Q: I was just wondering if you could refer me to some information regarding pricing per student. We run a Continuing Education program here and I have an instructor who teaches Yoga. Her class meets once per week for one hour for 7 to 8 weeks. She has an existing class and then we advertise and take any additional registrations. There is just no way to factor a per hour rate….student registrations run from 1 student to as much as 10 so I’m thinking per student would be best but I’m not sure how to figure it. The class meets at the instructors own facility and she does not charge us a facility charge. The instructor has also indicated that she will not take any registrations on her own going forward, so ALL registrations for her class would be through us. Any help you could provide would be great! Thanks so much!
A: This is a situation that is certainly not typical in many ways. However, there are some key issues that affect you and which are typical.
1. You incur costs in promoting this course.
Even if the course is "continuing" and students make up an existing class, your costs are the same--whether you recruit one student or ten students.
2. You have production costs for this course.
Even though you do not provide the facilities or supplies, you have to pay the instructor. It is instructor pay that comprises the bulk of production costs for most courses.
3. You have staff costs.
There are expenses related to your taking registrations and managing the enrollments for this course.
Your first question should be, "Are we making money on this course? What advantage do we have by offering this course?"
The LERN financial formula for making money is that you should generate an operating margin of 45% to 50% after paying your production and promotion costs. LERN recommends that promotion costs for a class not exceed 20% of the course income. Production costs (teacher pay) should not exceed 35% of course income. If the course performs at this level, you have an operating margin or "profit" of 45% which you can use to pay your general and administrative costs (taking registrations, etc.).
If the yoga class is not performing at this level, you are losing money on it. This means you are essentially providing a free service--promotion and registration--for your instructor who adds members to the existing class she offers. This is not a good deal for you. If you analyze the course's performance and find that you are indeed benefitting, then you would want to target instructor pay at 35% of course income. If however, the course is costing you money, you might want to discontinue the course, just as you would cancel any other course that is underperforming. You would not offer a course in cooking that only generated one enrollment, for example, unless, that was an atypical situation. It sounds like this course is only viable because the instructor adds members to her existing course, which is good for her, but not necessarily good for you