Last month we started to look at the overall plan to make your studio better. We wrote about the Evaluation part and how every year we have meetings with our staff, talk to customers and take a long hard look at the way we do things. Every year we have found that we can do something better. Sometimes it is just a simple change and at other times it is something that needs to be implemented over a period of time. We broke it down into three parts, Evaluation, Profits and Vision. Now that we have focused on the evaluation section and you have gone through the process that we recommended. You will soon be putting into place changes for the fall.
Lets take a look at the Profits part of our businesses. In this area you need to not only focus on your business but you will also need to get an idea of what your competitors are charging. You can ask around to find out what they charge or get a friend to find out their pricing. If your competitor knows what they are doing they probably will have done the same with you.
To start, you must first look at where you are with your business. Are you making a profit? Is it enough? Ok, I know you would like a little bit more, and why not, you deserve it! Next, do you have a budget? If not, it is not hard to create one and you will need a budget to keep track of not only where you are but where you want to go. Start by estimating all of your expenses. Rent, utilities, staff, faculty and any other thing that you regularly write checks for. I would also recommend making an incidental category. Add up all the extra expenses for unforeseen and emergency expenses that you have incurred during the year. The next step is to figure out how much revenue you are currently bringing in and then to subtract your expenses from your revenue.
After doing all of this, do you show a profit? If yes, then you should consider a price increase. If no, then you must have a price increase! If you are someone who is hesitant and unsure as to whether or not you should increase your fees, you are not alone. Every day we are bombarded by the media with concern about the economy. Of course, many of these concerns are very real and the economy, the price of gas and all the other issues that are affected by the area you live in are genuine. However, do not let any of this scare you into believing that the prices you are asking for your classes are not worth it or that there will be a mass exodus from your studio if you increase your prices. I know of some studios that have not increased their fees for years! I dont know of anything that has not gone up in price over the last few years.
As a matter of fact, if your prices are too cheap then your clients will not place value on your product. They will think it is inexpensive because it is not worth anything. Every year over the past ten years we have had some kind of price increase at our studio. It could be as little as adding five dollars to our registration fee or putting a few dollars onto our ticket sales. We have gone up five percent or more in class costs. Every year, when we have a price increase we try to add value in some way, either through increased customer appreciation events, more convenience in registration or new faculty members with impressive credentials. To my knowledge, no one has left our studio due to the increases. The majority of our clients never even comment on these subtle price increases because of the perceived value. Even if they do, we have good reasons to show them why the increases are necessary. If they object, then we know that unless it is a genuine hardship case where scholarships are available, these are not good clients for us. The point here is, if you never experiment with your price structure you will never know how high you can go. Why struggle if you can find the same amount of customers who are willing to pay more.
Here is the other kicker, if you charge more you could still increase your revenue with fewer clients! We all know what we give to the students. What benefits they derive from their dance training and how parents do not need to worry about their childs well being when they are at the studio. That alone is worth something to a lot of parents. The key is to find those who place a high value on it. We have found that by simply demonstrating how the studio not only benefits their children with an activity that is good for them but also is instrumental in teaching them life skills we very rarely run into any problems. Of course, we are always thinking up new additions to present for the fall. It really is dependant on how you position it. People expect things of value to go up, so dont disappoint them!
When judging what you charge, please keep in mind that people think that if it is expensive it has to be the best and every parent wants the best for their children. When something has a high price tag people assume that that is the best product. It is the same for cars, food, houses and on and on. We keep trying to be the most expensive but our competitors keep upping their fees as well! In the end we are all making a better profit. I would never recommend cutting prices. If you do, you will lose credibility with your customers. Even if your competitor does this, let them run themselves into the ground not you. It is important to have confidence in your product. So now that you know where you stand, start to make a plan to increase fees. We are, after all, running a business. I fully believe that we are giving a great service and never feel bad about what we charge for our services, as a matter of fact, I think it is a great deal and that parents are crazy if they dont jump at it! If you do not feel this way, find ways to increase the value of what you are doing. You deserve to make a decent profit. For all you do and give, they really cant pay you enough.
Next month we will work on the final piece of the plan when we work on the Vision. Before we get there you will need to complete the first two phases of this plan. Once you do the evaluation you will see where you can increase the value of your studio to your clients and in turn increase prices. Heres to your success! *If you missed Part I you can view it by clicking on the article archive link then click on May.