How To Overcome Inflation's Effect On Your Music Lesson Business

Inflation is an increase in prices across most or all of the economy. In short, it means the same amount of money now buys you less. As one of the most important economic indicators around, inflation has a significant effect on your business's ability to stay profitable and efficient.

The current (April 2022) 12-month inflation rate in the U.S. is a staggering 8.5%. That means you AND your business are spending 8.5% more, on average, on goods and services. Think about it this way: if you are making the same amount you were a year ago, you really took an 8.5% pay cut, in terms of what you can buy.

You know things are more expensive now, but But what can you do about it?

Be More Efficient

Efficiency is essential for any business, but it is especially crucial for small businesses with limited resources.

We tend to think wealthy businesses are or have to be better at managing resources, including money. The reality is, that the less money you make, the better you have to be at managing it because you have less wiggle room. Where are you efficient?

• Lost Time? What technology or processes can you implement to speed up how long a task takes to do? You might be surprised at how many problems have already been solved by other people, so don't reinvent the wheel! For example, manually entering business expenses is a time-waster when there is free software like Wave that can pull them automatically from your account.
• Lost lessons? Are you losing lessons because students don't show or cancel at the last minute? Implement a pre-pay policy ASAP. Ask students to prepay their lessons if they haven't already done so and set policies for lesson cancellations. Many studios can offset the 8.5% inflation challenge by simply making sure they get paid.
• Lost students? It costs a lot more to get a new student than keep the ones you have. Create incentive or reward programs for students who stick around. Figure out why students leave. Figure out why they give up their instrument/voice. You can't keep every student, but you change issues on your end that might be causing them to leave.

Budget

If you don't have a business budget, you need one now, like today. Nothing should be spent in a business that does not fall into a budget category. For example, a piano studio with five teachers might budget $4,000 per year for tuning and repairs, but that's not going to buy a new grand piano. They would need another budget category for that.

Using online accounting software like Wave, Xero, or Fresh Books will show where every dollar goes in costs and expenses, but you must be diligent about categorizing expenses.

You should also have budget flexibility based on revenue: how much money is coming in each month. Don't plan your budget based on your best month. Base it off, say, the average of your worst three months the previous year. Give yourself wiggle room.

Cut Expenses

First off, don't cut expenses without working from a budget. See, the challenge is that some expenses are monthly while others come once a year. You need enough cash to pay those once-a-year bills, like insurance. A budget is critical to this.

Second, what should you cut? Don't cut expenses that make money for you. At Blink Lesson we sell a software product, so that is what we tend to think about. That said, we've seen many businesses cut spending on software like ours not realizing how many labor hours it saved or the revenue it increased.

For example, systems that send lesson reminders are essential because they have a direct link to revenue. A piano is essential for a piano teacher, but not a grand piano. Maybe cut coffee and drinks for guests or a big one is rental fees. Can you teach out of your home or online and avoid practice room fees?

Do you have gear you can sell that does not make you money - maybe cool stuff that isn't being used? A new symbol might be great to have for gigs, but do you need it to teach?

Charge More

Raising prices isn't easy. Creativity is a must.

Price is an important factor for students and parents. Still, most are not naive to how much everything is going up. You need to know that it is okay to raise your rates. You are not a bad person if you increase your rates. In fact, since the cost of living has gone up, it is expected by most people that businesses will raise prices in response to the increased costs of running their business. 

Raising your lesson rates is only one way to make more money. Consider changing how you charge. For example, if you charge by lesson, sell package deals. By discounting certain purchases (e.g., 10 lessons for the price of 9), you encourage people to buy larger quantities in one transaction instead of paying the standard rate per lesson or program. This increases the perceived value of what is being purchased, making people feel like they're getting a "deal" while also giving you more money upfront.

Something fundamental is making it easy for your clients to pay. Use a payment system that can keep a credit card on file. This then is used instead of collecting cash or writing checks every time someone pays you for your services. Check our video - HOW You Charge for Lessons Matters More Than WHAT You Charge for Lessons.

Whatever creative way you figure out, how you communicate the changes is just as important. Find a way to spin the increase as a positive. "We know everything is going up, and we want lessons to continue to be affordable. We are changing our prices, but the good news is, now, if you prepay for eight lessons, you get one free." 

Conclusion

Now that you know how to overcome inflation's effect on your music lesson business, you can be confident in growing your music business even when prices continue to rise. Charging more money for your lessons is a normal and natural way to increase income due to the rising cost of living. If you think outside the box when it comes to increasing revenue and reducing expenses and being smart with what money you have, inflation does not have to become something that closes your music lesson business.