A Formula for Pricing Educational and Training Programs

Many people ask me how to price their programs. There are a number of ways to approach this. One simple, straightforward formula for pricing educational programs:

Work out your costs. Double the total. That’s the price you charge for your program.

This is just one method used by “big institutions”. It ensures that you really have covered all your costs (including the ones that you sometimes forget to factor in such as insurance, etc.) Surpluses go back into your organization for future programming and capacity building.

When you calculate your costs, here is a partial checklist of items to consider:

Instructor salary – How much are you paying your instructor per hour? Remember to add in benefits, vacation pay and any prep time you pay.

Management and administrative support – How much of your time as a manager is put into each course? Ask your coordinators or admin staff to calculate how much time they spend prepping for and working on a given course. Multiply that by their hourly wage. That’s your cost for admin support for the course.

Rent – If you lease a space or pay rent, work out how much your space will cost you for each hour of your course. Take the square footage of your classroom and then add in all public areas accessed by students and staff during the course including the reception area, bathrooms and lunch room. What do those spaces cost you per hour? Multiply that by the number of hours in your course. That’s an approximate cost for your rent.

Utilities – What do you pay for phone, Internet, heat, hot water, etc.? If you work in a large institution it may not be easy to work out these numbers. Figure out an estimate though. You’re still paying for these things, even if it is only indirectly.

Insurance – What insurance do you cover for your premises (fire, theft, etc.) and for your staff (liability, workers’ compensation, etc.) – Although the amount may be small, allot a portion of these costs to each course. Without them, you can’t run your programs.

In my experience, the first time managers figure out their real costs to run a course, they are surprised. They want to go back and check the numbers. “That can’t be right…” they say. In most cases, the number is right. As educators, we often underestimate our real costs to run programs. Become aware of your actual costs. When you double them to arrive at a price for your programs, you are becoming fiscally responsible by making sure there’s money left in the pot to keep your programs and your organization sustainable over the long term. You’ll have some extra in case of emergencies (and there are always emergencies), to subsidize a course you believe in strongly and enough to stay afloat when the economy tanks.

__________

Share or Tweet this post: A Formula for Pricing Educational and Training Programs http://wp.me/pNAh3-sb

One Response to A Formula for Pricing Educational and Training Programs

  1. All great advice.
    There are two general ways of calculating what price to charge – the costs plus model as you’ve described above, and the market and competition model.
    In my opinion the second one works better – we all use the costs plus model at budgeting time to make sure everything adds up, but in my opinion it focuses too much on ‘us’ and not enough on ‘them’ – our clients and the market.
    Adding up the costs and then just doubling it can be particularly dangerous as we always need to adapt to the market first and foremost, rather than stubbornly battling on based on our costs. It’s always a balancing act, with some types of training and some markets being able to support a high profit margin, while others need to work with a lower margin, or find out how their market can support a higher margin.
    The biggest problem, however, of pricing based on market expectations and value is figuring out what those expectations actually are (6-10 quotations at various price points soon give you that information) and keeping up with competitor moves and changes in strategy…
    Alex

%d bloggers like this: