How to set and when to raise prices

The art of pricing: It’s a slippery slope for studio owners to navigate. How do my rates compare to other studios in town? How much should I be marking up my costume fee to pay for the time I spend ordering and organizing? I really need to raise my rates this year—but what will my parents think? If you find yourself asking these questions as each new studio year looms, take comfort in the fact that you’re not alone. Pricing a service such as dance education is more difficult than pricing a product. Instead of just calculating how much it costs you to make something, you need to determine the worth of your expertise and the value of your time as a studio owner.

When setting prices, a savvy business owner will keep the following factors in mind: First, what are all your costs—not just what you pay staff for teaching a class or the cost of a costume, but all direct, indirect, fixed and variable costs involved in delivering that service? Don’t forget overhead, such as rent, insurance, taxes, advertising and administrative help, plus a profit margin to fuel growth (more classes, better teachers), which should all be factored into the price you set for every service you offer.

Next, in establishing prices you need to know what your competitors are charging and the perceived value of your service—that is, how much you think your customers are willing to pay for your studio owner know-how. “You should always keep an eye on the competition, but don’t dictate your prices based on what they’re doing,” says Mike Campbell, director of North Florida outreach at The Jim Moran Institute for Global Entrepreneurship. “It’s okay to charge a higher rate to show value.”

Setting a reasonable—and profitable—price for your services is only the first step. From time to time, you’ll need to raise prices, something many studio owners seem loath to do. But “dance teachers are no different from any other business,” Campbell says. “They’re providing a service.” Building in a profit margin is, in fact, what defines you as a business and not a charity. “People have prices raised on them every day—blueberries, strawberries, milk,” says business and sales expert Grant Cardone. “But these same people are unable to ask for more money for their own product.”

Lose the guilt, and concentrate on offering a great product. The clients who value your service will stick with you, regardless of a periodic price hike or a recital fee that tops your competitor’s. Read on for three studio owners’ competitive pricing examples and to learn how they’ve gained confidence in their rates and how often they raise them. Use this knowledge both as a gauge of your own rates and a motivation to be more transparent—and assertive—about your business’ prices.

 

Shannon Crites, owner of Shannon Crites School of Dance

Location: Ardmore, Oklahoma

Years in business: 25

Enrollment: 225

Studio type: 52 students are part of the competitive company; largest age group is 10- to 14-year-olds.

Crites used to think she was the most expensive studio in town, but after learning that she hovered near her competitors’ rates, she raised her monthly tuition—and continues to do so every three years, though never by more than $5. “I don’t want people to come to me because I’m the cheapest,” explains Crites. “But I don’t want to be cost-prohibitive, either.”

Costumes: For dancers in second grade and below, each costume is $65; for dancers above that age range, the fee is $70. Crites delivers each costume in a hanging bag, with a piece of paper attached, itemizing each piece of the costume, how the student should wear her hair for this number, what shoes go with it and what tights should be worn. “We don’t make money on our costumes,” says Crites. “I have a set fee, and I tell my teachers to try and find costumes a little bit under it,” she says, with the surplus covering the purchase of the hanging costume bags, shipping and paying two staff members to help her organize the costumes.

Registration fee: Early-bird rate is $35 per child; after that it goes up to $45.

Recital fee: $40 per student

Director fee for competition students: $75 per child per year. “Last year was the first year I added this fee,” says Crites. “I have to cover five teachers’ hotel rooms, their travel, their food, everything.”

Tuition: Crites charges $35, $40 and $45 per month, respectively, for 30-, 45- and 60-minute weekly classes. Once a student has enrolled in more than three classes, Crites gives a five percent discount. This information is clearly visible on her website.

 

Kathalene Taylor-White, co-owner with Vera Dantzler of DanzHouse

Location: Memphis, Tennessee

Years in business: six

Enrollment: 130

Studio type: Good mix of recreational and competition students; biggest age group is 2- to 6-year-olds

Since 2008, when DanzHouse opened, the owners have raised prices twice. “We sent an e-mail at the end of the year, saying that tuition prices would be increasing in the fall,” says Taylor-White. “We’d been way below everybody else. When parents asked, we told them to research what other studios in the community were charging.” Taylor-White isn’t worried about losing clientele. “Parents might complain about the price to the person sitting next to them in the lobby,” she says, “but in the end they’ll do it anyway.”

Private lessons: $55 per hour,

though most of the time these clients are outsiders and not her students

Renting out studio space: $40 per hour; $200 for a two-hour birthday party

Registration fee: $25 per family

Recital fee: $80 per dancer

Tuition: As advertised on the DanzHouse website, one class a week is $55 per month; two classes are $104.50; three are $154; any student enrolled in more than three classes each week pays $203.50, the “unlimited” monthly rate.

 

Corey Burns, director of Burns Dance Studio

Location: Aiken, South Carolina

Years in business: 33

Enrollment: 300

Studio type: The competition company makes up about 10 percent of the total enrollment. The studio’s target enrollment is preschool and elementary-age kids.

Burns is the son of studio owner Rhoda Burns and serves as the studio’s full-time director. The studio last raised its tuition (by $2 a month) in 2010, and Burns plans to do so again in the coming year. To prepare parents, he has increased the summer program’s tuition. When it comes time to enroll for the 2014–15 year, Burns will advertise the new rates in the newspaper and on the studio’s website. “They can make their own deductions about the change in price,” he says. He’s not worried about potentially losing a handful of students: “There will always be some families who will go anywhere for a dollar cheaper,” Burns says, “but most understand the quality of the programs.”

Choreography fee: The studio marks up an instructor’s self-named choreography fee by 10 to 20 percent.  Burns has no qualms about it. “I get things together,” he says. “I find the rehearsal time, deal with the parents, adjust payroll and get up and turn on the power on the day of the session.”

Private lessons: One-hour private sessions are $50 per hour; if you purchase in bulk, the rate goes down to $48 per hour (for 10 or more) or $46 per hour (20 or more). The teachers conducting the private lessons take 75 percent of the hourly fee.

Renting out studio space: $50 per hour, for birthday parties, garage sales and karate tournaments

Registration fee: $10 per child

Instructor fee: Burns pays the studio faculty from $18 to $25 per hour. DT

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