The two are: per-lesson and levelized.
Per-lesson billing means calculating tuition on the charge for each lesson.
The teacher multiplies the number of lesson days in the month by the per-lesson fee. The result is what the parent pays that month.
For example, suppose an hour lesson is $20; and a half-hour lesson is $10. Student A takes a half-hour lesson on Wednesdays. There are 4 four Wednesdays this month, so Student A pays $40. Student B has an hour lesson on Thursdays. In this month, there are five Thursdays, so Student B has a tuition payment this month of $100.
In the next month, other students will have five lessons. It all balances out in the end.
In short months, as in December if two weeks are taken for Christmas break, the weekly lesson charge is multiplied by a fewer number of weeks.
The shortcoming of this system is obvious: in some months, tuition received will be drastically slashed.
And if there is a summer break, there are even more weeks without income. (See discussion of this topic in a separate file.)
To preserve a steady income -- and income is somewhat precarious, anyway, when one is self-employed -- some teachers use levelized billing. In this billing system, all months are charged at the same fee, whether there are four lessons in the month, five, or two (as for December vacation). The teacher calculates the number of weeks per year the student will be open and multiplies that by the lesson charge. This result is the annual tuition. This large number is divided by the number of months the studio will be open. (It also may be divided by 12 months, if the teacher would like tuition during the months the studio is closed. The previously-linked file addresses this problem as regards summer schedule.)
If you want to use levelized billing, first you must decide how many weeks of the year you are going to teach. Most teachers take at least four weeks off (two in December, one at Spring Break, and one in the summer). Many take six to eight weeks off (perhaps one on Labor Day week, one on Thanksgiving week, and perhaps two more over the summer). Of course, the number of weeks of vacation depends most on how much you depend on the income. Can the shortfall be covered by other family members? Do you have savings on which you can fall back? And so on.
Let's suppose you teach 48 weeks a year. Your fee is $10 for a half-hour each week and $20 for an hour each week. Your studio year runs from September through August(11 months).
At $10/lesson (a half-hour per week), 48 weeks' tuition is $480. Divided over 11 months, each monthly levelized payment is $43.64 (let's call it $44). Divided over 10 months (if you had a 44-week studio year), it would be $48.
At $20/lesson (an hour per week), 48 weeks' tuition is $960. For 11 months, it would be $87.27 (let's call it $87). For 10 months, $96.
Now the problem with levelized billing -- especially if you spread actual payments over more months than the studio is open.
Parents understand a direct link of amount paid to lessons received: "There are only two lessons in December! I am paying the same amount as every other month!" Yes, true, you say patiently, but you calculated the monthly tuition on the total number of lessons per year. You might even add that in the five-lesson months, the student is receive "more" lessons than he "paid for."
Despite your careful explanations and the parent's intellectual understanding of your calculations, at the gut level the parent sees only "I am paying for something I'm not getting." This sort of generalized dissatisfaction creates a hostile environment for raising your fee when it's time to do this. (Which is probably now!)
And, of course, there is the problem of collecting the tuition in the months the students are not physically at the studio. (Teachers generally further group tuition payments into "terms" (two or three terms, with a third one being summer session). Payment for the full term is payable in three installments in the first three months of the term.
Suppose you want to use levelized billing but don't want the hassle of collecting payments when the studio is "closed." In this case, you might want to ramp up the monthly cost to give you a cushion of tuition for the weeks you will not be teaching. If you are building in a cushion for four weeks' vacation, you are essentially raising your tuition rate.
Why not just raise your fee and be done with it? Don't think of it as a vacation cushion; think of it as an annual increase in fee. The surplus (there -will- be a surplus, right?!) will carry you through your vacation time.
I do not recommend levelized billing. It adds a lot of paperwork and figuring. I truly believe parents prefer to see a direct relationship between lessons taken and fees paid. (This is why I suggest rather than having a higher half-hour lesson fee -- that is, greater than 50% of the hourly rate -- it is better just to raise the hourly rate and use 50% of that for the half-hourly rate. See the file on setting your fee.)
If you presently use levelized billing and like it, by all means, stick with it!
If you are a beginning teacher, I suggest you use per-lesson billing.
If you are re-opening your studio because of a move or some other reason and used levelized billing in the past, I encourage your to give strong consideration to per-lesson billing.
copyright 2001, Martha Beth Lewis, Ph.D.
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