.jpeg)
We come across performing arts school billing in different ways, and oftentimes we see debates on social media, conferences or casual conversations, about which billing model is best. With multiple options available, from term billing (every few months) to monthly billing (flat or per lessons), it can be overwhelming for schools to decide which model to implement. It is also not easy at all to experiment and “try" different models.
Through years of experience running a large music school myself (1400 students, multi-million $ in yearly revenue, and growing, as of end of 2023), discussions with hundreds of music schools over the years who we’ve helped migrate from various software to opus1.io, and seeing among our own customers which schools operate efficiently, grow and scale, and which ones don’t; I’ve come to the conclusion that Monthly billing is overall much better to alternatives. Here are my thoughts on the topic.
1. The Monthly Habit
Think about it. Most of our daily-life utilities and recurring payments like rent, mortgage, gym memberships, and utility bills are charged monthly. People are paid once or twice a month usually (depending on which country you live in), and even when paid bi-weekly or twice a month, most people usually budget their income and expenses monthly. This model is deeply ingrained in consumers' habits, making monthly payments natural and expected. Why bill differently for music lessons?
2. Lower Enrollment Hurdles
First impressions matter. When potential students are deciding on a music school, the thought of a large upfront payment can be intimidating. Keep in mind that when parents sign up their kids, they don’t know the school and teacher very well yet (they may have had one trial, and that’s it). They are much more likely to sign up if they only commit for month-to-month, rather than a larger amount and period of time upfront.
3. The Fear of Commitment
It's a universal truth; nobody likes to feel trapped or “locked-in”. By charging monthly, you're offering flexibility, which means customers are less likely to feel like they're locked long term into a service. While it might be tempting to business owners to attempt to “lock-in” customers, it’s just not a good business practice that customers appreciate. They will be more likely to be suspicious and reluctant to sign-up. The best way to retain customers is to provide them great value, not constraints. Leave the shady practices to your competitors, focus on offering more value and flexibility to your customers and you will outgrow the competition quickly.
4. The Psychology of Continuation
With semester / term billing, every few months, students face the decision of whether to re-enroll or not. This frequent re-evaluation and re-commitment, increases the likelihood of dropouts, or simply “not renewing". On the contrary, monthly billing keeps this decision at bay, ensuring higher retention rates long term. Customers never ask themselves if they want to continue, they continue automatically, until they explicitly need to stop and withdraw from lessons.
5. Maximizing Revenue
Often, term-billed services come with the expectation of discounts. “If I pay for 4 or 6 months upfront, what is my discount?” - Learning music takes years, students will naturally stay for years. If your music school boasts top-notch instructors, you essentially have in business terms a “sticky product”; there’s no need to provide unnecessary discounts and leave revenue on the table. Monthly billing ensures you're not undercutting your worth, leading to the highest revenue potential.
Additionally, I often hear business owners say: "If I charge for a whole term I am getting more cashflow upfront". Well yes, BUT if you have to provide a discount for that "up-front money", which is usually going to be 10-25%, you are essentially "borrowing" money against your business at the most horribly high rate.
If you need cashflow, that are ways to get business loans at MUCH lower rates.
6. The Inevitability of Student Churn
Regardless of the billing cycle, life events might prompt students to halt their lessons. Whether it’s due to unforeseen circumstances like injuries, moving away, or simple loss of interest; term contracts don’t guarantee continuity. In such cases, schools usually find themselves dealing with angry parents demanding refunds on a pro-rata basis, regardless of what contract they signed or commitment they initially made. And yes, it is unfair, but if you don’t provide refunds in these cases you end up dealing with time consuming arguments, headaches, costly and damaging credit card chargebacks, bad reviews online etc.
Essentially: “Good luck enforcing these contracts”. Locking-in students in my school an extra 20-30 days when we used to enforce our 30-day withdrawal policy, was by far the single highest generator of bad yelp/google reviews for my business (slightly different topic for another blog post, but you get the point).
This also affects your own peace of mind and sanity as a business owner, and increases the burden on your administrative staff. No one likes to enforce rules that anger customers. Guess which schools see the most churn in frontdesk / admin staff?
7. The Technological Advantage:
A significant reason schools opt for term billing is the administrative ease. Dealing with invoicing and payments can be tedious, especially when done manually, which most schools end up doing when they don't have the right software. However, this concern can be easily mitigated with the right software that handles monthly billing seamlessly (opus1.io handles automated invoicing, payment, receipts, discounts etc. for private and group music lessons).
The Sweet Spot of Monthly Billing:
Drawing a parallel to the Software as a Service (SaaS) industry, the combination of a monthly billing model and a high-value offering (like quality music lessons) is the golden standard. It's no wonder that investors and financial organizations value businesses with this model more than those on term contracts that require renewal on a regular basis (Here is a great podcast episode that touches on this topic - How much is your School Worth - around minute 19:20)
In light of these points, we've witnessed a shift in preference from term billing to monthly among our own clients who were initially billing in terms, especially when supported by an efficient software like opus1.io. The benefits are clear, and the results speak for themselves.
By aligning with consumer expectations and leveraging the strengths of monthly billing, music schools can optimize their operations and set the stage for long-term success and growth!