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7 minutes reading time (1305 words)

How to determine your rates and profitability

concept

Implementing a tuition structure that yields a consistent monthly income will ensure a comfortable income only if the chosen tuition rate is reasonable.1 Whether you are just beginning to teach or have been teaching for decades, it is important to go through two evaluative processes regularly to ensure that your tuition rate is reasonable to you and your piano families and competitive both for you and the sake of your fellow teachers.2 


The first process: Determining your rates

1. Survey the right competitors.

It is essential that you are well-informed about your local market. While we might think that other piano teachers are our competition, the truth is that most piano teachers are not actively competing for your students' time and money. Rather, sports and gymnastics are more direct competitors. Finding out what these professions charge in your area is much more informative than simply a survey of piano teachers.3 

Here's an example of what is typical in our profession. When our local association sent out a survey to determine the "going rates" for various areas of town, we found that prices were literally all over the board, despite similarities in teaching experience, education, and location. However, when we surveyed local gymnastics, sports, and dance studios, we found that parents were paying much greater fees and tuition for these activities than they were for piano lessons. For example, we found that local dance studios charged almost twice the price for a group lesson than our teachers did for a private lesson! This kind of discrepancy may be due to many factors, including valuing our services too low and not adjusting yearly for inflation.

2. Survey other teachers, but keep it in perspective.

Many teachers think that simply taking a survey of teachers in their area will give them an idea of what is reasonable and competitive. But unfortunately, our profession has not been well educated in the need to adjust yearly for inflation, construct profitable business plans, and look outside of our own industry to help determine rates and policies. This means that simply collecting tuition information only from piano teachers is, at best, unreliable. However, it is helpful to know what fellow teachers with similar experience, offerings, education, and location are charging. Your colleagues can be wonderful sources of referrals, and many teachers will be happy to tell you what they charge if your purpose is to be professional about your policy. 


3. Factor in education, success, and experience.

Enter heading here...

As you consider your competitor's prices, compare what you are actually offering to what you found in your research. Are you offering private lessons while the dance studio offers group? Do you frequently have students who win competitions? Is your experience and education greatly different from your competition? Do you have a waiting list? All of these factors can influence what you decide to charge. 


4. Ask the right question.

Our empathic tendencies tempt us to ask questions such as "Can my families afford this?" But starting with what is reasonable to you, your family, your investment, and your profession is paramount. The correct question is, "Considering this research, what would be reasonable to charge per lesson for one-to-one tutoring in piano?"4 Remember that following good business practices means that you can later "make space" for those that are truly in need! At this point, calculate your potential gross income by multiplying your projected per lesson price by the number of lessons per year and the number of students you teach. 


The second process: Determining your profit

Being self-employed dictates that you are responsible for all operating expenses. Hence, the amount of money you take in is not the amount of money you are actually taking home. A second process to determine the profitability of your business is needed in order to prevent losing money, discouragement, and burnout.

1. Determine all your yearly expenses and operating costs.

These expenses can include office expenses, piano tuning and repair, computers and iPads for your studio, recital expenses, internet, facility expenses, electricity, professional organization fees, mileage if you travel to teach, national conference expenses, continuing education, insurance, marketing, website, instrument replacement or purchase, music, and more.5 Add up all of these expenses and subtract them from your gross income to determine your net income. 


2. Put your price in perspective.

At this point, you may think that your net income looks quite promising, but it is important to remember two often forgotten factors: Calculating an hourly rate is sometimes helpful for comparison, but keep in mind that for every hour that we teach, we typically spend an additional one-half hour in preparation. 

This will vary greatly depending on the time of year, but it is a safe average to assume. For example, a teacher who is teaching twenty hours a week is actually working about thirty hours per week. To calculate your hourly rate, divide your net income by the number of hours you will work per year. 

As a self-employed teacher, you will be paying more taxes than you would in a job with an employer. Subtract about 15% of your net income to allow for FICA taxes (Social Security and Medicare), plus your effective federal and state income tax rates (these will vary widely depending upon your filing status and household income), and you will come up with something closer to your actual take home pay.

After you have calculated your take home pay, ask yourself, "Does the amount of money I will take home make all the effort of teaching piano worth it?" Be honest. If it is not worth it, then you will need to raise your rate so that you do not experience resentment, discouragement, or burnout. 

If you are satisfied that the take home pay you will be making is fair to yourself, your effort, your family, and your profession, determine what your yearly tuition package will be by multiplying this per lesson price by the number of lessons you will be teaching in the year. Then, as directed in the March/April article "Three keys to making a consistent income," divide your yearly tuition by either the number of months or semesters you want to receive payment to ensure that you will make a consistent income. 

Taking time to go through both of these processes each year will help ensure that you can maintain the positive energy needed for effective teaching. 


Notes 

1 See, "Three keys to making a consistent income," Clavier Companion, March/April 2015. 

2 Rates will vary considerably from city to city and even neighborhood to neighborhood. This article will not tell you what to charge—the goal is to help you determine that for yourself. 

3 Keep in mind that some sports programs are subsidized (for example YMCA sports programs), so these would not be good comparisons to a private teaching studio. 

4 When communicating with piano families, speak in terms of a "tuition package" rather than a "per lesson" price, as discussed in "Three keys to making a consistent income," Clavier Companion, March/April 2015. A "per lesson" number, however, is helpful in comparing prices with your competition. 

5 See your tax advisor to determine which of these expenses are deductible in part or in full.


Do you have a business question you'd like to see answered in a future issue? Email Wendy: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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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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