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Jessica, if you are effectively providing training then you should confidently be offering a lower rate than if you were seeking to hire people who required no supervision (leaving aside the obvious quality control issues). On the other hand, once these teachers have been with you for a year or two they will be better trained than they are now, and of course a pay rise will be in order. But I would take this training benefit into account when working out a rate.....

And I second John's comment about the actual take-home pay as being at best 50% of gross takings.

Hi Elissa,

So are you suggesting that, considering John's 50% comment, it is fair and acceptable to pay my instructors 50% (after taxes)? That is a lower number than I am considering, but what would be the reasons that would be unacceptable?

Hmm, well what do you mean by after taxes? I'm not up on the taxation system in the US, and there may be taxation implications about employing people which might change the formula.....

But I do think that in the circumstances you describe there are good reasons to be looking at about this figure (without knowing how tax impacts on the equations).

Well, I guess I meant take home. So if I gave my instructors 60%, but they ended up taking home 50%.

Thanks Elissa!

Just to clarify, so no one jumps to wrong conclusions here, I meant that in my in-home studio, after expenses, my take home is roughly 50%. But then, I have to pay taxes on my take-home, which are 15% self-employment, and 25% income tax. So, if I charge students $50/hr, I get $25/hr, and after paying the government my personal taxes, I end up with $12.50/hr.

I'm guessing you're going to have to pay 1/2 of Medicare tax, which will be going up soon, because you really cannot write off these teachers as private contractors, not if they have to be at the studio at set times each day.

This is pure curiosity now, John - what is the 15% self-employment you are talking about? Also, in Australia most teachers wouldn't earn enough to pay 25% in personal tax, although some would. Most would probably be paying 17% maximum and probably more like 12% (with a decent accountant) on their after-expenses income.

All self-employed workers pay a flat 15% self-employment tax. Workers who are employed pay 7.56% and their employer matches that. This tax is split among several programs: social security, medicare and medicaid.

The reason I pay 25% income tax on my work is that my wife also works. As my work is variable, every additional dollar I earn gets taxed at 25%. If you're single, you're right, the tax would be lower.

<<So are you suggesting that, considering John's 50% comment, it is fair and acceptable to pay my instructors 50% (after taxes)? That is a lower number than I am considering, but what would be the reasons that would be unacceptable?>>

This doesn't make any sense. You can't do their taxes for them, you have no idea what their net income will be after they do their taxes. People's tax rates vary tremendously depending on their exemptions, investments and total income, and if they file jointly with a spouse. You also can't pay some people more than others based on discriminatory criteria, such as if they are married or single, or if they own a home so have mortgage deductions, or any of the many things that affects their taxes.

YOu need to know what professional competitive salaries are in your area for these type of people, their taxes are none of your business. They probably aren't going to be the best or they'd be teaching in conservatories, universities, etc and they wouldn't work in a place where they just followed the instructions of the owner as to how to teach, so I think you can pay lower than the best music teachers would get, obviously. I've been self-employed and mark up my rates about double from what I consider I think a decent salary in order to compensate for the things you don't get when doing casual work -- ie, no health insurance, no vacations, no sick pay, etc. So if I thought I was worth about $75K a year for example, that's roughly $35 an hour. SO then I'd charge $70 a hour if I were getting nothing but money for that just as an independent worker. So that's another thing -- no one can say what you should pay since you'd said nothing about benefits.

At the music school I attended until a couple years ago, the teachers were very good (meaning they also might perform professionally at times, teach in universities etc) and that school now charges $50 a half hour or $95 an hour for piano lessons. This isn't a conservatory but about the closest you'd get in this city and is considered one of the best and prepares students to be professional, if they want, and to get into Juilliard, etc. Now I don't know what they pay their teachers, though. I think they charge about $60 for a half hour violin lesson in Suzuki method (not group).

Christina, I think you're taking the numbers out of context and that's why it doesn't make sense to you.

And you should also be aware that the figures you cite are quite high compared to most of the USA, including economically depressed Michigan.

Can I ask this question from another direction to clarify another possibilty for paying teachers.

What would it cost if the piano teacher paid you to rent a teaching room? You would sell your space and also take a cut of the tuition fees to cover your operating expenses and give yourself an on-going salary as "finder, scheduler and business administrator of your music teaching program". You would still need a contract commiting to the services they would provide - such as adherance to the "manual" you are creativing and signing on for a year of teaching at a time. Or, whatever stipulations work best for you.

Without you thinking of yourself as "Numero Uno" to be paid meet expenses and be paid first for your services to the teachers before you "hire" or "enlist" them, you can't guarantee that the business will function to your benefit for the long term.

Start small and make it work on small numbers - how many students do you have to have to break even? How many students can one teacher handle? At what level is each teacher able to teach well? You have a lot of probabilites the more people you add to the mix.

Could you afford to start with only yourself as the primary teacher? Could you add one new teacher at a time. You don't want to have teachers waiting in the wings whom you can not put to work soon.

Can you see any possibilities in this alternative arrangement?

And, with every business, the owner must have a plan for recognizing when he has to quit the business. At the same time, after all this work to establish it, you may decide in 5 years, with a thriving business to market it for sale with guaranteed students and teachers to a new owner. Or you might have to hire an administrator and lead teacher to oversee the business.

You have to think about what obstacles could upset the business plan.

I hope you got all that in the way I mean - not as negative things - but as empowerment so that all bases are covered in advance.

And, with the savings that you have and all the new expenses to starting, you will want to get the most for your money in every way and you will want to preserve your capital and not part with it easily in your enthusiasm.

Do you know anyone who has started a similar business?

And, please tell us about the "music store/studio marketing plan you mentioned you are going to be attending. I'm not aware of the presenter you mentioned nor what might be covered in such a class. To me the legal requirements, IRS, and state business license, insurances would be a very demanding process to get through.

Betty

This is definitely not the norm.

Betty - thank you for your comments! The best response I have for all of them is to say that all these things have been very well thought-out by not only me - but several others whom I trust and are experienced in business.

The legal business registration process is actually very straightforward and simple (for a sole proprietorship which is what this will be). The taxes and accounting part are not so easy - my father (accountant) is working with me on that aspect.

As far as my savings - I am not parting with it easily or enthusiastically, trust me.

Here is the website for the "Successful Studio Strategies" conference.

https://www.danceseminarpreview.com/

I know that not every one of Sam Beckford's strategies will be useful to me, but I am excited to learn what ones will be.

I hesitate to resurrect a thread that has pretty well spent itself, but this month's American Music Teacher has a most interesting article on running a studio and grossing (not making) $100,000/yr. Worth a read, if you're an MTNA member. If you're not, and you live in the USA, shame, shame!

Hmm, John is there any way this article can be accessed online? (paid online subscription, or similar?)

You might want to contact them via email and perhaps they could pdf you a copy.