This article is first in a series of posts that are a follow-up to the workshops I’m giving this summer and fall called, “Best Stress-free Business Practices in 2012.” Please consider attending the SMU Institute for Piano Teachers this summer if you wish to hear the entire workshop! (I’ll only be posting a few of the practices here.)
In a recent survey, my local piano teaching organization found that over 50% of the teachers had “no set time” in which they raised their teaching rates. Only 6 out of 50 teachers participating in the survey raised their rates every year. So, I wanted to share with you some of the things I’ve discovered and shared with my teaching friends about what happens when we don’t raise our rates yearly and how to do something about it.
I’m sure you all know about inflation. Inflation is defined as “a general increase in prices and fall in the purchasing value of money.” Inflation happens every year at differing rates depending on what you are talking about, but the idea is still that over time, the same amount of money will purchase less/fewer goods. So, let me give you an example. Let’s say that since 2005, you have charged $25 for a 30-minute lesson (a very low granted, but I’m in the Midwest) and you have not increased your prices at all. If we plugged these numbers into the inflation calculator at the Bureau of Labor Statistics, here’s what we find:
This means that whatever you were buying for $25 in 2005, you now have to spend $29 for the same products. So, if you aren’t increasing your rates every year, then you are trying to live the same way with LESS MONEY! You may have been thinking all these years that you are just “not giving myself a raise” to help your families, but you are really giving yourself a pay CUT every year!
Let’s see what that adds up to at $4 per student, 20 students a week, 40 weeks a year:
$4 x 20 students = $80 a week
$80/wk x 40 weeks per year = $3200 a year
That means that you have lost $3200 compared to what you were living on in 2005! (Granted, it will not have been $3200 every year between 2005 and 2012, but you get the idea that it can be pretty substantial once it is compounded!) I don’t know about you, but I can’t imagine having to live with $3200 less than I did 7 years ago and yet that is exactly what we are doing when we don’t give ourselves regular price increases.
Now, just a few notes about the inflation calculator. This calculator is just one of many that you can use to help determine how much you should increase every year. You can also consult the Employee Compensation Index which gives you an idea of what kind of pay and benefit increase companies are giving to their employees. There are several other calculators (including health care costs, etc.), but none of them give you an exact picture of what is happening in your studio. This is why it is so important to pay attention to your expenses (see Got Enough Money? by Kristin Yost). For example, if you travel a lot to competitions and festivals or if you travel to student’s houses, then the price of gas is a major factor in your expenses! The CPI inflation calculator helps you take the price of gas into account. If the price your health insurance has increased, then you’ll want to consult the Employee Compensation index. If the price of supplies, MTNA costs, the cost of music, etc. is going up, then these things will significantly impact your cost of giving lessons and need to be accounted for. The point is, use the CPI as a guideline as to how much to increase each year and then adjust that according to your studio expenses.
And don’t forget, that’s just to keep up with inflation! It’s not really “giving yourself a raise” but rather just keeping up. Don’t be afraid to give yourself a raise if you deserve it, if you are offering more to your students than before, etc.
So what do we do now that we know we need to institute regular price increases? Well, I’d encourage you to increase your prices yearly for these reasons:
- Your families typically get a cost of living increase regularly (some not yearly, but regularly)
- Yearly increases prevent the need for large increases, making it easier on your families
- Yearly increases allow flexibility. For example, because I have increased my price yearly for about 10 years, I was able to give my families a break last year when it was tough economically. I knew I would be taking a slight pay cut, but I could do this because I had kept up with inflation. In addition, one year instead of a price increase, I just decreased the number of lessons I taught, resulting in a salary increase but not a price increase for families
You don’t need to explain the price increase every year. You can simply put the following in your policy:
Families should expect a yearly price increase.
If you do not set your rate to be reasonable and competitive to begin with and increase your rates yearly, you are more likely to fall prey to the “piano teachers can’t make any money” mentality that surrounds us. It is possible to make a decent living teaching piano! It’s just up to us to make wise business decisions to make this happen.
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