'How much should I charge?' 'What do you charge for classes?' These are questions I have been asked by many new and experienced dance school owners. Charging either too little or too much may produce the same results: difficulty luring customers, poor cash flow and suspicions about the quality of your training.
Let’s take a look at how to develop a fee schedule that’s fair to you and your customers. Keep in mind that first and foremost, your numbers must work for you. If you charge more than the studio down the street, that isn’t necessarily a worst case scenario. Remember that most people associate more expensive with better quality—just consider Ford versus Mercedes. The key is to show them the difference. Whether it is better training, more free events, better facility or all of the above. Make sure you and those who are selling your classes know your USP (Unique Selling Proposition) so it is easy to differentiate you from everyone else.
Look At What Others Are Doing
Professional organizations such as Dance Educators of America or Dance Masters of America often publish baseline rates and fees for national, regional and local markets. Asking other entrepreneurs is also helpful, though some may be justifiably reluctant to discuss their fees with potential competitors. Be sure to learn the story behind these prices. Blindly charging the same as someone else may be inappropriate for your business or customers. Remember cheaper prices do not mean more business. It may also mean that you need twice as many customers before you make a profit!
Set a Reasonable Starting Point But Do Not Undersell Yourself
Stay on top of what the market will pay. You may need to test it regularly to find where the top is. Finding out what other schools in your region are charging is important, but it is not the only criteria. As an example if you have been in business for a long time you can charge more than a new enterprise. Remember that if you do many customer service events that are free of charge or that make life easier for your clients, like costume alterations at no added expense, point out these added benefits to your customers.
Don’t Forget the Extras
Your hourly rate should include a percentage to cover the cost of employer-paid fringe benefits (e.g., Social Security and health insurance), and your overhead costs (e.g., rent, instructor fee, equipment, supplies and business development). You may also include a profit percentage. As they say, do the numbers work? If you are not making ends meet, then you need to find a way to charge more.
Reward Customer Loyalty
As you develop 'regular' customers, consider offering discounts in return for them taking a larger volume of classes. Make sure this discount does not cut into your profit margin and that the advantage of staying busy doesn’t limit your ability to attract or serve other customers. It makes no sense to give a large discount if you are just breaking even.
Communicate
Be sure your customer is aware of your rates and registration fees before they sign up, especially if you have recently had a price increase. I recommend that when you negotiate a discount individually, carefully weigh the pros and cons of a lower fee. I know that most schools call these lower fees a scholarship, but we know that in most cases it is just profit out of your pocket! Is this a one-time deal or the start of a long-term relationship with this customer? Will you still be able to cover your costs of doing business? Think long and hard before you make an accommodation that the customer will think of as permanent.
Keep Your Prices Current
Don’t set your price schedule in stone. Monitor inflation, industry trends and your own costs to preserve your profit and marketability. Some variables that influence your prices may not become apparent until after you’ve been in business for some time. Every year we have a price increase of some kind. Whether it is class fees, registration fee, costume fee or ticket prices. It doesn’t have to be a big increase—just a few dollars here or there can make a big difference to your bottom line.
