How much to charge for tutoring is one of the most important business decisions you will make as a tutor. Setting the wrong rate can put off students, cut your income short or even attract the wrong type of students.
In this guide we will look at why charging the right rate is so important and how to figure out what the ideal rate is for your tutoring service.
Warnings From Bad Advice We See Online
There is a lot of advice on other websites on setting a tutoring rate and while all of it has been written with good intentions, a lot of the advice is horribly misguided. Even experienced tutors can give you the wrong advice when they don't properly understand economics. Many times it feels like tutors have been setting their rates based on a the throw of a dart - read through this guide to avoid the same mistakes others have made.
Before we start, let's stamp out some of the terrible advice you may have already read online:
"The rate you charge should be X"
Quite a lot of websites suggest a specific range that you should charge. You look on one website and they say, "tutors should charge between $30-50" while another website says "tutors should charge between $15-20". Another website says "you should start off with a base rate of $10 per hour".
So which one is right?
Actually, they're all wrong. Every tutor will need a different rate based on a wide range of factors such as location, subjects, experience, demand, etc. While $30 might be the perfect rate for one teacher, $30 might be way too low for another teacher. Ignore any advice that gives you a specific rate you should charge because it doesn't take into account your situation.
"Start with a low rate if you're just starting as a tutor"
Generally speaking, a tutor with a lot of experience should charge more than a tutor with low experience. But the advice that you should start off with a low rate is misguided. As we will explain later, charging a low rate can create a lot of problems.
If you're just getting started as a tutor, you might feel a bit uneasy with setting a rate. Don't worry because by the end of this guide you will have figured out the right rate to charge and you will feel confident with your rate. Don't automatically start with a low rate - it could cause more problems than you think.
"Charge X for kids, Y for teenager and Z for adults"
This is bad advice because age is only one factor. In one area $15 per hour teaching 8 year olds might be reasonable while in other areas the standard rate for 8 year olds might be $30 per hour. In another area $30 might be cheap. Don't make any assumptions until you do your research as explained later.
Any time you see online somebody saying "you charge $15 for 8 year olds? That's way too much!", remember that those tutors aren't taking into account other more important factors such as local demographics.
Lesson: unfortunately there is a lot of misguided advice online. This guide will give you the right advice you need because we understand economics, we regularly survey students around the world and we deal with a lot of tutors. We know what works and what doesn't.
Why You Shouldn't Charge a Low Rate
Before we look at working out what the right rate is for your tutoring service, it's important we look at a major problem a lot of tutors experience due to their rate. Let's look at what happens when you set your tutoring rate too low.
Some tutors mistakenly feel that if they set a low rate, it will be perceived as a more compelling offer and they will attract more students. You might feel that other tutors in your area are charging too much so you want to offer a cheaper alternative for students.
When you charge a low rate for your tutoring service, it attracts price sensitive people (aka: bargain hunters or discount shoppers). These are people who seek out the lowest rate possible and will push for discounts. They are very likely to haggle your already low price to even lower levels. The problem with these type of students or parents is that they care more about the cost than the service you offer. Tutors often find that price sensitive students can be difficult to deal with as students and they can leave at an instant if they find another tutor with a lower rate.
The main problem with a low rate is that it sets the perception that you're not offering a quality service (even if you are a great tutor). Imagine buying something at a store and you see two versions: one sits on it's own stand in a prominent position and another similar product sits in a bargain bin among a lot of other heavily discounted products. The product in the bargain bin doesn't come across as a high quality product. That's exactly what happens when you set a low rate for your tutoring service. It makes you appear inferior.
You might have read on other websites advice to start off with a low rate then raise it after you gain experience. That's the wrong approach. Start out with a fair rate and always charge a fair rate.
Lesson: do not set a low rate. It attracts price sensitive students who aren't likely to treat you well and who often leave at any time when they find a better offer. A low rate makes you look inferior as a tutor.
Analyzing Your Tutoring Market
The first step in setting the right tutoring rate is to gain an understanding of what your competitors are charging and what your target audience is willing to pay. While that doesn't automatically mean you should charge the same as your competitors, it gives you a good starting point.
Step 1: Make a list of your competitors
If you tutor in person, then start out by researching other tutors for your subjects in your area. If you teach online, research other online tutors who cover your subjects.
Record all competing tutors in the Excel file and fill in as much detail as you can under each column.
Step 2: List all the details for your competitors
Comparing the rates other tutors charge isn't enough. You need to consider a wider range of factors such as experience, subjects taught, location, home-visits or studio only, etc. The more information you have on your competitors, the easier it will be to set the right rate for you. Even if two tutors charge the same rate, one may appear very expensive and the other may appear as a bargain. So don't be tricked into thinking that the rate is the only thing potential students will consider.
In the downloadable Excel file, you will notice we have provided a number of columns for different information you could enter for each tutor. Fill in as much as you can.
Step 3: Work out the price range for your competitors
Now that you have all the information on your competitors, you can work out the price range for your area. Remember that a lot of tutors will be charging the wrong rate so don't be surprised if a lot of tutors charge the same as each other. Often when a tutor doesn't know what rate to charge they will simply copy a competitor. Don't make the same mistake!
The downloadable Excel file will do all this work for you and provide you with useful details on the price range of your competitors.
Once you know the range of prices other tutors are charging for the same subjects and students you want to tutor, you can move on to the next step.
Finding Your Position in the Market
Once you have figured out the range of prices your competing tutors are charging, you can start to figure out where you fit into that picture. To understand how this works, imagine you want to buy a new car. You have a massive range of options depending on what you want in a car.
For example, here are a few very different options:
- A convertible Ferrari at over $300k
- A convertible Porsche at over $100k
- A 4WD Porsche at $80k
- A 4WD Toyota at $40k
- A Toyota sedan at $15k
- A second hand Ford sedan at $2k
All of the above are cars, but the prices are dramatically different between the options. If you wanted a 4WD, the Porsche and the Toyota are both 4WDs, but the two couldn't be any further apart in price or in features. Likewise, the 4WD Toyota and the Toyota sedan are both Toyota, but very different cars. There is no one price range that works for all cars. Every car has a different price because every car offers something different.
Bringing this example back to tutoring rates, it should be clear why there is no standard rate for tutors. There is no one price range for tutors because every tutor offers something different. A native speaking Spanish tutor should charge a different rate to a Spanish tutor who learned Spanish as a second language. A math tutor teaching college students should charge differently to a math tutor teaching 8 year olds.
It's perfectly clear in the photo above that the three cars are worth very different amounts. It's also clear that each car appeals to a different type of person: the rusted heap appeals to somebody who likes to do up old cars, the SUV appeals to a family and the super-car appeals to somebody with too much money. 🙂
But should also be clear by now that it's exactly the same with tutors. Every tutor has a different target audience and needs to set a different rate. While some people would never in their wildest dreams pay $300k for a car, many people do. Likewise, some people would never pay $100 per hour for a tutor while there are plenty of tutors charging far more with a full schedule.
Another way to look at this is that people would go crazy if a brand new Ferrari suddenly sold for $20k just as people would go crazy if a PhD tutor at Harvard suddenly changed his rate down to $10 per hour.
All of the above comparisons are important because it explains how important it is to compare apples with apples. If you start comparing yourself to tutors who cover different subjects or teach different students, you're going to run into problems. You can't compare a Ferarri to a Toyota SUV, so don't do the same with your tutoring rates.
So our first step is to find out which tutors are closest to you in what they offer.
Step 4: Rank your competitors
Start with the subjects you teach and the year level if applicable. Look through your list of competing tutors and highlight the tutors who teach the same subjects as you.
Now we want to narrow your list down to three tutors:
- A 'premium' tutor
- A mid level tutor
- A 'bargain' tutor
The easy way to do this is to simply look at the price range and write down the tutor with the highest rate, the tutor in the middle of the range and the tutor with the lowest rate. Go through your list and write down the three tutors based solely on their rates.
But that's only half the picture. We also want to consider what extra features those tutors offer along with their rates. Here are some examples of what we call 'premium' features tutors can offer:
- Email support outside of scheduled lessons
- Skype support
- Home visits
- Custom assignments outside of standard curriculum
- Video lessons on their website
- Articles, lessons or exercises on their website
- Social media support
Go through your list again and identify the tutor who offers the most extra features. Mark down their rate.
Go through your list again and identify the tutor who doesn't appear to offer any 'premium' features. Mark down their rate.
Finally, try to identify the teacher in the mid-range in terms of extra features they offer. Mark down their rate.
You might find that the first three tutors you write down are identical to the second group of tutors. But more likely you will notice differences. While the first three tutors you write down (based purely on rate) are important to consider, the second three tutors are far more important when it comes to setting your rates.
Step 5: Compare yourself to your competitors
Now that you have identified a premium, mid-range and bargain tutor, you can compare what you will offer students to what those tutors offer. This is how you identify the correct rate to charge for your tutoring service.
Let's say you offer more support and extra features than the premium tutor you identified, that means you can easily charge the same rate or higher and students will find it reasonable. On the other hand, if you don't offer any extra support or features, it's going to be hard to price yourself above the mid-range tutor and you're more likely to be closer to the bargain tutor.
Be honest with yourself and work out where you stand compared to the three tutors you identified.
Setting a Fair Tutoring Rate
Once you have identified where in the range you sit compared to your competing tutors, you can decide what rate is fair for you and your students. The above steps help you work out the rough range that is appropriate for your area and level of demand. But each tutor is different so even if you find another tutor offering the same service as you, that doesn't automatically mean you should charge the same rate.
Step 6: Set a rate that is fair for you
You now know the range of prices for your competing tutors and you know where you stand in that range. Now you need to decide on a rate that you feel confident in. You need to feel like it's a fair rate for you as well as fair to your students.
Let's say you compare yourself to the 'premium' tutor you identified earlier and it turns out you offer much more than them in terms of support and features. In that case you deserve a higher rate. You might feel a bit reluctant to charge a higher rate, but if you feel like you will give students excellent quality tuition, then you deserve that rate.
As a general rule, we recommend tutors try to aim for the higher range of prices. You don't want to be the 'bargain' tutor for reasons we explained at the start of this guide. The best case scenario is when the public perceive you to be the best tutor available. You can't be seen as the best if your rate is so low it raises suspicions.
Lesson: the reason we emphasize setting a rate that is fair for you is because you deserve a fair rate. There will always be some people out there who feel your rate is too high, regardless of whether it's $10 or $100. So set a rate that is fair for you and you will never run into trouble.
Stand by Your Rate
The last advice we have for this guide is to stick by your rate. Once you have gone through the work in identifying a fair rate for your services, never allow potential students to haggle your rate down. We will explain this in a future guide as it's an important topic.
If a potential student wants to haggle your rate down, it means they don't think you're worth it as a tutor. That's an early warning sign that the student/parent could be a nightmare to deal with later on.
Even if your rate is higher than any other tutor you're competing with, if you have decided that it's a fair rate, stick to it. Don't let anybody talk you into believing that you're not worth the rate you feel is fair.
Let's look at a real world case study so you can see how easy it is to research your competitors. In this case study a tutor called Anne wants to start tutoring Japanese in person. She lives in Sydney, Australia in the suburb of Chatswood.
Let's walk through the above steps with Anne.
Step 1: Make a list of your competitors
As Anne is in Australia, she finds an online tutor directory specifically for Australian tutors. She loads up tutorfinder.com.au and searches for Japenese tutors in Sydney. Here is what she finds:
Several hundred Japanese tutors are listed for Sydney - which shouldn't be a surprise as it's a big city.
Anne clicks the 'Rate' heading to sort listings by their rate and finds the lowest rate is $10 per hour and the highest rate is $100 per hour. This is exactly why you should ignore advice saying you should charge the typical rate of X because there is no typical rate. A massive range of rates is a good sign as we will see later on.
Fortunately, not all these tutors are direct competitors with Anne as many will be too far away from her suburb. So Anne searches for tutors who only live in the suburb of Chatswood. Here is what she finds:
Now the list of competitors has been narrowed down to 12 in her suburb. You can see that the range of rates is still quite wide from $20 all the way up to $40. Anne enters all of the above tutors in her Excel file as shown below:
Because Anne will only be tutoring in Chatswood and only tutors Japanese, she doesn't fill in what other areas or subjects her competing tutors cover. If she taught multiple subjects or in multiple areas, it would be a good idea to fill all this information in.
Step 2: List all the details of your competitors
Anne has some basic information, but now it's time to find out as much as she can about each tutor. Understanding why one teacher can charge $40 and another only charges $20 will make it very clear to Anne what rate will be right for her.
Anne looks through the profile of each tutor listed above and fills in information covered in the columns in the Excel file. She looks through each tutor's website (when they list one) and notes down what she finds.
Here is the updated Excel file with the details filled in:
With this extra information it quickly becomes clear why some tutors are charging higher rates than others. Anne can see that the tutors charging $40 have a website, use social media, offer email support and give home visits. On the other hand the $20 tutors don't offer any of those features.
While the $20 tutors may be just as good when it comes to teaching, the benefits they offer play a massive role in how much they earn.
Step 3: Work out a price range for your competitors
Anne was lucky as the tutor directory she used could easily rank tutors by price. If the directory you use to research your competitors doesn't have that feature, once you enter their details in your Excel file you will easily be able to work out the price range.
Anne knows the price range for her competitors is $20-40.
Step 4: Rank Your Competitors
Anne has already ranked her competitors by price in her Excel file, but it's also important to look at the features. If you notice some tutors offer more features for the same price as others, rearrange their order as you see fit.
To find out what the 'Premium', 'Mid-range' and 'Bargain' rates are, she clicks the 'Price Range' tab in the Excel file. The numbers are automatically calculated for her as shown below:
While Anne's situation was pretty clear, this simple calculation can make it far easier to work out the right range for your rate. Anne can now start comparing herself to her competitors.
Step 5: Compare Yourself to Your Competitors
Anne starts out by looking at what benefits she offers that other tutors do not. For example, no other tutor in Anne's list offers Skype lessons. Anne plans on offering Skype lessons and email support for students outside of scheduled lesson times. She also plans on building a website with useful articles, tips and videos to give her students extra help. These are all benefits that her competitors aren't offering.
It quickly becomes clear to Anne that she offers students far more than the other tutors. She even offers more than the tutors charging $40. This is important as it will give Anne confidence in whatever rate she sets.
If Anne didn't offer as much as some tutors, she would easily be able to compare herself to other similar tutors to work out a fair rate.
Step 6: Set a rate that is fair for you
Anne knows that she will be offering students far more than what her competitors are offering. She can see that she already offers more benefits than all of the tutors. This means she can price herself above the other tutors if she wants to.
Anne sets her rate at $50 because she wants to stand out as the 'premium' tutor in her area. By offering excellent benefits to students that other tutors aren't offering, she is justified in charging a higher rate.
Anne also knows that $50 is still a very affordable rate when she considers the rates charged across Sydney as a whole. Almost half of the tutors from other suburbs were charging way above $50 with some all the way up to $100. So Anne knows that there will be potential students out there willing to pay her rate.
The most important point is that Anne feels her rate is fair. This is important because if a potential student ever tries to haggle her price down or say she's too expensive, she can explain that she offers more than the other tutors and other tutors in other areas of Sydney charge far higher.
The research she has put in will protect her in the future.
How Much to Charge for Tutoring Summary
How much to charge for tutoring depends on quite a few factors. If you have gone through all the steps above, you can see how much information you need to take in to find the right rate for your tutoring service.
You're still going to hear other tutors say things like "you should charge $30" or "$30 is way too much", but now you know why those statements are misguided. The majority of tutors don't set their rates properly and unfortunately that means a lot of tutors are missing out on income they deserve. Don't be one of those tutors - take your time to set your rate right.
Have a Question?
Every situation is different so if you've experienced issues with your rate or you feel stuck even after walking through the above steps, we can help. Have a look through the Q&A section to see if somebody else has asked about the issue you're having and if not, ask us and we'll help you out.