Today I stumbled upon an interesting post by a medical resident on a specialty site for medical education. She describes how she has been able to charge an obscenely high rate of $388 per hour for her tutoring services. Here are the key excerpts (typos included as written):
I started tutoring at 10 years old. I tutored for free initially. It was fun for me. I love the moments when the “light bulb goes on” in my peers. I find learning so much more interesting when other people’s welfare in addition to my own depended on how well I learned. I guess that was an early sign that medicine would appeal to me. I relish the challenge and the privilege of someone else’s well-being weighing on my shoulder. It somehow made what I do more meaningful than if I were to just do it solely for myself.
Then in 10th grade, I started charging $10/hr for tutoring AP sciences. I loved it. I was the favorite of teachers & parents, many of whom confided in me all their worries about their kids’s academic performance and future prospects. I felt that not only was I helping the student acing AP tests, but also I was somehow part of their household harmony.
I continued to tutor in college. I worked for tutoring companies at first. Ecstatic at the pay raise, $23/hr, when I saw the newspaper ad. Only to learn that I was to drive to students’ home, in Bay Area traffic, pay for gas and maintenance for my car, foot the occasional car accident bills because I was so tired and distracted trying to find new students’ houses all over Bay area.
It came down to about $5/hr of my time, way worst then when I was my own boss in high school, when it was a solid $10/hr plus I had free rides, free food, and made my own schedule. The worst thing in working for others (tutoring companies) was to learn that my students paid my boss $65/hr while I got $5/hr.
Then I said to myself, “screw this. I’m not going to let some talker business man eat off my back when I’m doing all the hard work.” So I quit all my jobs where I was not my own boss. I put my credentials, experiences, tutoring results, student testimonials, & CV on craigslist. Before long, I was getting tutoring requests left and right at $23/hr, with students coming to where I am (so no driving, no getting lost, no parking tickets, no car accidents). I tutored the hours I wanted; I made the curriculum myself.
Shortly after my craigslist advertisement went up, I could not keep up with the demand of tutoring requests. So I said to myself, instead of working like a dog to fulfill every tutoring request, I’m going to raise my hourly rate, until I can comfortably satisfy the demand & still take care of my other responsibilities and still go out with my friends and have a life.
I continued to tutor because I love teaching and being my own boss. After Mini was born, students came straight to my house, paid me $100/hr, and were so understanding towards my role as a mother that I could put Mini in a front sleeper/carrier and tutor at the same time.
Did I say I love being my own boss?
I continued to tutor throughout medical school and into residency, as I take on more responsibilities in my medical training, & Mini demands more intellectual engagement, I had fewer & fewer hours allotted to tutoring. Yet, I still had lots of demands… more than I could fill.
So I kept increasing my hourly rate, to the peak of $420/hr while still in California. Now, I’m perfectly content with the equilibrium price of $388 for the past 2 years.
It’s an interesting read because of how she independently discovered the advantages of being a self-employed niche consultant, as described in my book. Let’s see which principles she recognized and applied.
- Scale: It doesn’t have to grow too big. Actually, being too big becomes a hassle to manage. Instead of doing the work that was initially interesting, the owner eventually transitions into managing employees, inventory, and crunching numbers as an accountant.
- Exit strategy: Going along with the previous point, she started out with a firm a goal for her earnings – to supplement her income from her day job, provide some welcome distraction, monetize a hobby, and not work too many hours at the same time.
- Price adjustment: If there’s anything you should take away from this article, this is the point. Many times business owners starting out are unsure of how to price. One way is to price at the market median (look around at competitor prices), provide exceptional quality, and titrate the price upwards as the number of customers grow. This is especially key if you don’t want to scale up and up such that the company exceeds the ability of one person to manage.
- Focus on your expertise: Her business was in specialty tutoring. While anyone can bill themselves as a tutor, she had exceptional and unique credentials that she could leverage into higher income. Imagine how much you could earn as a dedicated nanny+tutor to the children of the privileged wealthy, if you had a degree in medicine from an Ivy League plus a masters in early childhood education!
As a side note, the UC system is taking the price adjustment technique to heart. They have a simultaneous problem of a revenue shortfall and too many international and out of state students rousing the ire of Californians. They are implementing the best solution for this, which is to raise prices for those students, maximizing revenue and decreasing their numbers at the same time. It’s a win win for the system!