Setting a Price

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By Larry Duggins

Sometimes, I simply cruise through life assuming that everybody knows what I know. The other day, I was in a meeting with two of the Missional Wisdom Foundation’s smart young people, and one asked how to set a price for a class that she is teaching. I kind of cocked my head, thinking “Well, that’s really easy,” and then caught myself. These two have not run their own businesses (yet!), so I slowed down and explained the process step by step. They both caught on very quickly, and told me that the explanation had been so useful to them that I should write it down. So here I am. 

Setting a price for your work is an uncomfortable thing, especially for church folks who think everything the church does should be free. That is a throwback to a time when everyone who served a church expected to be supported by tithes and offerings, which is a mindset that is simply not holding up well in today’s world. In order to provide access to expert teaching or to encourage alternative Christian communities to form around work, school, kids and affinities, it may be necessary to charge a fee in order to pay the teacher or support the team facilitating the community. Paul made lots of tents, and charged for them in order to support his ministry. There is nothing “unclean” or unChristian about collecting money to support a ministry.

The first part of pricing a class or activity is knowing how much you cost. It is likely that somebody is paying your salary, but, even if that is not the case, your time costs money. Let’s imagine that you make $40,000 per year plus a $10,000 housing allowance, either through a salary or as a proxy for the salary you would earn if you were in a traditional job. Your employer likely pays employment taxes and Medicare taxes for you, so multiply your base salary by 25% to take those costs into account. Then add any additional funds you receive like a housing allowance or health benefits, and add them all together to estimate the total cost of your employment. So in our example, you add your $40,000 salary plus $10,000 in employer costs (40,000*0.25) plus $10,000 in housing allowance for a total annual cost of $60,000. You then divide that number by 50 work weeks in a year and by 40 hours per work week to yield an hourly rate of $30 ($60,000/50/40). That means that at the very minimum, your class or activity has to generate at least $30 for every hour you teach just to break even. Of course, if there is a charge for the room or for refreshments or materials, you need to add that too, not to mention the fact that it would be nice for the class to generate a little extra money to be used in your other ministries. Say you were teaching a 4 hour spiritual formation retreat for 10 people in a room that costs you $50 per hour and that includes an art reflection that requires $10 in supplies for each person. You would need to charge $120 for your time (4 hours times $30) plus $200 for the room (4 hours times $50) plus $100 for the supplies (10 people times $10) for a total of $420 or $42 per person just to break even. 

And that analysis does not take into account the time you spend in preparation for the class. If the class is one that you developed particularly for one group, the time you spend in development also needs to be reflected in your price. Using the example above, imagine that the group who asked you to teach wants the formation activities to all focus on the cross and flame symbol of the UMC, and that you do not expect that work to yield a class that you will teach again. If it takes you 10 hours to prepare for the class, then your price must increase by $300 (10 hours times $30/hr) for a total of $720 or $72 per person. If your development work yields a class you will teach again, spread that development cost over the number of times you expect to teach the class over the next year.

To carry the example forward, if my break even cost is $72 per person for the 4 hour retreat, I should round the price up to generate some additional funds to support my ministry. As a rule of thumb, I begin by doubling my break even cost to establish a price, so my charge would be $144 per person, which I would round up to $150. That calculation takes me to the second part of my pricing exercise, which is to research what others are charging for similar classes or activities. You can find prices to compare to by doing internet searches, by looking at other activities that your church or ministry have sponsored, and by checking with friends or acquaintances who do similar things. Don’t limit yourself to comparisons within churches or ministries: if you are offering yoga and prayer classes, look into the pricing for classes at local commercial yoga studios. Remember to take into account the relative experience and notoriety of the teacher, the types of space involved, and other factors which might push the price up or down. To keep with our example, if three other good teachers in your area are teaching customized 4 hour retreats for $125/person, then your $150/person price is too high. The “art” of pricing is finding a price that people perceive as fair and that will appropriately compensate you and your ministry for your time and energy. Remember that “breaking even” does not generate funds to sustain your ministry—you need to include funds in excess of your cost to do that. Include the non-monetary benefits of your teaching, the critical aspects of disciple making and spiritual growth, in your calculations, but do not allow those important non-monetary benefits to push you into pricing that does not support your work.

Pricing is a balancing act with several variables. Approached both prayerfully and economically, it is an important component of establishing a fruitful and sustainable ministry.