Are Your Classes Profitable?
It’s an easy question and one that is very important.
But, actually for a lot of people it’s not easy to answer
Collating Class revenue, venue costs and staff costs allows you to work this out, but it needs to be done class by class.
This is important because many franchisees don’t realise the large increase in profit margin they can make with an additional student at each class they run and that the last 2 or 3 spaces on a class are the real ‘Jam’ rather than ‘Bread and Butter’
We calculate this automatically for our franchise networks
See how we calculate this for them to see if it can help you.
Calculating the profitability of classes is quite straightforward on an individual basis. We need to know these three main figures for any given time period
- The revenue from the people or children attending
- The teacher or staff costs
- The Venue Costs
With those three figures, determining whether a class is profitable or not is easy.
But how do we get those figures and how do we do it for a whole network?
The Class Revenue
Revenue, surprisingly, can be calculated in a number of different ways. The difficulty comes from the fact that the money generally arrives at a different time to the classes, so you cannot just use the money received in the bank account.
When a student is booked onto a class, we allocate the appropriate amount of the booking to each session (or lesson) so that we know exactly how much revenue is attributable to each lesson. This means that for all lessons we know how much to use in all calculations
Teacher or Staff costs
Depending on how your teacher or staff costs work, you will need to do this in different ways.
The simplest is that the cost for any given teacher is the same for every class they take. If that is so, then you can just set the price on a teacher’s record and use that for your calculations.
However if the teacher’s costs vary from class to class you will want to set them at a class level.
Adding a further complication if a replacement teacher takes one of the classes, does a different cost apply?
To manage this scenario, we also copy the teacher cost to each session, so if a different teacher covers a class, we know what the actual staff cost is for each lesson.
Not surprisingly these are very similar to the Teacher Costs in the way we handle them.
The venue costs can either be set on the Venue (if it’s the same amount for each class) or at the class level.
So, once we have the above figures, we can calculate the profitability of each class.
Not only that, we can show how much extra profit a franchisee can make from an extra student at each class, showing them that once they have reached break even, every additional student is pure ‘Jam’.