grow your business, small business, Tutors, Tutoring Businesses

How much to charge for your online tutoring services: A definitive guide to tutor pricing

Looking to find the right charges to kick start your tutoring sessions? Or you’re wondering if your current prices are giving you the revenue you deserve?

If your answer to any of these questions is yes, you’ve landed at the right place! 

Determining how much to charge for your tutoring services can be a challenging task. Largely because you are offering a service and not a commodity. It is money in exchange for your time, efforts, knowledge, and skills! 

We understand that this estimation is not easy. So, we’re here to help you with it! 

Here’s a sneak peek into what all we have to offer you in this guide:

  1. Who is this blog for?
  2. Pricing strategies to kick-start your business
  3. Pricing strategies for business growth 
  4. Pricing is not a step, but a process… 
  5. Next in series: Communicate your pricing 

Additionally, we are also putting together a guide on how to communicate new or increased prices to your customers effectively. It is expected to launch next week.

If you want, we can also send it straight to your inbox so that you don’t miss out on valuable insights. Just leave your email address below:


Who is this blog for?

The pricing strategies for any tutoring business depends on whether it’s a new venture or has an established presence in the market. That’s why in this blog we have covered the pricing strategies for both groups!

Whether you are looking to start your business and design your first price list, or if you are looking to increase your prices for an existing online tutoring business, this guide has you covered!

You can click on the link below to jump to the section relevant for your online tutoring business:

  1. Pricing strategies to kick-start your business
  2. Pricing strategies for business growth

Pricing strategies to kick-start your business

Determining what to charge for your tutoring sessions can be challenging and confusing, especially when you’re looking to kick start your online tutoring business. 

Here are a few things to keep in mind:

Factors to consider 

The following are the factors that you should not ignore in the process of figuring out your tutoring session charges. 

Location

The region that your target audience belongs to has a significant impact on their paying capacity attributing to the cost of living in that place. The rich crowds might even be willing to pay $300 without any negotiations. While the scenario can be completely opposite for locations with middle-class families. 

Demand

If your audience in the target market does not have a demand for your tutoring, people will not be willing to pay even considerably lower amounts. Where the demand is high, people will have a need for your services and would, therefore, be more willing to pay! 

Subject complexity/ level

People who teach comparatively “tricky” subjects or those who offer some unique teaching like special education can take the liberty to charge slightly higher prices.  If you offer a higher level of upper elementary math tutoring, you can charge higher because clients would be willing to pay for it!

Qualifications 

Are you a graduate? Or a postgraduate? Did you get your education from a prestigious institution?

Most parents (or students) give a reasonably high weightage to the tutor’s level of education. Some even tend to prefer tutors who have graduated from a reputed school or college in their field of study.

Experience

You probably are well aware of the significance of professional experience in your field. It positively influences your charges as well. In fact, some relevant certifications also add to your credibility and experience as a tutor. 

Grade of students 

Since academic performance holds a high degree of importance for students in higher classes, it is a crucial factor to consider for your pricing. For ex: Students looking for SAT tutors will have urgent academic needs, and therefore will be likely to pay higher. On the other hand, parents of elementary school students might not be willing to pay as much.

Competitor rates

Even if you consider all the factors that are discussed above and determine a price for your services, you may still not get expected results! Why? Because you left a crucial determinant – your competitors’ pricing. 

Since tutoring is mostly a competitive market, the rates that your competitors offer would help you get an idea of the acceptable charges. 

However, remember that not every tutor is your competitor. The ones targeting the same location, with similar levels of qualifications and experience in your subject, they are your competitors. 

Tutor calculating expenses with money in hand

Calculate your own costs

For your online tutoring business to be profitable, you should ensure that your revenues cover your costs, and give you profits. 

But what should you consider for your tutoring costs?

1. Prep time

Your time holds the utmost importance in this industry. Whenever you invest your time for a particular session, charge for it. Preparation time for a session requires you to plan the lesson, prepare a presentation or notes, and refer to resources to enhance the quality of your content. This labor is what will determine your costs for preparation time. Take suggestions from your peers for a more accurate number. 

2. Materials

There are certain resources that you will need to refer to in order to offer the best sessions or for test preparation. Moreover, sometimes you will need to provide some study materials to your students like worksheets, study notes, test papers, etc. Since they involve monetary or labor investments from your side, it is reasonable to include their cost in your rates. 

3. Marketing and other costs

A fair share of your revenue will go into other things. Some of it will go into your marketing and promotions efforts. Even if you choose to spend considerably less, you need to allocate a marketing budget for your business. 

Online tutoring tools will also require you to invest some money. You can choose to use individual tools for video conferencing, scheduling, email, payment processing, etc. Or you can choose to use a single software that integrates all of the necessary tools. Whichever way you choose, you will have to spend on tools. So don’t forget to consider these costs. 


Choose a pricing strategy

Once you have finalized your costs, determine how you want to cover them through your rates. Select if you want to charge your customers for tutoring per hour or per course.  

1. Hourly rates

Charging customers a tutoring rate per hour is a common pricing strategy. It is particularly helpful when you’re not sure of exactly how much time or how many sessions you will need to complete a particular topic/project. 

It will also be a good idea for parents and students to try your tutoring services. They won’t have to commit for the long term. 

2. Flat fee

You can charge a flat fee per month or for the whole course. This will depend on your course and its duration as well. This will be a good idea when you know how long you will take to complete your teaching for a particular course. For example, you’re a SAT tutor and take a three-month-long crash course, then you can charge a flat fee for it, instead of an hourly rate. 


What should you charge?

After everything else, it’s time to set your own prices for your online tutoring sessions. Just a few more steps until you can finalize your rates! 

1. Determine a fair profit margin

For your tutoring business to be fruitful and grow into a sustainable one, it should bring you profits. Set a realistic profit rate for your business. While there is no single rule about tutor profit margins, tutoring companies often pay their tutors a 20-30% of their sessions charges. A good place to start if you have your own business is upwards of this number.

Apply that to your rates – per hour or a flat fee, and you’ll have a general idea.

2. Add a discount buffer 

Some students or parents will try to negotiate with you regarding the prices and ask for discounts. Some flexibility in your rates in such cases will help you increase sales.

The best way to do this without a negative impact on your income is by adding a discount buffer in your prices. When customers request for discounts, just offer them the buffer amount, and you’re good to go.  

3. Offers and group packages

Offering classes as a package can help you ensure student loyalty. A student who opts for a group of classes, say 10 classes at once, he/she is willing to commit. A good way to make it an attractive deal is by reducing the amount per class in a bundle by a few dollars.  

4. Value + cost based pricing 

The most important rule to stay profitable is to ensure that your pricing covers your costs and reach a break-even point at the very least.

But that is not all, it should also offer appropriate value to your customers. Understand how your customers value your services, and how much they are willing to pay or they can afford to pay. Customer-centric pricing will help you gain customer’s confidence and trust. 

5. Consider offering a lower price to penetrate into the market

In the initial stages of your business, getting more customers is substantially important for your business to make a place in the online tutoring market.

To do this, you can set your rates slightly lower than that of your competitors. With similar credentials and lower prices, people will be interested in trying out your services. This will create your place in the industry, and maybe later, you can slowly increase your prices for business growth. 

A graph on a tablet showing price rates of a tutor

After finalization of your prices comes another important part – communicating these prices to your audience. You can directly go to this section from the link above.  


Pricing strategies for business growth

To ensure the growth of your online tutoring business, you should rethink your pricing strategy. Increasing your rates can help you generate more revenue through the same client base. 

Most of you might be skeptical about raising your prices fearing that you might lose on your customers. 

Do you feel the same?

Read further to find out why you need to get rid of this fear and escalate your tutoring rates. 

Why should you increase your rates?

In the tutoring space, increasing your profits can not always be achieved simply by increasing your clientele. You cannot afford to take students beyond a certain number, because that would make you compromise with the quality of your sessions. 

That’s why increasing your revenue per customer by raising prices or up-selling is a vital part of growth. While many business owners tend to explore other ways, but most experts suggest that an increase in ticket price has the biggest impact on your business, followed by retention and acquisition.  

A 1% improvement in price optimization results in an average boost of 11.1% in profits. 

If you are wondering if right now is the correct time to increase your tutoring rates, look closely. There are some clear indications that it’s time to hike your prices.

For example, when all your competitors are increasing their rates, there is no point in keeping yours on the lower side and losing valuable revenue. Moreover, if your customers often remark that you’re a bargain, take it as a hint that you offer lower prices than you should be. 

Grow your business with increased tutor rates

How to decide on the new pricing?

Now that you’ve understood that you should rethink your pricing, the next big question comes. How to do it? 

That’s exactly what we will answer here. 

Conduct a small pricing audit 

With so many tutors in your competition, you need to understand where you currently stand in terms of pricing, before taking further steps. 

Here we are providing a Google Sheet to help you do a price audit for your business, considering all the important factors.  

Research the market

The online tutoring industry is in high demand now. To make the most of it, compare your business with those of your competitors. That will give you an accurate understanding of the current state of the industry. 

Compare your tutoring services to the top 5 highest paid tutors in your area of concern. However, make sure that you identify who your competitors are. Your competitors will be those in your area who teach the same subject with the same complexity, similar qualifications, experience, and who target similar grades of students as you. 

Tutor conducting market research

Rethink your current pricing model 

Now that you are revamping your pricing strategy, it is a good idea to think about updating your current strategies. 

1. Hourly or flat fee

If you currently charge an hourly rate, do have a look at the flat fee strategy once, and vice versa. Since you have been in the business for a while now, you will be able to tell if your current strategy has worked out for you.

You can offer a per hour charging process if you are not exactly sure about the number of hours you might need to teach a particular student. If you have an idea about the number of hours, and you’ve found that customers are willing to pay a flat fee for the whole month, or for a particular topic, then consider charging this way. 

2. Individual vs group fee

Do you offer private tutoring services or group services? Or both?

Depending on your answer to the above questions, your pricing will differ. 

For individual sessions, your approach will have to be more personalized. Therefore the pricing should be in accordance with that effort. 

However, for group sessions, you can follow a certain framework. The prices per student for a group class should be less than that of private tutoring. As a rule of thumb, for a group class student, charge a 75% rate of the individual rate. 

Get the customers’ perspective 

Your pricing will be a point of concern for your customers as much as it is for you. That is why it is important to understand what they’re willing to pay and what value they attach to your tutoring. 

A good way to get an idea of the customer value is to ask them directly. Request for feedback from your customers on your current pricing. To get direct insights from your clients, you can consider including a questionnaire in your feedback email. 

We are providing a “Pricing Feedback Template” in the form of a Google form. You can use it for your reference and create your own form using any other free tool.

Understand your metrics

Understand and analyze all the key financial metrics of your business. Your costs, labor cost, expenses, profit margins, will comprise these metrics. 

To take your business to new heights, increase your profit margin as well. Set a realistic value. Also, consider slightly raising your labor cost – the value of your time and efforts. 

After setting these values, you can accordingly calculate your pricing.

For example, according to the business.com article on ‘How to Set a Price for Your Service’, if your labor costs are $210, and you plan to net 21% before taxes, you’ll need to apply a profit factor of about 25% to your labor and overhead to achieve that profit goal. 

Tutor analyzing their key business metrics

Set a price

It’s now time to set your own price. After assessing all the factors, set an appropriate price for your tutoring sessions. These prices will be leading your online tutoring business towards growth and hence, set them wisely. 

A few points that you should remember while you finalize your pricing are as follows:

  • Set a price you deserve 
  • Don’t set unreasonably high rates 
  • Think from the customer perspective
  • Choose rates for long term growth

Set your final price now and you’re good to go! 


Pricing is not a step, but a process…

Pricing is a vital process for your business to flourish. It is also exhaustive. 

Above everything, remember that pricing is not a one time job! It is an iterative process. You might not get the numbers right in your first attempt. It might take a couple of tries, and a lot of research at a personal level, and that is fine. 

You will understand how much to charge for your tutoring business over time. However, when you need to change your pricing and run experiments about how a particular rate has performed for you, you need the right medium to communicate. 

If you want to update your customers through offline menus, you will need to change it every time you update your prices. This will require investment in terms of time and money, and it can become tiresome in the long run.

To frequently change the prices displayed on your website, you will need technical help frequently. And the whole process can be cumbersome. 

What if there was a way to update your pricing with a single click?

Seems unreal to hear at first, huh?

But it is true!

The right tool can make the whole process of experimenting with prices and analyzing the corresponding results very easy! We suggest using an online tutor scheduling software to do this!

The thing with a tool like this is that you can make your pricing dynamic. As customers use a booking portal to view your services, prices, and self-book sessions, you can update the prices displayed to your customers within a matter of seconds! Just a click and you’re good to go. 

No technical help, no extra monetary investments, and you’re done! 

With Appointy’s tutor scheduling software, enjoy all the benefits of dynamic pricing. With a single medium for pricing communication, you won’t have to deal with miscommunication issues regarding rates.

You and your staff won’t have to worry about the confusion that can be caused by changing and remembering the right charges.  

Additionally, with Appointy, you also get detailed reports for your appointments. You can see how was your business doing a month before the new prices, how have things been after a month of new rates, etc.

Just choose your own date range, download the report, and compare it yourself! 

Don’t believe us? Try it out free for 14-days and find out yourself!

Ready to try Appointy’s tutor scheduling software to increase profits for your business?


Next in series: Communicate your pricing 

How you communicate your prices to your customers is as important as the whole process of pricing itself! 

Tell your clients the value that you offer for whatever you charge them. They’re interested in what you give them first and then in how much you bill them for it. That is why it is important that you justify your pricing to your audience. 

If you’re offering a lower price for market penetration, ensure that your audience realizes that there’s no compromise on the quality. If you’re raising your rates, offer more value if possible, or portray it in that way. Whatever you ask for, it should make sense to your audience. 

To help you with this crucial step, we are putting together a special resource on how to communicate increased pricing to your clients. It is expected to launch in the next week.

If you want, we can also send it straight to your inbox so that you don’t miss out on valuable insights. Just leave your email address below:


About Appointy

We at Appointy, help business owners grow and run their businesses with our online scheduling software. This blog was a part of our ‘Manage your Business’ category, where we provide expert tips, resources, or simply talk about the challenges that small and medium business face every day. 

If you have any thoughts on this blog, or would like to chat about your business struggles and achievements, let us know in the comments below. 

We love a good talk!