As a driving instructor, should I increase my hourly rate?
It's always tough to know when is the right time to increase your lesson price. What should I charge? What will my pupils say? Am I worth that much? Trust us, you are and this guide will show you how to successfully raise your lesson prices.
It's the start of 2021 and driving lessons haven't resumed yet, but before they do, perhaps it's time to increase your lesson rates. Being an Approved Driving Instructor (ADI) is an extremely long and challenging job. You're wearing many hats, and you're teaching a valuable skill that lasts a life time - you have to ensure that you are being compensated correctly.
Due to the COVID-19 pandemic and the pent-up demand that it has created, this is the time to increase your prices. If you lose a pupil, there will be another one around the corner. You are, for a lack of a better phrase (really really sorry for this pun) in the driving seat.
Step 1: It's time to work backwards
When setting any goal, we find it best to work out where you want to end up. What is the end goal for you? And like all goals, having a measurable and realistic value will help ensure you can track how you are progressing. You can read about SMART Goals on this blog here.
So the question is, what is your annual salary you want to earn in the next 12 months?
Several different sources cite £34,000 is the average salary of an ADI. This data is from 2018, so by taking inflation into consideration and any additional costs due to COVID-19 and Brexit, we should be looking at raising this figure.
If you wanted to to earn £37,000 per year, what would that look like?
First, you have to look at the maths - how does that salary breakdown? Well, take 5 hours of teaching each day, 5 times per week, accounting for 6 weeks off (which you won't be paid for). This would mean to hit £37,000 you would need to earn £32 per driving lesson.
This may or may not be what you charge now, however, all over the country numerous instructors charge this and more.
We have built this tool for driving instructors so you can figure out a working pattern is best for you.
Driving Instructor Salary Tool 💻
We estimate your annual salary as a driving instructor works out at as:
There is an error with your Lessons per Day value, please ensure it is between 0 and 11
There is an error with your Days per Week value, please ensure it is between 1 and 7
There is an error with your Weeks per Year value, please ensure it is between 25 and 52
There is an error with your hourly rate, please ensure it is between 15 and 60
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It's up to you to work out what is your goal, and how much you wish to work. Remember to consider, lesson packages and block bookings (we cover this later). Also, your quality of life is an important factor - remember to take time with your family and friends into account.
- Write down what you want your annual salary to be.
- Ask yourself why, you want that to be your salary - what will you do with the money. Write this down.
- Work backwards on how you can realistically achieve this goal in terms of hours work, number of pupils and even how much time off you will give yourself.
- Don't forget tax! You can use Listen To the Tax - a great tool to work out how much tax you will need to pay on your business.
- Think Value Add! Electric Vehicles and Automatic instructor charge more and they are even more in demand. You can boost your business by jumping on the bandwagon!
Step 2: What are your outgoings?
Now that you know what you want your end goal to be, it's time to analyse your outgoings and realise how much money you will have at the end of each month.
Listing all your outgoings on a sheet of paper or a spreadsheet is a great way to visual how much you are spending. It's so easy to forget what we are spending our money on, we often overlook it.
Your business expenses like the cost of your vehicle, road tax, insurance, you standards check (even though this is once every 3 years, divide the cost by 3 then by 12 to get that monthly cost). How much does your website cost? Your spend on Yell.com. Facebook Ads. Any instructor apps that you may use too.
Split these into Essential, Nice to Have and Can Do Without.
Next to each of the expenses, work out the price and calculate your monthly cost of running your driving school. Then ask yourself, how does this compare to your monthly revenue after tax. How much does this leave left over? Is that enough for your cost of living? Enough for your goals in life? For your holiday or hobbies? If not, revisit Step 1 and increase your price per lesson again.
- List out all your costs and how much they cost you each month.
- Ensure you have enough left over for your lifestyle, and if not look at increasing your hourly rate.
- Split your costs into Essentials, Nice to Haves and Can Do Withouts.
Step 3: What are your local market rates?
Ever wondered what Bob from down the road is charging? Or wonder to yourself "I can't believe she charges this much! We were taught by the same trainer!" when you see someone else charging more than you? That's fine - everyone has been there in many different careers.
It's important not to compare yourself to others, you are on your own journey. However, looking at the market rate objectively is a data gathering exercise and must be done at least every 12 months.
How do you research local market rates? You can look on what driving instructors are charging on their Facebook pages, or their websites too.
Although GoRoadie hasn't launched all over the UK, you could use us to get a good idea of how much instructors in your area charge.
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- Research how much local driving instructors in your area are charging. Write down the values from the lowest to the highest.
- If you see anyone offering 10 lessons for £100, ignore it and simply realise that is an outlier. We are here to focus on achieving your goals not fixating on others cash-flow.
- If you are already at the top-tier, there is no any harm increasing your prices further, remember this is time for price increase.
Step 4: Figure out your packages and block discounts!
This is where you need to be cautious. Learners like packages because like all of us, they like a good deal. This entire exercise is all about increasing your hourly rate - so what you don't want is to throw that away by giving huge discounts.
In Step 1, we picked what our annual salary would be, now by adding discounts you will be reducing this value - perhaps by 2% to 5%. This means, when setting your lessons prices, you need to build in a 2% to 5% margin, so ensure that you earn your ideal yearly salary.
- Ensure that your yearly salary has a 2% or 5% margin for block discounts.
Step 5: Reduce your costs, where it makes sense.
The last step we have today is to look at your costs - all your costs and analyse the benefits.
Do you have a website? If so, how much value do you get from that website? To work out your customer acquisition cost, you have to understand how much it costs to run. Write down how much it cost to build (if that is your own time, then write down your hourly rate), if you are using Wix or SquareSpace, note down the monthly cost associated with it. If you have a private company hosting your website, how much that cost. Do you use Yell.com or GoogleAds to give yourself a boost, these costs need to be factored in.
Once you have your total costs per month, analyse how many pupil leads this generates. On average how many emails or enquiries do you receive per month. Once you have this figure, you must work out how many of them convert to a paying pupil in your car. Use this last figure, and you can then work out your customer acquisition cost. And now ask yourself, is that worth it for attaining new business.
You can then do this with other outgoings too.
- Work out your customer acquisition costs for your Website, Facebook Ads, or Yell pages.
- Look at other monthly subscriptions you have, and ensure you understand their value.
Optional: Price increase for new students only
We received some feedback from ADIs across the UK and here is a piece of advice we heard numerous times that we agree with.
Steven Cranfield, ADI, suggests "Whenever I have raised my prices I usually do for new starters only which can take awhile for everyone to be on the new rate"
This means you could keep your prices the same for existing pupils and any new pupils that start, would start paying your new rate.