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5 minutes reading time (1038 words)

How often should I raise tuition?

​In the last article, we discussed how to determine a reasonable tuition and make sure that your studio is profitable. Once you've determined this and set your plan in motion, however, you can unknowingly sabotage your plan if you do not also plan to raise your tuition regularly. In any business relationship, knowing what to expect and when to expect it makes everyone feel more comfortable. Knowing that you have a regularly scheduled rate increase, consistent with inflation and services offered, makes parents much more comfortable than sudden, large rate hikes. Small and consistent increases are also less stressful for the teacher and less likely to result in students leaving. Every policy should have a statement that summarizes how often price increases will occur:

Families should expect a yearly increase in tuition appropriate to cost of living increases and services offered.

But to determine how often we should raise our rates, we must look first at the effects of not raising our rates consistently. We know that the value of the dollar tends to decrease over time. Because of this, what we plan to purchase in 2015 will cost us slightly more than the same purchases we made in 2014. Therefore, if we do not raise our rates in 2016 and still plan to live in the same way we lived in 2015, then we will be forcing ourselves to do the same things, but with less money. We aren't actually earning less money, but the net effect of inflation means that we will have less money to purchase the same things.

Here is a practical example of how this works:

Janice has charged $30 for each lesson since 2008. Using the United States Bureau of Labor and Statistics Consumer Price Index calculator,1 we can calculate exactly how much more money she should be charging per lesson, per student, simply to buy the same things in 2015 that she did in 2008.

So, for every lesson she gives in 2015, Janice should be charging $2.71 more than she did in 2008 in order to live in the same way she was living in 2008. If Janice has thirty students, that means that she is living on $81.30 per week less than 2008. If she teaches 45 weeks per year, the net total amount of revenue that she has lost is $3,658.50. This means that in 2015, Janice is now trying to live on $3,658.50 less than she did in 2008. Even if she did increase to this new rate, she will have consistently lost considerable income in all the years between 2008 and 2015, resulting in a substantial, compounded loss.

As you can see, the net effect of not raising your rates at least to keep up with inflation can be quite significant. In addition to the CPI Inflation Calculator, there are additional resources that can be consulted to determine appropriate rate increases, including the employee compensation index2 (which reports compensation increases from year to year for specific industries), housing costs, and an examination of your own operating expenses from year to year. But the CPI Inflation Calculator is an excellent overview of increased costs, as it factors in food and beverages, housing, apparel, transportation, medical care, recreation, education communications, and other goods and services.

It is extremely important to remember that this CPI calculator can only be used accurately if you already have determined and entered a reasonable and competitive rate in the first box! It is paramount that you read the previous business article in the July/August 2015 edition of Clavier Companion entitled, "How to determine your rates and profitability" to make sure that you are actually charging a reasonable and competitive rate. If your number is too low to begin with, you will never "catch up" and earn what your services are worth by using the CPI inflation calculator!

Since the Consumer Price Index changes and is updated yearly, making small increases on a yearly basis makes economic sense. Employers should be giving their employees a cost of living increase every year, so it follows that since you are the CEO of your company,3 you should also give yourself a cost of living increase.

Another thing to remember is that by using the CPI Inflation Calculator, you are only determining how much more you need to charge to live in the same way, given the fact that prices of consumer goods increase over time. Giving yourself this cost of living increase is not the same as giving yourself a raise. If you are providing more services, have received more education, or are simply a much better teacher than you were the previous year or years, you should also feel free to give yourself a raise in addition to this cost of living increase.

Of course as independent teachers, we can increase or not increase our rates as often as we like. But by increasing regularly and consistently with inflation, we have more financial freedom to make alternative choices when we want. For example, instead of a price increase one year, you might choose to give yourself an extra week off while collecting the same total revenue from tuition. In addition, if there is an economic downturn and you wish to give your families a break from a price increase one year, you can do this more easily because you will have kept up with inflation in previous years. However, if you do choose to keep your rate the same, it is important to be honest about the net effect this will have on you, your business, and your family.

However and whenever you choose to increase your tuition, remember that running your business in a financially sustainable way is key to making more space in your life for the things that matter most. In addition, ensuring that your business is profitable and remains profitable is the best way to maintain resources to help those in need, both inside and outside your studio.4




3 Thanks to Kristin Yost, author of How I Made $100,000 My First Year as a Piano Teacher, for helping piano teachers think of themselves in this way.

4 For additional reading, see: http://www.composecreate. com/should-i-raise-my-teaching-rates-this-year/.

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Piano Magazine is the leading resource for pianists, piano teachers, and piano enthusiasts. We bring you informative, interesting, and inspiring ideas on all aspects of piano teaching, learning, and performing. The official name of Clavier Companion magazine was changed to Piano Magazine in 2019.

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