Considerations for raising tuition prices

Considerations for raising tuition prices Welcome to the DanceStudioOwner.com webinar. Today, we are talking about considerations for raising tuition prices. This topic came about really out of my own interest in finding out where are studio owners stuck, what's the hold up for raising tuition prices. I know what concerns we go through on our own. Sure enough, we're going to explore some of those concerns because if we don t talk about it, then we're just stuck. In this call, it should be about 45 minutes. As always, if you're listening in live, we will make sure to give you a chance to ask any questions by phone or if you're listening in the web, you can go ahead and type in any Q&A right from the screen you'll see it there. Jill is watching those questions come through so we really do love it when you have questions or things to add. Feel free to dialogue with us. The slides are running online. The three major areas we're going to talk about are how a small, say a three percent tuition increase can make a big difference at your studio. We're going to cover some of those concerns that were posted in the member discussion forum such as the fear of losing students to how to add value to your current program, and lastly, I do want to share a case study about a member who actually converted a $35,000 shortfall in her tuition by sending one email. She has a very successful program. Her shortfall was because of renovating her studio. It was covering those costs that we all run into. It's not hard to rack up a $35,000 shortfall. Anyways, she came to one of the events we've hosted and really encouraged her to raise her prices, and she did. We're going to show you that email and go a little further into detail about how you might map something like that onto your own program. Let's talk about what does it take to be more profitable. Sometimes, people get a little nervous when I say profitable because actually a member posted a great question in the forum yesterday, What's the average profitability of a dance studio? It's about 10 percent. That's the truth of the matter for a dance studio. Ten percent, you're doing pretty well. That's after you take salaries and after you pay yourself so that's a pretty good number but more profitable does not mean taking people's money and not giving them what they pay you for. I always want to make sure that we position that in a way that it doesn't make people feel uncomfortable. When I say profitable, I don t mean you're off shopping at the mall spending people's money. I'm talking about having your business be healthy and in a position so that you can continually make investments into new faculty, new programs, new equipment. That's the kind of stuff we refer to when we say profitable. What does it take to be more profitable? You either need to raise your prices, get more students, or cut costs, or a combination of all three. I'll say that again. In order to be more profitable, you need to either raise your prices, get more students, or cut costs, or a combination of all three. Where we tend to go first as dance studio owners is we say how do we either get more students or cut costs? We generally don't run to raise prices. 1

The place where I want everyone listening to this webinar to come from is to consider the place where it's actually easiest is to raise prices. It's hard to cut costs. I find it very challenging to cut costs at the dance studio. It feels like it's a lot easier just to spend more. If you're listening in, it's like we need this, and we need more of that, and we need another computer, and we need more software and more programs. Cutting costs is almost impossible at times. Getting more students, that's exhausting. That's the forever and always thing but raising prices, that's actually not as hard as you would think. I hope that when you're done listening to this call, you'll say even if it's not this season coming up, you'll put a strategy in place to see how raising prices even just slightly can make a huge difference to your business. If you're listening in, feel free to type any questions or comments in the Q&A box. If you dialed in live on the phone, we're so glad you're here and we will make sure we get to questions and answers in a little while. The first thing I want you to consider was asking yourself when was the last time you raised your rates if you can remember. Some people say, Oh, we do it every year. I doubt that's for you. Jill and I were just saying about daycares. They have no problem raising their rates every year. Colleges and universities, no apology every year. You can be ready for the tuition increase. Has it been more than two years since you've raised your rate? I do know that a lot of people were so freaked out by the economic meltdown we had in 2008 but the thought of raising prices is scary, but it's really important to consider that you have to do this. You're trying to serve your customers. You're going to have to raise your rates at some point. The question is when. It might be right now. Let's look at a small increase from two to four percent, how it can make a big difference. There's this handy tool online called PercentageCalculator.net or if you Google any sort of percentage calculator online, I prefer, you can use a calculator but I like typing things into the web. It's easier. Let's do a little math. If you have 200 students and you add a two dollar per hour increase onto your tuition prices, let's say you go from $60 per hour to $62 per hour, that comes out to, as I'm showing in this demonstration, about a 3.333% increase. Let's just say it's three percent. Just doing that, first of all, it's about a $20 per year increase of that tuition price. If I'm not making sense here, I can slow down. You're basically raising your rates two dollars per increment. Every studio does their tuition a little differently but let's just say for the sake of the one hour, easiest place, I'm going to pull up two dollars. If you charge ten months worth of tuition approximately, it would be averaging $20 more per year for that class. If you take those 200 students and you increase by two dollars per month on that, that's an additional $4000 in added revenue. That's just one little example of one our class. The numbers here are much more interesting when you map that onto more students or more classes or what have you but just for the sake of this, your students probably are not going to notice a two dollar per month increase but you will over the course of a year feel a $4000 increase because that can cover your rent for one month. That solves the summer problem. One of the things you might want to do if you're still at, Oh, it's been awhile since we've raised our rates, let's just play around with it on a calculator. It doesn't have to be online. Say what if we went up one dollar per month, what if we go up two? What if we go up three, $3.50? Start to do the math on that. We have personally at our own studio, we tend to go in the two dollar increment every other year. We could do a dollar a year but it's just easier to go up two dollars across the board. We're going to get into that a little further with everyone listening. We're going to give some more specific examples but I wanted you to have that to get started. 2

Once you've asked yourself, When was the last time you raised your rate? you can move into, What are your concerns? This is where most people stop. Ooh, it sounds so good and interesting to just add two dollars a month on classes. You start to do the math and you're like ooh, right Jill? You kind of said it when we got started. The number one fear of dance studio owners is losing students. I get it, the number one fear of losing students around raising rates in particular. Here's me with my tough love, everybody listening. Students come and students go no matter what your price point. I'm going to say that again. You're going to have students that are going to come and students that are going to go no matter what you re charging. We lose students, we gain students. We lose more students, we gain more students. Some students stay for their whole childhood. Some students stay for a week. I wish I could take away the feeling of nausea over losing students. I think it's like I was born, my mom has passed it into me somehow through my whole life. It is what happens. We care about our students and we don't want to lose them, I get it, but this is where we stop and your business suffers, and then you get into a place of panic. Financially, it's not sustainable if you don t raise your rates. Keeping with the fact, acknowledging the fear that I'm afraid to lose students but here's the thing, just saying that is what's makes you human. That makes you normal. If you can be like no matter what people are going to come and people are going to go, you can free yourself up to have the conversation. The next thing that people often struggle with is they don't want to be the most expensive dance studio but they also don t want to be the least expensive. That was a point that some of our members had posted online when we asked what are your concerns. You don't want to be the most expensive, but not the cheapest. Do you advise that studio owners do a little research on their competition to figure out the competitive pricing in their area? That's actually an exercise that I would recommend you do. Two things I want to say about that. I recommend you do a tuition inquiry of your area and then I would do it in your state, and then I would go to geography. An exercise I just put our own dance studio through was I looked at the tuition prices that we have and compared to some of our very immediate competitor areas, and then I looked to the whole state we're in. The studios that we see out of the caliber we're running in that offer similar programs, and then I look at it from the geography, the Northeast. Then I go out nationally. It helps because you get a feel for obviously you can't charge tuition prices of New Jersey in Northern Maine, I get that. But you also have to keep in mind that tuition is not all the same everywhere. My next point of that is I also compare our tuition prices to similar activities, not just dance. What is the going rate for gymnastics per hour? What's the going rate for music lessons? What's the going rate for cheerleading classes, all of those things that there's instruction for children, if you're teaching kids? If you're teaching adults, same thing. What are some of the going prices for those type of programs? It's really useful to do that but what I would say is don't get too paranoid about it. Don't get so hung up on it, right Jill? 3

Right, but just make sure you know what's going on regionally within your own locale and taking it out statewide, and even across the nation just to be aware of where you are so you can be not the cheapest but not the most expensive either. This is a little bit of a snarky comment that only the dance studio owners can understand. This also is the information you need to be armed with when a parent is like, Oh, it costs to dance!. You should move to New Jersey and see what it costs to take dance there. It's crazy. I mean that in a loving way but seriously, you should know what dance classes cost in general industry wide. I encourage you to look around for that. The next thing I want to say about the desire to not be the most expensive but also not the cheapest is that people have a perception that is their reality. Believe it not, the more expensive, people think, Oh, that must be really good. Think about your own life. The expensive thing, that must be better. I mean that even for my own children and things we do. Money doesn't grow on trees but you definitely want to know that parents equate look at the cost. It's expensive. People put value on when things cost a certain price. You want to make sure you aren't the cheapest or that you re at least pricing in a level that people see the value. Jill, the next point that people said was a concern was the fear of having to chase people for unpaid balances, that that would increase. If I raise my price, I'm going to have to now really chase down people for tuition. Right, because we all have so much time to do that, right? We definitely want to make sure that that doesn't happen. Right, another true fact of the dance studio, just like students are going to come and students are going to go. Guess what? No matter what your fees, you're going to have to track people down to pay. It's just how it goes. Whether your tuition prices are $50 a month or $500, there are still always going to be some people that you have to track down for payments. Here's the other thing on that. If you re stuck on chasing people for balances, make sure you are accepting credit cards. Are you doing auto payment tuition billing? Are you using software that can do that? These are the types of things where if you re stuck on that, you want to look at the systems you're using to collect tuition. Do you need to write a new policy for that? Sometimes, people do a tuition increase simply by saying actually, this is a cool way to do it. There's a studio I know that positions their tuition price where if you pay between the first and the tenth of the month, this is different than it being a late fee. This is different than the conversation of a late fee. It's almost like the way we do early registration pricing right now for our summer. You actually position early payment discount but really, that's just the price. You make people feel like that's the discount but that's actually really just the tuition price you are hoping to collect, and then payment regular rate after the tenth. Literally, the regular rate, don't say late fee, don't say penalty imposed. Just say, Hey listen, if you want to pay after the tenth, that's fine. That's the regular rate but the early payment price is this. It's kind of a cool thing. I could demonstrate that further, Jill, but do you know what I'm saying? 4

Some people say, Oh, that's late fees. I don t like to charge late fees. You could just simply reposition your pricing and say early payment pricing is X, meaning the payment you actually want to collect to and then the regular tuition rate after that is Y. Right, and then you'll get those people that want to take advantage of that and they feel like they're getting a great little bargain, a percentage off each month if they pay on time and pay early. Exactly. Logically, how do you want to motivate people to pay? Once again, everything we're saying here, we're not tricking people. We're not confusing our parents into submission. It's just literally, I was a psychology major. You have to play to people's psychology of the whole process here. Raising tuition prices takes that from looking at it from all those angles. Lastly, the fear that an hourly rate would scare people away. This is another member who posted that if they raise their rate, just looking at the hourly rate would scare people. There are some people that come at this by not breaking it down. They break it down by what the per class cost is. Instead of saying, It's $62 for a one hour class, because parents aren't doing the math that that's for the whole month, you could say, It's $18 per class, if you wanted to do a per class rate. Some people want to break it down to really small numbers for people. You could do that. Then you could say, And your tuition per month is $62. That's up to you how you want to position it. Some people like to break it down to the per class rate. Some people like to show the hourly. We show our tuition rates in the month. For one month, a one hour class is $60. We break it down that way because that's how we bill people but some studio owners prefer to break it down by it's $18 per class and you're charged 36 times because there are 36 classes in the year, and then do the math on that. What do you want to say about that, Jill, anything? I think it's great. For me, as a mom of two girls that dance, I go through this. I see it from both sides so when I look at a website that has the pricing on it or a brochure, I love to see what I'm going to be paying for month. Then you could take it the step further and break it out what the yearly cost is because I know that some studios like to discount if you pay the full year in advance. That way, the studio owners are just guaranteed to get that money all up front for all nine or ten months. I'm visual that way. I like to see it broken out by the month and even the year if I want to say, You know what? Maybe I ll save a little bit of money and I can pay for the whole year at once. Right. Everybody listening, you got to always go with what works for you. We know that at our studio, we prefer to just publish the monthly rates plus the multi-class discount. Other people spell out the whole year's worth of tuition. Some people only post the per class. You've got to go with what you believe your clientele can handle, prefer, like, or are asking for. Because I manage my life in monthly increments of bills and payments, the monthly thing seems to work well for me personally. Again, you might have to position it differently when 5

you do an increase. Those are just some of the concerns that people have shared, and they're valid concerns. These are real concerns. I have them too. Don't negate your concerns. Address them. I'm one of those people that's, Let's get all the concerns out on the table, and then we can do something about it, and each of these has a solution which is why I wanted to present them that way. Basically, we're going to move into now, I actually want to give one example, Jill. Can I give an example? Is there anybody listening in with a question? Feel free to type those in. I see one coming in. We can address that. There's one coming in about competitive teams. Jill seems to think that she doesn't charge enough but she spends endless hours with them. Do you have any ideas when addressing the competition side of the studio? Yeah, and thanks for posting that by the way because I think you speak for so many of us. We need our competitive teams on so many levels and yet we lose so much money on them in other ways. Sometimes you have to look at the value of things, not just in the dollar per dollar hourly exchange. I don't think studios in general charge enough for their competitive programs, our own studio included. I think if we actually charge what we put into it, most people couldn't participate. Given that you can't charge crazy money, I think that it's very, very important to make sure that you're building out the rate here for your competitive students to make sure you're at least covering your costs. I spoke to a studio owner who is an amazing dance studio owner, losing like $25,000 a year on this, losing $25,000 out the window, goodbye. You can't sustain your business on that for much longer. That will run out eventually. I would recommend that when you look at your pricing, you absolutely charge an administrative fee on every single entry fee. Make sure you're charging a monthly fee if you do a monthly competitive team class in addition to their already classes, choreography fees. We make sure that we build in rehearsal time. Absolutely positively, you've got to charge for stuff. I can't get into the details of that today but I think if you post it to the forum, we can talk about some of the things that you want to consider charging for because you're going to end up spending a lot of time on this and you at least got to cover your costs. If we start with let's cover our costs, then we can work into how do I at least get compensated for my time, really important. That's a great question. I know I can't answer it in specific detail right now but I think that we definitely want to look at making sure you re charging administrative fees for all of that. This is what I wanted to say, one example. I'm being very open and honest. We're looking at increasing our prices at our own studio this year. I mean that heavily. I've done a lot of the work on this. I talked to our accountant and said, Can you give me the prediction? If we raise our rates, what's going to happen? He said, I can predict for you. He has this very highly sophisticated spreadsheet that he types up. Jill is probably laughing right now. He did the math and said, Suzanne, if you can average 600 students, which is kind of a lower estimate than what we shoot for ever year, 6

but if you can average 600 students next year, and you implement that three percent increase, just two dollars across the board, we could lose 110 students and still bring in the same revenue as last year. Literally, with a three percent increase, we could lose 100 students and still be at the same revenue. Do I want to have that happen? Absolutely not but he said, You have to look at it by raising your rates only a small percentage, it can make a huge difference in terms of how you're able to run your studio, like we have things we need to invest in, more teachers, different things. It happens so consider that you can raise your prices and still lose some students and be okay. The chances that where we get them is like, Oh my gosh, the thought of losing a student or a family, or people that you love, that seems really painful. I'm not talking about doubling your prices overnight. We're talking about small increments. People are used to this. They can handle it or they'll cut back in another way somewhere else. Most people will not sacrifice. They'll do anything for their kids. I'm a mom of two. I would rather forever shop the sales rack for my clothes at Old Navy to make sure that my kids can be in the activities that they want to be in because I know that their childhood is short and it's only going to happen once. People will make sacrifices for their kids. We're going to move onto the next slide. Once you've taken time to look at a possible price increase, then address your concerns. Be with them. Let them go. Understand there's a solution. The next thing is where can you add and show the value of your program? This is a tricky one, Jill. You and I have had conversations about this before. How do you measure all of the great things about your dance studio? How can you continue to add to that? One book that has really made a difference, this is thanks to our good friend, another member who runs a multiple dance and music studio. They're great friends. They recommended the Worth Every Penny: Build a Business that Thrills Your Customers. You can get that on Amazon. It's by Erin Verbeck and Sarah Petty. It's called Worth Every Penny, easy read, super handy, great book. It helps you to define and position your value without rushing to discounts. Most dance studios, the discounts that come into effect are siblings or multiple classes. There's just a natural part of having to offer certain discounts. We're talking about not leading your value with, Oh, and you can take money off. Let's start to take inventory on all the great ways that you add value to your students. Here are some examples, or can you give us a couple of examples that you think are added value at a studio? I can give you one thing that it's not. We've talked about this before. It's not about your sprung floors. It's not about how comfortable your waiting room is. It's really defining who you are and your values as a studio. I know that means a lot to people. They want to know that you're creating that nice family atmosphere in your studio where the kids can come and they're going to be spending a lot of time there. 7

To me, that's important. I think putting specifically outlining those things on your website, making sure that your website is professional and it looks good, and it's well done, will give the impression that you re top notch and can justify those price increases and the tuition that you're going to charge, making sure that you keep your social media update, that you're mitigating any type of issue that somebody posts some sort of negative comment, that you're handling those swiftly. All those things that we've talked about with marketing, I would take a look at what your website looks like, what your social media, how good in shape that is. Those are the things I think would be very helpful to justify that. Absolutely, those are great points. I would encourage everybody to get out paper after the call or when you have a minute and start with your list of all the ways you add value. You can start with the easy ones like, Jill, we don't mean the floors aren't great. We put a lot of money into our floors too but start with the things everybody expects, the floors, the waiting room. Then get into things that are really hard to measure. For example, on our own studio website, on our dress code area, we say, Great news for students, we always have hair elastics available in our office and in each studio if you forget yours. That's the most random thing I brought up but parents are busy. Making a bun is important for dance. We realize it's those little things. Do you host a spirit week at your studio? Do you have a special visitor week? Are you always giving a progress report to your dancers? Do you measure and size your kids for dancewear, not just costumes, but can you ensure a perfect fit for a shoe? Parents are busy and have no idea what size dancewear their kids should be in. These are just types of things you can add value. I will say wi-fi in your waiting rooms is a pretty cool perk. We do go above and beyond for that. Those are the types of things that show the value. We're not even getting to the dance class yet. That's when you get into all sorts of things. Start to get a list going. Don't forget about all of the great stuff, your talented faculty. Then you can really get into all of the nice background that your teachers have and that you have as an owner. There's a lot. Your list is going to be very long. Right. This is my confidence booster piece of it. Once you have that list, you're going to be like, Yeah, we need to raise prices. Look how awesome it is here. This is amazing what people get. This is worth every penny, like the book title says. You really need to embrace that and own that because once you take it back on and be like, Yeah, this is amazing. It's worth it, you can start to leverage parent testimonials, photographs of your own studio. It's going to take a little bit of effort, but I can assure you, you're offering more than a dance class. You're giving people an experience. You're offering more than a dance class. You're giving your students an experience. That's when raising prices isn't even, That's what we do here. It's okay because it's worth every penny. That's my little pep talk about that. That's an exercise. We'll move onto the next slide. Again, if you're listening in on the web, feel free to type in any questions. If you re on the phone, we have a couple more slides and then we'll open it up to questions. 8

One quick question that came through, Please repeat some examples of ways that add value and go slowly. I'm sorry, I'm so excited. We'll go slower. Jill, you had said a few. I can start off with a few things. Your list is good. Why don't we start with yours? Start with the things like what makes being in your waiting room special? I'll go around the areas of the studio. What makes being in your waiting room comfortable? Do you have wi-fi? Is there a child's play area, beverages or concessions? Just think about your waiting room. The next area I would talk about is are you someone that can offer full service dancewear fitting? Can you be the studio that if you come in for an open house, we guarantee dancewear fittings, even if you're not selling the dancewear, which on a side note, I would encourage you to consider offering some pretty basic dancewear for sale. It's so easy now to sell. The service of measuring kids and sizing them to the right dancewear is very helpful for parents. You can position that like, We guarantee that. Do you have ample parking? Let's go to the exterior. Is it safe? Is it easy to park? Then inside, in your studio space, sure, you can list the sprung floors and all of that but then get really into the stuff that's hard to measure. Do your teachers give progress reports? Are they hosting a spirit week? Do you do classroom observations, special parent viewing times? Here's what I'm going to do. I'm going to make sure with the replay of this call, we include a list of all the ways that you can show value, and we'll post that. How does that sound? Yeah, we'll compile that list and post it. That's perfect. I'm sure other people have great ideas. Shoot me their ideas too. We can post a little post on our Facebook page too and can have everybody contribute. That's a good idea too, awesome, I like it. The next thing, this is now once you've done all that, you need to determine your strategy for the price increase. If you're listening to this and you're already like, Oh, definitely, we're raising prices, now you might be at the point of should you make an announcement or say nothing and just let people figure it out when they register. This is a big question people have asked us. I think that you have to decide what's going to work for you. Personally in our studio, we've never made a broad sweeping statement like, Yay, prices are going up. We just haven't done that because we figure people, when they go to register, they see online the tuition prices. Returning students, same thing, they can figure it out. The only time we've made any sort of announcement about pricing has to be doing more with when there's an event specific but I want to say this. There's an example that I'm going to show next about a studio owner who absolutely did a great job with an announcement about prices. You can do this either way. It's really up to you. When it comes to this, if it's really something you think is pretty subtle and doesn't need an announcement, when people will 9

figure it out, take it on a case by case basis if people have questions, Yes, Mrs. Smith, we had a tuition increase to reflect the increased cost of doing business, everything from our utilities of the studio to whatever. People understand that costs go up. They really do. Think about it. The cable company does not apologize to me or the heating company when they increase the cost of fuel. It's just natural that you'd have an increase for an increased cost of doing business. The next question that someone asked is, Should it be a tuition price increase across the board or just a segment of your program? As Jill had asked online, that was a good question. Maybe you're just going to increase pricing for your competitive program this year or maybe yep, we're going to do a full blown tuition increase across all programs. That's really, once again, up to you. You might say, You know what? This year, we're going to raise prices on one segment. Next year, we're going to go for just the one-off classes. Again, you really have to determine what do you think is going to make the biggest difference to your business in a way that won't be really complicated but will make the best decision for your business. That's all I can say about that. Next question, should you lock in your current students at this year's pricing if they reregister by a certain date? This is an incentive that a lot of people do. In fact, this is often a pre-registration incentive that's very popular. I'm not opposed to this at all if you want to do that. I think it makes complete sense. It's never been a strategy we personally use at our studio, mostly because we can't get our fall schedule compiled in time and our show runs so late in June but that is a strategy that some people use, and the next example, I'm going to show you exactly how that works for one studio. If you have the ability and the programming to handle those different prices and keep track of it, by all means, that can be a way to get people coming back. Then the other question was, Should I just increase my registration fee? Here's an area that I think too many studio owners overlook the value. A registration fee, can you do me the favor, never, ever apologize for your registration fee. I'll repeat that. Please never apologize for your registration fee. It is a very important part of running your studio. It costs money to get people registered into the proper class. You know this. You know what it takes to get people moved around into the proper class, answering all those questions, getting them set up in your system. Frankly, those costs cover things like insurance and all your music licensing fees, all the stuff that tuition doesn't cover. That's your registration fee. You might say, Hey guys, let's increase our registration fee by five dollars. If you have 300 students, there you go. That might be the difference maker for you. If you're not ready to do a tuition increase, then I would highly recommend you look at increasing your registration fee, again, if it's been awhile. Our registration fee has stayed pretty consistent throughout the years. We tend to increase tuition fees more but increase in registration fee could work. Lastly, Jill, the people who took time to ask online have said, When is the timing right? Should we roll this out at the beginning of the year, at the launch of a new program? Is there 10

any time? Some experts say whenever there's a new thing. Did you expand, are you adding new teachers? I think it's really for dance studios, obviously the most logical time for a price increase is going into your new school year but sometimes it has to happen mid-year. I prefer to roll it out at the beginning of the school year. It's just easier but you can do it mid-year. Here comes the example. We had a studio, moving onto the next slide. I just want to share this case study and then we're going to open it up to questions or comments or thoughts. A studio owner who is a member came to us and said, I have a $35,000 shortfall for payroll and expenses, because she expanded her studio mid-year. She basically added on. It happened. She came to an event we had and saw the value of raising prices. She sent an email. She was thrilled because she actually sent the email that I'm going to show next but she privately sent an email to Jill and I and just said how she literally is so grateful she did this because it's all that fear, but she did it and it worked. The email subject was, Tuition notice: Save $30 to 100 immediately. She decided to only increase one segment of her business like the hourly rate classes versus the family discounts. She explains the increase in this email. She summarizes what to expect and how to prepay. Essentially, in January or December, she let everybody prepay for the rest of the year. Now, while some people say, That doesn't make any sense because she's taking all the cash she would have needed for the rest of the year. It worked out for her because she was able to add more students by January because she expanded her studio, still very successful studio owner. Here it goes. The slide is on your screen, probably not the easiest thing to see from the webcast but it will be posted with the replay. She says that, Notice, January prices are going up 10% for students enrolled in three hours or less. She was implementing a big increase, 10 percent. I'm advocating you guys to consider an even less one. She was doing a 10% increase. If you scan down, she answers the question why the price increase. She says, This is our very first price increase since June of 2008, all the value, then the expansion. I had to white out specific names to give her anonymity. She really gives it to them, Here it is, you have an opportunity to prepay and save. Here's why, and to summarize, she sent us this email. She earned $30,000 of money in that month by sending that email. Jill, do you want to say anything about that before I get into some more examples of it or questions? I just think it's amazing to be able to see that. I think the studio owners need to walk away not being afraid to do their prices and to just feel good about it because they can not only be more profitable but add that value back to the whole student experience. If they're charging what they're worth, then they're going to be right where they need to be and I would assume that they'll see their student base and their students increase as well. Right. This studio owner, she's very talented. She has a great studio, world class. It was an expansion that happened probably faster and got out of hand expense. She did this. She still very much runs the successful program. Sometimes, I'm not even suggesting you have to do this. 11

I wanted to show you the worst case scenario, a $30,000 short fall in one month, couldn't make payroll, was very nervous about having to ask for loans. She was getting so stressed out. We're like, What's the worst that can happen? She said even in her email, I think I lost one student, and she wasn't even sure that that had anything to do with the price increase. She even said that in her personal email. She said, One person dropped out but I'm not even sure that that was price related. You can do this. You can. I want you to stay in financial health for your business, and I frankly want you to be able to be reinvesting so that you can take your business to the level that you desire, whether that's growing or maybe investing into new technology, all of it. It's important. Let's open it up to Q&A before I finish the last slide. There are a couple more questions that came in through the website. Do you want me to read those out and see? Yeah, and those of you who are on the phone, you can press star seven on your phone to let you talk as well. The first one is about pricing. Like typical studios, she says the calendar year runs from September through the end of May and that the problem is leaving that month of June for makeup classes because most of us had a bad winter this year, so they're falling into then that June block. It's costing time and money, but then having to charge for the month of June doesn't make a lot of sense. How would you rather, do you want to charge by the calendar year or I guess how do you deal with the makeups and the things that might spill over into that extra little bit of time? This is a good question. Once again, you might have to reevaluate your structure of how you bill for tuition. If you're doing makeups in June, we tend to say you have to make up the class. We don't let them accumulate their makeups. That's a question where you might have to set a new policy around makeups. We bill for ten months. We like to have cash flow coming in June even if there's only a couple of classes because we tell people that their tuition is calculated based on a 36 week calendar year, which comes out to an average of 3.6 classes a month. Some months have two weeks of class, some months have five. It averages out to 3.6 per month. We don't prorate. We're just like, Here's the tuition fee, boom, that's what it calculates out per month, and that's how you do it. You might want to rethink your makeup policy to have it be a little more strict or specific so you're not running into that problem. Good answer. Quickly going back to the email that was sent out, your case study. Do you know what month she emailed out for her discount and the promotion? Yes, the email, I want to make sure, I switched off the slides. This is going to be reposted on the website. You're going to be able to look right into the detail of it. She sent that email in December, Christmastime of all things. We met her in early November for this event we 12

were at. It was maybe end of November because she knew she was going to have a December shortfall. She was freaked out to raise her prices midyear but we were like, What are your options really at this point? She sent it out midyear. One of the last questions that's coming in from the web right now is from Yvette. She says, I've been offering a 10% discount to returning students. Last year, I reduced it to eight percent and didn't say a thing. Not one client mentioned the difference. We just said, 'Oh, and with your discount, your monthly fee is X.' This year, I plan to raise two dollars across the board and reduce discount to six percent. That's a really great strategy. Thanks for sharing that. That's something I've been looking at as well. This might prompt you to really look at your discounting model because we feel like at our own studio personally, we're very dynamic with the sibling discount and the multi-class discount. After awhile, you might have to adjust like you suggested. That was a great example. Thank you for posting that. You can play with your pricing by adjusting your discounts. That might be the best place to start raising your fees, good point. Thanks for sharing that. You talked about across the board. We talked about percentages and dollar increases. Which way do you like to go? Do you tend to increase based on percentages or by dollar amount? Is there a different way to look at it? I remember Shawn Beaver had mentioned something before that I heard. Right, I think sometimes essentially, you can come at it, if you say, Okay, we're going to do two dollars. What does that come out to approximately? That might be on average three percent. Like the other member posted, we tend to go up in dollar amount increments but then we look at the percentage discount on say kids that are three, four, five, six, seven, eight, all those multi-classes, unlimited. That's where it starts to get really complicated. The kids taking the most classes get the biggest discount but they also do take the most classes and they do bring in the revenue. You have to look at I would actually encourage you to pull a report. One of the great things about a studio management program in particular, we use Jackrabbit Class. I'm sure any others that you're using, pull a report for yourself to look at. Start there. Say, How many kids are on the four class a week dance pack? We started to look at those numbers to find what is the sweet spot for participation, and what if we raise that price and not another, or what if we keep that the same and we raise in other places. You got to look at some data, you got to look at some numbers. I would say then make your decision on whether or not it's a percentage across the board or it's a flat rate across the board. With regards to makeup classes, I know we've just touched on it briefly but can you go back and talk about how you manage your makeups? For instance, a lot of us on the Northeast this year were hit really hard with a ton of cancellations. Does it go back into that whole flexibility with your months are bigger, more classes than others and build it in that way? 13

Right, everybody's studio is probably a little different based on when you can do a makeup class and also what's offered on your schedule. The way we usually do makeup classes is that you're sort of responsible for finding a class. You can make up any class in an appropriate class of your choice. It doesn't necessarily have to be in a ballet class for ballet. You could try another style. If anything, it encourages parents to have their kid try something else. We make our personal makeup class policy very, very flexible meaning as long as you're not putting yourself, if you're an advanced dancer or if you're not an advanced dancer, you can't make up an advanced class but as long as you're in the same age group or level, you can make up a class across a genre other than a class say Irish step which requires certain, within reason, if you've ever taken tap, but mostly it would be between ballet, jazz, hip hop they can go between. If you can make it pretty flexible, that works but we do not do any sort of credit for missed classes or for snow days. If you didn't already have a snow cancellation or weather cancellation policy in place, now might be the time to do that. We do not give credit for snow cancellations. We will make up if we miss a certain amount, consecutive week, let's say Wednesday classes are canceled three times. We will definitely make those up on a vacation week. We'll actually run the class but we will give people an option to make up another time. I have more questions. Everyone listening in is really, really excited about this. I did post on Facebook already too so be sure to go over to our Facebook page and comment about some of the value that you add and how you can justify those price increases. Jen said, One school in her area asks for a credit card number for those times the parents don t' get their fees paid on time, and basically they charge their credit card after a certain date no matter what. She wants to know, Do you feel this is a little cutthroat? That's a good question, Jen. Some studios make you put the automatic withdrawal through your bank account, the ACH withdrawal in order to participate. For example, my son when he did karate, you could not participate there unless you gave them a canceled check to your bank account. I personally was horrified by that policy because I'm like, Look, I'll pay you on time, relax, but I'm sure because of those people that don't pay, they're going to suck that money right out of your bank account. I think that people are moving more towards this because I think we're all getting exhausted from tracking people down. This goes back to having pretty much a red flag in place for when are you going to put the late fee on, or when are you going to pull the trigger on billing these people. You could strongly recommend that people, or give people an incentive. Some people charge more if they put it on a credit card. This goes back to the idea of if you pay before the tenth of the month, you get some sort of bonus discount. It's up to you. I don't think it's a little cutthroat. I do know you're not supposed to charge a credit card without people's authorization so I think that you got to make sure that whatever the terms are in writing, if you're going to take people's credit card, you have to have some sort of legal jargon that says, If you do not pay your balance by the tenth of the month, your card will be charged. 14

Then they have to accept those terms because otherwise people will go mental and you'll get all these charge backs. Make sure you follow the policies of the merchant account before you start charging credit cards. Great. Another question that came in from Jill, not me but another Jill that we have listening in, she offers multiple class discounts so she offers like a 10%, a 20%, a 30% discount. She wants to know if dropping that discount, going from 10, 20, 30, to five, 10, and 15 plus increasing across the board a three percent increase, is it too much at once? Should she do one or the other or just do both and let it fly? This is either do you want to rip the Band-Aid off really fast and make everybody get comfortable or do you want to ease them into this? Once again, I think that the member, I don't know if she's still on, who was offering the discount and she started gradually dropping it down and she didn't even mention it, the parents were like, Okay, no problem. My first thought is I think you should do both because you have to make up somewhere. I would pull a report. This is my recommendation. Pull a report from whatever program you use to know how many people are going to be affected by a change. This is assessing what's going on here. How many people are on your 30% discount? How many students are we talking about? Once we get a feel for how many people you're talking about, you can work with this. That's why I hesitate to say, Oh yeah, just do it and it will be fine. Get a feel for it if you're talking about 10% of your students on a 30% thing, yeah, something's got to give but I think that the drastic, is it too drastic? I'm not sure. I don't think it's too drastic to drop to that but you have to ask yourself, is that 10%, should you maybe not drop the 10%, leave 10% because if that's encouraging people to take multiple classes, maybe go 10, 12.5, 15. Maybe it's just the second and third level that you're over discounting. I hope she understands what I'm saying. Maybe what you don t need to do is so much lose that initial 10% because I know that might draw a lot of people to take multiple classes but you realize it's the second and third that need to be dropped. Does that make sense? Yeah, so not necessarily drop all tiers but maybe one or two of the latter tiers. Yeah because if you pull that report and you see that there are a lot of people participating in the second, just taking two classes on that 10% discount, that's what we found. We have similar. If that's a bandwidth, a lot of people, you might say, Oh okay, right, I don't want to necessarily drop that, or you might say, Let's drop that to eight percent, then 12% and 15, where you can keep those people still encouraged to take the multiple classes but the people that are getting such a crazy discount at 30%, they need to be dialed back a little bit. I do think the three, I think the increase in tuition of three percent is reasonable, and again, take a look at how many people are on your multi discounts to get a feel for how much you're talking about here. Fantastic advice. Then someone else about how much time, the makeup class things are good. You can't bank your makeups. If you miss a class, you need to make it up. You can make up any class and at 15

any time in the school year, if they want to pop in the last week and take classes, the problem with that as we warn our students is those classes are preparing for the recital. You're going to miss half the class because of choreography. The other cool thing about if you have enough, if kids miss, say there's a kid and the parent is nervous that they're missing their classes because of recital choreography, we sometimes will facilitate a class. Sometimes we do group choreography. One class is doing the same piece and our Saturday 11 shift is doing a whole set of kids different doing it at Sunday at noon. They can make it up in that class too. That happens every once in awhile where we can make it happen. Lots of great questions on the web, thanks for posting those. I just want to wrap it up here because I think people listening in because we could talk about this for days. Here's the thing about this. I want you to be confident in your approach because you really do make a difference. This is about gaining the confidence to really roll out a strategy. The first step, I would encourage you to take some time to create a strategy. All those things we just talked about, getting some reports, feeling your way through what you could adjust, really take some time to create a strategy. You might discover and say, You know what? This year, we're going to do this price increase and next year, we're going to do that, and then boom, we don't have to do it again for two years. Every two years, we're going to raise our prices. Almost make it be a habit so you don't feel stuck but you know that this is what's coming, we know what's going to happen and people can get comfortable with that. When we take the time to do that, you really can rule it out and not be scared. You can be concerned. I would love to say, Oh, we don't get nervous about things. Yesterday morning, our ticket sales went up. I still hold my breath all night. It's not something you're going to get rid of, but rather, you can be confident about the steps you're taking. Lastly, when you're doing all this, keep the health of your business in mind because you really do make a difference in the lives of your students. They need you to stay in business. When it comes right down to it, you're doing this to stay in business and to keep your programs going, maybe add on different things. Raising your prices is actually a great thing for everybody. I really want to encourage you to look at this not from the fear mentality but more like how is this going to help us do more for our students. That's my encouraging statement for the day. Is there any other thing you want to add, Jill? We did have one more question that came in. Do you want to take it before we hang up? It's from Tracy. This is a really good one. She said, Some of our biggest competitors locally are nonprofits and they get grants and support. We need to be competitive in pricing but how do we compete with the organizations that get that kind of help? That's a great question, Tracy, because we compete with sort of some local boys and girls clubs and things that are offering dance classes. I think this is where you have to go back to 16