you have a regularly scheduled time that families know they can expect a rate increase. No one likes surprise rate hikes and especially not big ones! So, it’s best to raise your rates consistently and at small increments than haphazardly in large chunks. Doing it in large chunks is painful, so getting in the habit of doing it regularly and in small increments is helpful for everyone.
In order to understand why it’s important to raise teaching rates a little every year, we have to review a general principle of economics. We all know this truism:
The value of the dollar tends to decrease over time.
Because of this, what we plan to purchase in 2014-2015 will cost us slightly more than the same purchases we made in 2013-2014.
How is choosing to NOT raise teaching rates affecting me?
Let’s do some math to see how NOT raising our rates affects us:
- Let’s say that you have not increased your rates for 5 years.
- Let’s say that you have 30 students.
- Let’s just pull a number out of the hat and say that you charge $40 for a 30 minute lesson.
If we simply plug these numbers into the inflation calculator (nevermind the fact that there are other calculators and factors to consider), we find this:
Here’s what this means:
- In order to buy the same things in 2014, we would have to be charging EACH student $3.77 more per lesson.
- That means that in a studio of 40 students that take lessons 44 weeks of the year, you would need to make $6,635.20 more per year in order to buy the same things! (40 x $3.77 x 44 weeks)
- So, you are never “holding steady” when you do not give yourself a pay raise.
- You are actually giving your self a pay CUT when you do not raise your rates because you are asking you and your family to live on less $$ (in this case $6,635 less, nevermind the thousands of other dollars you lost in the other 5 years) than you did last year.
- In essence, you are losing money every year that you do not at least keep up with inflation.
So how much should I raise my rates?
There is no one right answer to this question. How much you raise teaching rates will vary from year to year and from teacher to teacher to some extent. There are multiple indexes you can consult to help you decide including: The employee compensation index, housing costs, healthcare costs, etc. But, I would recommend that you at least consult an inflation calculation to determine a minimum price increase.
For example, if you charged $40 per lesson in 2013, then the Consumer Price Index inflation calculator would indicate that you need to charge $40.31 per lesson in 2014 to keep up with inflation:
Remember, you are not technically charging by the lesson, but rather a tuition, so be sure to multiply this number by the number of lessons per year to get a “yearly tuition” and communicate that to families.
Here’s another way (a better way) to look at it. Remember that we should never be communicating a “per lesson” price to our families. They should know that their tuition pays for more than just a weekly 45 minute lesson (or 30 minutes or whatever). So, let’s skip the “per lesson” step and just do the math based on our yearly tuition. If you charge your student $1760 per year for 44, thirty minute lessons, then you would need to charge $1773.78 as your tuition in 2014 just to keep up:
The most important thing to remember here is that you MUST start with a competitive and fair tuition in the top box before you calculate how much you should increase. If your number is too low to begin with, you’ll never catch up doing it this way!
Must I really increase teaching rates every year?
Of course not! But…
If you don’t, just be honest with yourself.
Of course you can do whatever you want! But hopefully you can see why this only makes sense. However, if you are in the habit of increasing every year just a little, then there are definitely times that you might want to not do a price increase. There have been years that I know are economically hard on my families, so sometimes I opt not to do a price increase. But, when I don’t increase my rate, I have to at least acknowledge that I will be living on less for the next year. If you are okay with that, then you can certainly take an occasional break from increasing rates.
Increase your value.
If you feel like your families are beginning to question your increases, then consider giving your families more value (or just reminding them of the value they are getting)! One teacher told me that adding Rhythm Menagerie, Rhythm Manipulations, and now Rhythm Cup Explorations to her studio is a way of distinguishing her teaching from others in her area since her students are much more rhythmically strong using this reproducible curriculum. The year she added these things to her teaching, she had no qualms about increasing prices even when she was the top of her price point, because she knew she had added value to student’s lessons in the year.
Add a flex week.
Another option is to give yourself an extra “flex week” (week off) without changing your price. So you would be technically making the same amount of money, but working one less week in the year.
I’m going to ignore your advice anyway – it scares me!
I know it’s hard for some people to be firm and proactive about business decisions. But this makes perfect economic sense, so at least consider it. If you don’t raise your rates every year (or do some of those options above), I’m afraid this will happen to you (I’ve heard countless stories like this, so I decided to make it into a limerick):
Just to clarify…
Just a few last things because sometimes these articles lead to misunderstanding when talking about whether or not to raise teaching rates!
- Do what is best for your studio! There are all kinds of variables in every studio (Do you even have enough students to begin with? Do you have a waiting list? Is your mission to underserved communities?) so if you do have to make a large price increase, do it wisely.There is no right answer for everyone on how to do this.
- I do NOT always increase my rates every single year. Read the article carefully and you’ll see that b usually raise my rates, then that allows me flexibility and I can choose to do an additional week off some years, give more value other years, or even NOT raise my rates (but acknowledge that I’m living on less).
- Make certain that you are starting with reasonable rate before you do any of the inflation math!!!!! Look at your competitors (check other piano teachers, but know that they many times are not in the right ballpark either) like dance and sports to get an idea of what parents pay for extra activities.
- You can do whatever you want! This is just generally a good idea.
So give it some thought for this coming year. In five, ten, and especially twenty years time, you’ll be so glad you have kept up with inflation!