There are
lots of things related to preparing to give instruction whether for a few hours
or days. This is only about the easier
element – calculating the costs.
Costs – these are both variable and fixed
costs. These are important in calculating
costs per student.
Variable costs. These are the expenses you have no
matter how many may attend. E.g.:
Tools – how many people do you intend to
cater for? What kind of tools do you
need? Does everyone each need the tool? Can some doubling up occur?
Advertising, promotion – The costs in printing and time to
distribute leaflets and other promotional efforts. Costs of advertising online or in print.
Course Preparation and
delivery time – Every
course requires time to plan the course and organise the materials, take
bookings, set up at venue. The amount of
time you spend delivering the course/class needs to be claimed.
Travel expenses and
time to get to the
venue. Mileage expenses only cover the
transport costs, it does not include your time.
Venue costs – If you have been invited, check
the venue is free to you. In some cases,
you will have to pay for the venue and this needs to be added to your variable
costs. In this case, I am assuming the
host is providing the venue free. If it is
your own venue, you should add a sum to cover the overheads of your premises at
the very least.
Fixed costs. These are the costs for each person
on the class/course.
Materials and consumables. The materials the students will
use varies directly with the number of people.
Any provision of food, refreshments will depend on the number. Any handouts or demonstration materials are
also related to the number of people.
Price.
The price of the course/class will depend on the costs and the profit
you wish to have as well as what the market will stand.
Working out the Costs
I will go
through the main areas of costs and give examples to demonstrate. Not all these areas will apply. When they don’t the cost is zero.
Equipment
You can
estimate the number of classes over which the tools and any other equipment will
last.
Example
Say, you plan on 6 students and the cost of the tools for that
many will cost 440.00 and you expect the tools to last for 10 courses. (you
will have to top up on tools due to loss during that period, so you may want to
add an additional sum to your calculations.)
Ten classes of 6 gives you 60 people to spread the cost across. This gives you an individual cost of 7.34 on
this basis.
Cost sub total: 7.34/student
Promotion and administration
The
promotional effort includes time to prepare, costs to produce and time to
distribute. You can prepare the
advertising before the pricing begins, so that amount of time can be known
before you start. The costs of printing
or publishing can be determined by getting estimates. The amount of time you spend in distributing
leaflets, and in using the internet to advertise needs to be included in the
promotional time.
I am going
to assume your administration of the applications and payments for the course
are taken by the venue. If you do them,
you need to add a notional amount of time to cover that aspect of delivering a
course.
Example
Say, you have determined the printing and advertising is
going to be limited to 50.00. In
addition, you are going to spend 5 hours distributing the printed leaflets and 10
hours of social media time promoting the classes.
As you can see, your time is going to be a large part of this
promotional work, so this is the occasion you must decide how much you are
going to pay yourself. There are ways to
do this. Here is one.
Say you have decided that you need to pay yourself 20.00 per
hour. This is the figure that needs to
be applied to all the time-based costs you incur in preparing and delivering
the class.
The promotional costs for the course are going to be 50.00
plus the 15 hours (distributing leaflets and 10 hours social media) at 20.00
(=300.00) totalling 350.00. Will this
promotion be useful for subsequent classes? Probably not. This means that you can’t spread the cost
over more than one course unless you redesign the materials in some way. It may be that subsequent classes will
require less effort to promote them, but don’t count on it.
Assume your promotion cannot be spread over more than one
course, which is the most likely. This
means the cost for each of the six people is 58.34
Cumulative cost sub total: 65.68/student
Preparation
You need to
prepare a course syllabus or outline at least.
This will guide you in the presentation of the class and will help you
determine the equipment and materials your students will need. Any additional materials and equipment needed
for the course will need to be added to your initial equipment calculations. You need to keep track of the amount of time
you spend on designing the course.
Example
You may have spent 10 hours researching and writing your
course. You can decide that little
alteration of the course will be required over the life of the equipment. This then becomes 200.00 divided by 60
students or 3.34 per student. You may
also have course handouts. These will be
fixed costs as they relate to each student.
Cumulative cost sub total: 69.02/student
Some of
these promotional and preparation costs will have to be guesses until
experience is gained. How long will the advertising last? One class or more?
Will you need additional preparation time each time the class is held? The answers you give will affect the
calculations by the number of students or classes the cost is distributed.
Travel and accommodation
Of course,
The travel expenses and time, and the class delivery time will remain relatively
constant; varied only by the distance and the facilities at the venue.
Example
The venue is 25 miles away. The travel time is 45 minutes
each way. The set-up time is 30 minutes.
The course is for 4 hours and clean-up is 30 minutes. This means that at 0.50 per mile the expense is
25.00; the travel time is 1.5 hours (1.5*20.00) gives an expense of 30.00 to
get to and from the venue. Set-up and
clean-up is 20.00. Class delivery time of 4 hours equals 80.00. All these on the day costs are 155.00. For six students, this will be a cost of
25.83 each.
Cumulative variable cost sub total:
94.85/student
Of course, your accommodation expenses for a multiple day
course will need to be added, although not the time between class sessions.
Fixed costs are the ones directly related to
each student. These will vary according
to venue, style, length etc.
Materials/consumables. The materials the students will use
varies directly with the number of people.
The costs of this relate to the materials the students will consume
during the class/course.
Example
The glass used by each student will cost 20.00
Additional consumables will be 10.00
Firings for each student will be 5.00
fixed cost sub total: 35.00/student
Hospitality - provision of food, refreshments - will
depend on the number.
Example
Refreshments at the beginning and middle of the course 5.00
each
fixed cost sub total: 40.00/student
Any handouts or demonstration materials are also
related to the number of people.
Example
Handouts and examples for students – 10.00
fixed cost sub total:
50.00/student
Student accommodation – this is relevant for those who
need to stay overnight either because of their travel or the length of the
course. Normally, this is the
responsibility of the student. It may be
that you wish to include the cost of this in the course fee, although that
usually makes the course appear to be very expensive. In this case, I will assume accommodation is
the responsibility of the student.
Cumulative variable cost sub total: 94.85/student
Cumulative fixed cost sub total: 50.00/student
Total cost for a one-day, six-person class: 144.85/per student
Profit
You do need
to make a profit on this class, or you can’t continue. You can’t continue with an “at cost” basis,
because this is time away from making where you can generate an income. A small profit margin of 20% is the minimum.
It does give you some recompense for your knowledge and provides a small margin
for contingencies.
Example.
A margin of 20% on the above example would add 28.97 per
student.
Cumulative cost total: 173.82/student
If you feel
this does not represent good value for your experience and knowledge, increase
the price. This exercise only provides the
base cost level for setting the price.
Also remember that it is easier to reduce prices than it is to increase
them.
On the other
hand, you may decide that your hourly charges are sufficient profit for the
course. This is not advisable, but is a
choice you can make. You should always
be aiming for doing your work on a cost, plus profit basis. Not simply covering material costs and
expenses. Remember your time is also a cost factor.
If you were
to feel this is too expensive, there are some ways to reduce expenditure. The
only ones that you cannot reduce are your hourly rate and the profit margin.
Possible reductions include:
Tools and equipment – get the venue to share costs or underwrite
costs.
Promotion – reduce your expenditure, or get the venue to take
all or most of the promotion costs.
Venue – get them to set-up and clean-up, or better, get the
students to do these things. Get travel
expenses from the venue. Move the venue
closer.
Accommodation – get the venue to provide at their cost.
Student numbers – get more students which will reduce the
variable cost per student.
But – to repeat – do not reduce your
hourly rate, ever.
This is a
general introduction to costing, profit, and pricing. There are a lot of more sophisticated ways of
calculating these things, but until a lot of experience is gained, most of the
work will be from estimates and guesses.
So, investing in highly detailed methods will not make the pricing more
accurate, as all the calculations are based on estimates.
