This time I will run you through the labyrinthine world of how to pay your staff and what to pay them. I will go through your likely expenses and help you calculate what you need to make a profit and stay in your online school business.
Working out a salary and payment plan
What to pay your teachers
In the world of English language teaching, the online area I am most familiar with, good teachers don’t come cheap. At current rates (2018) native speaker ones could be getting 50 euro per hour so you can see that individual tuition is quite expensive as when you apply the 70/30 rule an hour’s tuition comes out at close to 80 euro per hour. For multi-student classes, prices can come down but probably something like 8-12 is the maximum to comfortably teach online and give individual attention.
Top class native speaker teachers living in places such as the UK, US, Ireland, etc., will demand such levels so you need to research pay levels. If they live in cheaper countries but still fit your requirements you may well be able to get lower rates. My experience is that there are plenty of clients who will pay for quality as they have specific needs, plus putting aside time to attend classes is a big burden, and they have no wish to waste their time on substandard teaching.
What I do know about, is trying to deliver a quality service, that can last a long time, and brings you reliable clients that will help to promote your business. Quality cannot come cheaply. You will have to pay well to get good teachers. I reckon that you will have to calculate something on the lines of 70/30 or possibly 60/40. That’s 30 for you – 70 for your teacher. When you have done all your calculations, you decide what you will need. Honestly, professional advice is a good idea, if you can find a friendly accountant to go through everything it will clarify a lot for you. I will list as many areas to consider as I have encountered.
There are logistical issues. Like where you pay tax. In the country your business is registered in? Or where your workers are from? There can be many countries involved. Do they get paid as self-employed and they are responsible for their own taxes? If that is the case, and they are not salaried employees, can you regard them as long-term staff? Students like to know, return to, and recommend specific teachers rather than schools. Loyal, permanent staff are a great asset to a school and using self-employed people may not be conducive to this.
It might surprise you, or maybe not, that the world of online payments is not very well regulated. People use Paypal and other methods to collect and distribute money pretending that it is for friends and family. I have found it difficult to get good legal advice on the issues mentioned above. It will take some time before these issues are clarified and operating fully legally across boundaries is comparatively straightforward. However, if you are paying your taxes and your employees/contractors are as well, you should be ok. Get professional advice, though.
The good news is that
- a decent computer,
- a reliable internet connection,
- your platform payment and
- the teacher’s costs,
- plus whatever taxes apply
are your main outgoings. Of course a professional accountancy service will most likely be necessary. You can operate from home cutting out lots of business expenses. So can your teachers.
You will need enough
- to pay for your platform and Vedamo is a superb one, affordable, top quality with great support. It can scale up as you scale up allowing you not to have to put in huge upfront costs.
- to make enough to cover for bad periods, things going wrong, enough for you to live on, and to pay yourself for all the work that goes on behind the scenes.
The best run places are the ones that are like ducks in a pond. All serene on the surface and paddling furiously under the water.
First off, the world of online teaching is a maze, a hotchpotch, and doesn’t have any discernible rules. Many “schools” offer teaching positions to all, advertise their services at low rates, and have no real quality control. They also pay low rates and offer their “services” through instant messenger platforms. Even some of the bigger players go for a one size fits all, cheap and cheerful offering and rely on quick turnover and large volumes to make a buck. In those cases, payments are low and expectations also.
If you wish to take a punt in that world, by all means do so. I can’t really help you though, as I know little enough about it.
Because your running costs are easy enough to quantify, working out your profit margin shouldn’t be too difficult but be aware that upping prices can be more problematic. Put the time and effort into this at the start so you know what levels you can charge your clients, and stay in business, without the stress of trying to increase your prices later.
As a final word on salaries, I would say that you will need quality to grow a sustainable business. I doubt if there are cheap top class teachers out there so you will probably have to pay the going rate to attract the best. I did give a few tips however in my previous blog Running an online school – Part 3 on how to get potentially excellent candidates from unusual places and also do not discount technophobes. A technophobe might be very willing to teach online because of their circumstances but nervous exactly because of the technology. If you recruit them, train them and look after them, they may very well be the best employees you have as they won’t wish to learn a new technology.