The Studio Owner’s Guide to Raising Rates
by Daniel Patterson
By the end of this blog post, you are going to increase your yearly income by 5%, 10% or even as much as 21%.
In other words, if you carefully read this entire post, you will have the intellectual, emotional, and physical tools necessary to dramatically increase your income.
Not only that, this is the easiest money you will ever make, because you’re going to do this by writing only one email.
How?
By raising rates in your studio… something you should have done a long time ago, I’m sure.
The ideas apply to you whether your studio has 5 students or 500 students.
It is taken from personal experience, and the experience of teachers and music schools with whom I have worked.
Here’s what you will learn:
- Why You Should Raise Rates. It’s not about the money or results or “quality of student”. There’s something far more important at stake.
- Three Ways to Raise Rates. Squeamish about raising rates? Or are you completely bold and fearless? Doesn’t matter. There’s a method for any personality style… which method will work best for you?
- The Psychology Behind Raising Rates. What’s going on beneath the surface in parents? More importantly… What’s going on in you? Figure this out and you will get a step ahead of any problems that others might cause you… or that you might cause yourself!
This has been a highly requested topic by the community for over a year… so I knew it was time to turn my attention to giving you the very best advice. To begin with, here’s a quick story of an experience I had raising rates in my studio:
Why You Should Raise Rates
I could literally write an entire blog post about why you should raise rates.
This post would be full of boring data about inflation and your years on the job. It would dive into facts and figures about how your experience entitles you to X dollars per hour of salary.
I’m going to spare you.
If the very idea of writing it bores me, I can’t imagine what it would be like to have to read it.
No, I’m going to approach this from a completely different angle. I want to focus on who you are as a studio owner. I want to focus on your creativity. On your empathy and understanding of your customer.
If you were forced to raise rates by 50%… who would you have to be? What would have to change in your studio? If you could no longer rely on charging a conservative, “safe” rate… what would you have to do? What would you have to innovate? What kind of service would you have to provide?
Very often, the entire reason we charge a “safe” rate, a conservative rate… is so we don’t have to grow or develop or change as a business owner.
This might look different from owner to owner.
For instance:
The Timid Owner. One owner might be extremely creative. They might have an incredibly unique and powerful program.
But, they avoid confrontation.
They simply don’t want to confront the families in the studio. They are afraid of owning up to all of the power they are already bringing to bear on their career. They are underpriced. They might even tell themselves that they are staying competitive by undercutting the rest of the local schools.
“This is my niche,” they say.
The “I’m Just a Teacher” Owner. This owner is avoiding the fact that they are an owner. They might even have a large studio.
But they deny the reality that they are a business owner.
They’re not living up to their full potential because they are avoiding the “business” in their business.
The Money-Focused Owner. This owner is focused on their bills. On their budget. They live in fear of students leaving. They need every single one.
Perhaps their marketing is weak or non-existent. They haven’t taken charge of their own results, and thus they are vulnerable.
The Perpetually Busy Owner. This owner is completely buried with work. Perhaps they are disorganized. Perhaps they don’t have a plan. Perhaps they’ll just get around to it when they get around to it.
Whatever the case, they haven’t taken the time to really think about the health and future of their business – and how charging a strong rate is a critically important part of that future.
Each of these owners is avoiding something.
Confrontation.
Taking ownership of their studio’s marketing and communication. Their own schedule. Their own results.
Whichever category you fall into… you should make a commitment to raise rates in your studio. It will force you to grow. And, when you grow… your studio will grow along with it.
Problems You Solve By Raising Your Rates
You might think that raising rates will cause problems in your studio. “I’ll lose students!” “This will slow my growth!” “This will ruin the relationships I have with parents in my studio!” These are common objections. They are stated as if these things are problems. They are not. Each one of these is actually a blessing in disguise.
Quality Students
If you raise your rates by $5 per month and you lose students because of it… You didn’t want that student. For close to a decade, I have charged a high rate for my area. This has had a “weeding out” effect that has allowed me to work with terrific parents and students. Because of this, when I’ve raised rates – these families have stuck with me. If you have never aggressively raised rates, you might lose a family or two. But that will only happen the first time. Subsequent rounds of rate changes will go very smoothly. Moreover, the rate change will allow you to lose a few families without a change in income.
Increased Growth
Won’t raising rates slow your growth? No. It will increase your growth. When you raise rates, you increase your margins. When you increase your margins, you can take that excess money and drive it right back into advertising. You can invest that money into new materials and tools. Here’s just a few examples:
- In 2008, I invested in 5 digital pianos all at once
- In 2011, I bought several top of the line iPads for my studio
- From 2010-2013, I invested in several expensive courses that leveled up my marketing
- From 2011-2016, I continued to upgrade technology in my studio right out of the profit margins
- I have invested a borderline outrageous amount of money to get expert business coaching, which brought further studio success
- I invested in my own well-being by planning small vacations and retreats 4-6 times per year. These were helpful periods of renewal. Work hard, play hard.
- I invested that money in professional development opportunities and teacher conferences (like MTNA 2017… got to see Leon Fleischer give an inspiring masterclass)
- There’s no question in my mind… increasing rates increases growth and quality in your studio.
Better Relationships with Parents
Raising rates will contribute to great relationships with parents. It might not be the same type of parent though. It might not even be the same parents as you currently have. But, over the long term, a healthy rate attracts a different kind of parent. As I mentioned before, raising rates will challenge you to be a different kind of person. It will challenge you to be stronger. It will challenge you to be a better communicator. It will cause growth in you… and that will cause growth in your studio.
More Margin to Attract Talented Partners
Would you like a more professional looking website? Perhaps you’d really love to invest in a social media manager for your Instagram or Facebook page. Or, maybe if you charged more you could hire and KEEP talented teachers on staff. Or, even have the margin to hire your first teacher for your studio! The old saying is that “money makes the world go ’round.” I don’t know if that is true. But, I do know that it costs money to work with talented partners. More margin equals better help- or even the ability to hire help at all!
Three Ways to Raise Rates in Your Studio
There are two primary ways to raise rates in your studio.
Method 1: The Conservative Way. There are a number of reasons you might be concerned about raising rates.
You might be severely underpriced.
You might be in a dry spell.
You might be an anxious person.
Your marketing game might be weak.
Whatever it is… you might need to raise rates now, and you don’t have time to address the aforementioned problems. If this is the case, then I would suggest using the conservative method of rate raising.
Raise rates for new students only!
I do not advertise my rates on my studio website. Many studios and schools do not. You can use this to your advantage.
You can price test on incoming students. I did this a while back, and it allowed me to raise rates by 21% in one month. I did this for a studio that was primarily group lessons. I did this right before the largest advertising push I did in my studio’s history. Six months later, my studio income had increased by about 30% and a year later it resulted in a 50% jump.
Why?
Because a year later, I raised rates for everyone remaining. I made sure to let them know that they had received a discounted rate for an entire year. I only received two emails about the rate change. Not one family quit. But, I’ll get into that a little later.
Finally, there is no reason to believe that having two different rates in your studio will cause problems. It just doesn’t matter. Do not let irrational fears stop you from making a great decision for your studio.
Method 2: The Average Way. The normal way most studios raise rates is to raise rates on everyone at once… new students and old. I mention this because you might not have any more room on your roster. Thus, you cannot raise rates on incoming students… because you simply don’t have room to accept them. If that’s the case, you’ll have to resort to this method.
Method 3+: Unusual Ways. You could get really creative with this. Here are a few examples:
(a) Start a new program in your studio that has a number of benefits attached to it. Charge more for this program. Invite people into this program. This was one of the many suggestions I gave in my article about how to grow your music studio.
(b) Raise rates on a sub-group in your studio. There are probably categories of students in your studio… especially true if you are a large studio or music school. This could be pre-school program vs the rest of your studio. Group vs private. It could be that you have a list of people that you would just like to be gone… raise rates on them first, see what happens.
Raising Rates: Step-by-Step
No matter which method you choose, there is a simple way to handle the change. The following is my step-by-step guide to raising rates.
Step 1: Preparation
How do you raise rates? It all starts with a simple plan. Begin by thinking:
- When are you going to raise rates?
- What will you charge?
- Who will be impacted?
When you’ve answered these questions, write them down.
It might look something like:
“I am going to raise rates on August 1st. I am going to increase the studio rate from $90 to $97. I am going to raise the rates for all families.”
“I am going to raise rates on all new enrollments effective immediately. I am going to increase the studio rate from $100 to $120. I am going to raise rates for new families on January 1st.”
“I am going to create a new program that includes off-bench time, access to all of my studio lab tools. This new program will be $35 more per month. I will send out a letter to all families inviting them into this new program. New students will not be told about the “legacy” program… they will only be invited into this new program.”
Step 2: The Announcement
I recommend announcing by email. I would do it at least two to three months in advance.
I usually bury the announcement in an email. This is not weakness or fear. It’s to show that it’s not a big deal. It’s not even worth me sending out a special email. The price of gas changes, the price of bread changes, the price of enrollment in piano changes.
The Psychology of Raising Your Rates
What will parents do when they read this email?
Parents will read this email while they’re at work. Or, while they are commuting. Or, when they check their email at the end of the day. Or, while waiting in line at the grocery store.
If you handle the rate change correctly, they will read the information. They will process it. They will move on.
A few months later, you will send an invoice with the new rate. You won’t explain or give any further commentary on your business practices.
And everything will go smoothly.
Or…
You can apologize, explain, defend, excuse, and justify why you’re doing what you are doing.
If you choose to do this, things will not go as smoothly.
It is in human nature to attack weakness.
When you show weakness, parents will instinctually attack it.
The extroverted parents might come after you with emails or uncomfortable interactions at the end of a student’s lesson.
The introverted parents will internally complain and never bring it up. This is worse… because you can’t address the mistake you’ve made.
The next thing that will happen is that you will begin to resent these parents for their poor response to your poor communication.
Who was really to blame here…. You or them?
If you’d like to avoid this predictable, pointless problem… just do what I’ve mentioned above.
Don’t explain yourself – in email or in person.
My recommendation is to come up with a “magic phrase” that you can say that reinforces the facts and indicates that it is not up for discussion.
If necessary, practice this “magic phrase” in front of a mirror 20, 30, or 40 times.
If this sounds elementary or childish – I can assure you it is not. I do this. Preparation is the sign of a mature business person. Leaving things up to chance is immature and childish.
Conclusion
Raising rates isn’t just about making more money.
It’s one of the main tools you have to grow your studio and grow as a person.
Anyone can discount and charge a low rate. Anyone can provide a commoditized, safe lesson program.
It takes creativity to make something special.
It takes courage to charge what you and your program are worth.
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Good Morning Mr. Patterson,
Awesome blog and great advice! I really enjoy reading your emails they have been a great learning tool for me, but I have question regarding this one. I am coming up on my first year mark since opening my studio so my question is do you think it wise to raise rates with only being open a short time? I live in a small town where the next closest studio is 38 minutes away so Im pretty much the only private studio in my immediate area but I don’t want to push them to wanting drive 38 minutes away.
I didn’t raise rates for four years. That doesn’t mean you should wait that long.
If you are concerned… maybe try METHOD #1. Only for new students. Maybe try a small change $2-$5.
Or, if you are really underpriced, maybe start charging what you are worth.
It really depends on your unique circumstances!
Thanks so much for this timely advice, Daniel!
I was severely ill for about 6 years and my ability to teach was very limited because of it for a long time (I even had to stop working for 8 consecutive months at one point). Over the past year, I’ve thankfully been in good enough health to start growing my studio again and have been charging my new students more than my old students. I feel like it’s finally time to raise my old students to the same rate that my new students have been paying. Even so, I think I might continue experimenting with raising rates for new students after the studio-wide increase. I’d really like to be getting paid more and working less!
Thanks for all the time and energy you put into these blog posts. It really helps me to gain confidence as a small business owner!
Thanks for sharing your story, Stacey.
Experimenting with price – or, price testing, as Jay Abraham calls it – should be an ongoing process in a teaching school or studio.
Hey Daniel, thanks for creating this great resource!
I’m planning to raise my rates and wondering if it’s acceptable to avoid making any official “announcements”! My students register for an entire school year (Sept-June) and have equal monthly payments. They re-register in the spring for the following year. My current plan is to simply include on the registration form for the upcoming year (in the same format as the previous year’s form) “monthly fees for Sept 2017-June 2018 are $xxx” with the increased amount (about $10 higher than last year). This will be my first time making an increase since I branched out a year ago from teaching for a music store to running my own studio a couple of days a week so I’m feeling a bit nervous!
I think this could work, as well. In fact, it might be easier than what I’ve mentioned here… but only because you go one year at a time.
Great stuff… if you think about it, come back and tell us how it goes!
I’m reporting back! I used the method I mentioned above, and so far no one has said anything at all about the rate change! (Now I wish I had increased it by $1 more per hour! ) I’m definitely now in the higher end price-wise for my area, and I feel good about it. Next year I will raise by $1 more per hour, and then work on gradually increasing the cost for 30 minute lessons (but keep the 60 minute price the same). Making this move has given me more confidence for subsequent changes! Thanks Daniel!
Daniel, your video on how to raise rates is excellent. It is something most of us need to do, yet are always afraid to do. Great tips here. Thanks!
LeAnn- thanks for mentioning.
I think this goes without saying, but I’ll say it anyway… This method requires no planning.
Anyone reading right now could literally decide to write the email and send it.
OR, the next time they quote a price over the phone… just say the higher price.
SERIOUSLY. JUST. DO. IT.
Thanks for your comment!
in your Facebook and book you talk about pulling all of the piano parents together into a Facebook group. Say for example they started asking each other what they were paying, how would you respond if a high paying parent came to you finding out they had been paying more then another parent?
I would imagine I would just say that the people that were with me from the beginning were kept at the old rate and their rates will be adjusted in the new academic year.
Otherwise my phrase would be, “education is a business”.
People are used to paying different things all the time.
Do you compare your airline ticket price to the guy sitting next to you? If its lower, do you go off in a huff to the ticket counter and demand to speak to the CEO of the airline?
Of course not. We’ve just come to expect it.
Once your piano families come to expect that… they won’t have a problem with it here either.
BONUS: I would never say “this is a business”… this is sure to cause resentment and sore feelings with a studio family.
We have to give them a better explanation than that.
If I were confronted about this, I would immediately de-escalate the situation by acting really casual.
I would ask them a question to disarm them, like: “Oh, you know such and such family? How do you know them?”
They’re going to be really surprised by that question. They might answer it, they might not. Doesn’t matter. The whole point was to shock them that you don’t care about their question… because in their mind, they’ve “got you.”
Then, have them repeat the question and answer: “Oh, I’m honoring my original agreement with them, which was made before you all were even students. It wouldn’t be fair to break my agreement with them. I wouldn’t do it to you, nor would I do it to them.”
I think the biggest problem a studio owner would have is in THEIR OWN MIND. They’re freaked out about it… and that anxiety is going to be really obvious to the parent. They’re going to feed off of that anxiety. I think many studio owners make a neutral situation a negative simply because they think this is a big deal.
Having multiple prices in your studio is NOT a big deal! Get over it, and you’ve solved 80% of the problem right there.
Thank you Daniel!
This week I was in the process of sending out my re-registration letter for this fall. I was only going to raise my rates $3 per month but after reading your post it made me realize that I need to charge what I’m worth. I live in a small town so I phoned around to see what other piano teachers were charging and I was under cutting myself compared to what they charge per lesson.
I just sent out my e-mail this morning and mentioned the rates for next year at the bottom of my e-mail. Weird how you have to gear yourself up to let people know this increase in fees…but I guess you just don’t want to upset anyone. In a small town, everyone knows everyone so word gets around fast if I would be charging 2 different fees for old vs. beg. students. So I decided to just bite the bullet and increase my fee $5/mth for everyone. The good thing is next year when I increase my fees it will be easier now to increase by just a couple dollars.
So thanks again cause if I didn’t get your e-mail this week I would of sent my original e-mail undercutting my worth! Appreciate your videos as I find it quick to watch.
This is a terrific success story. I am really excited to hear this.
Who else wants to feel this way?!!? Follow Gwen’s lead here… and tell us about it!
I’ve always done a small annual increase. I always thought it was better to do that than not raise rates for several years, realize I had not enough income, then drop a huge rate increase on parents.
Most of us don’t take a business course in our traning, and our tendency as teachers usually means we have a giving spirit. That can be a recipe for bankruptcy, or necessitating our getting out of the music field, both of which would be awful. It can be difficult to start thinking of yourself as an entrepreneur, but it’s absolutely vital that we do so. Once you have the mechanisms and mindset in place, upkeep of them isn’t terribly difficult.
Great thoughts here, Angela!
I really would like some advice..I used to charge little rates, only a pound cheaper than the minimum average in my area.However now I feel the urge to raise. The point is that I have remarkable work experience as a professional performer and my rates should be more than double than what I charge if i had to charge fairly.I can teach classical musicians/professional performers in a career for my instrument. How can I do this huge change for existing clients that pay the old figure? And also I have doubts/fears that my old type of clients, mainly families and amateurs, would never pay that figure. If they leave all together it can really affect my finance. I live on this job. thanks for your blog, it`s one of a kind.
I would recommend the easiest method that I mentioned in this post.
Charge the higher rate to new students only.
Fill up as much as you can at the new rate. Perhaps even take a few more than you are comfortable with.
Then, warn old students PLENTY in advance (perhaps 3 or 6 months) that there will be a rate change.
You might have a few people quit right then… that gives you a few months to fill those spots.
I would recommend really making sure your marketing is strong and that you are doing everything you can to get new inquiries. This will make sure that you can quickly replace any quitters.
Does anyone offer family discounts?
Some do, but I don’t recommend it!
Would it be a good practice to introduce your make up schedule idea in the same email to parents along with the rate increase?
I think that would be perfectly fine!
Thank you for the feisty and helpful advice!
I plan to switch from a pay-per-lesson to monthly tuition and also raise my rate a bit this Fall. I am hesitant though because I am a fairly new teacher in a small town. Though I have extensive training and experience in classical violin, I have not been focusing on teaching until recently when I acquired 15 students (7 months ago).
Is it too early to raise my rate with such a small studio? Is $8 per month too much? I fear I will loose students, which I can’t afford, but I also need to make more income!
I don’t think so at all! And – you could always test it out on NEW students and then raise it on previous students later.
I’ve done that before!
Any other questions?
Great advice. I raised %5 three years ago and am going to do it again. It’s wise to check what other reputable institutions are doing in one’s area but also looking beyond that to other music schools in other regions. Going up %10 -20 is bold…….I’m not sure what’s holding me back from that……. I’ll have to consider a bit more. Or- try that with new students only. Thanks!
Gregory- glad this was helpful!
I know this is an old article, but I hope you see this. My question is about charging what I’m worth. I live in Detroit and do home visit lessons in Dearborn. I have a bachelors in Cello performance and I currently charge $50 an hour (mostly $25 half hour lessons). I’m realizing that is a fairly average rate for students coming to a studio, but I’m driving out to them! I feel I should increase to $60 an hour but am afraid that is too much of a leap. Any input would be appreciated.
It’s perfectly normal to charge a traveling fee.
Also, I wouldn’t change your overall rate… I would charge a separate traveling fee. If you tell everyone you’re increasing your hourly rate – you’ll lose out if they comparison shop for a lower rate.
But, if you keep your rate the same, and then charge the traveling convenience fee… Psychologically, it allows your clients to see the effects of their choices. You can even mention that they can come to you if they wish (provided this is something that they could actually do, obviously).
As mentioned in the article, I recommend giving several months advance notice to students. It gives you time to gauge reaction and prepare for the change.
Also, I don’t recommend give a huge explanation as to why you’re doing it. You could mention something to cover travel expenses.
Hope this helps!
Hey Daniel! Thank you for these tips! Any advice on raising your rates, as you’re providing more value, while also instituting a studio fee?
I teach weekly private violin/viola lessons. Next year, 2020, I’m going to be adding 6 group lessons throughout the year as well to give my students more of the chamber music experience. I had planned on raising my rates $5-10/month in January in anticipation of this addition of group lessons.
In the past, I have always paid for studio costs- i.e. additional sheet music, notebooks, recital treats/prizes to work toward, accompanist costs, the cost of recital halls, etc. I realize that this is not a good business practice, lol, and need to institute some sort of student fee to cover these costs. After doing the math, the average cost of these additional things per student is about $80. I figured I would start charging that as a studio fee for each of my students, seeing as each student participates and benefits from the sheet music, accompanists, etc. It makes logical sense; why would I pay for these things out of my own pocket? But now I’m a bit nervous about bringing it up because that’s $80/year extra that they are not used to paying in addition to the $5-10 extra per month for the group lessons.
Any advice??? I would appreciate it! Thanks!
I should also note- I had planned on raising the monthly rate by the $5-10, for the group lessons, in January but hadn’t planned on charging the student fee until perhaps March or April.
Nicolle, this might bear a longer, personal discussion… but in general, I think if you are going to charge these at separate times, you should be fine.
Also, increasing your marketing efforts so that you are getting a predictable number of leads each month will allow you to quickly replace your student base that might leave over these increases!