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The issues with ‘Mates Rates’

04 Sep

Hi There,

Thank you for reading my blogs so far and hope you find them useful.

In this blog i’d like to share with people my thoughts on ‘mates rates’ and why if you’re a business owner you should think carefully about whether you should be offering them.

mates-rates2ab

From time to time in both my covers band and guitar teaching business’s, I’ll sometimes get asked ‘what are your mates rates’, ‘Do you do mates rates’, ‘do i get special rates for being such a good friend!’

When i started off both business’s I assumed this was the norm and offered reductions in prices for both business’s. I’ve come to realise that the only time mates rates are acceptable is in an exchange of services. So for example I’m providing cheaper rates for my wedding band in exchange for slightly cheaper rates for website design. This way both business’s aren’t affected financially + loss of time.

So some examples to why Mates rates shouldn’t be offered:

If my guitar lessons were £30 for 45 minutes and I taught on average 20 lessons a week = £600 x 4 = £2400 per month x12 = £28,800 per year

If I were to have for example 5 mates as pupils offering £20 per lesson and they were having 1 lesson a week that would equate to £550 a week , £2200 a month and £26,400 a year. So essentially I’ve taken a pay cut of £2400 within the year if I were to go down this route.

So thoughts:

  • As any business owner knows there is a fair amount of risk in running a business so anything that can cause a reduction in income is not a good thing
  • Some people asking for ‘mates rates’ may have full time jobs, earning a reasonable steady income that can easily afford your prices, so by asking for ‘mates rates’ they are actually doing the opposite of being a mate! This is because if they were a good mate they would insist on paying full prices as they’ll not want to see you take a pay cut
  • ‘Mates rates’ do not occur in standard 9-5 jobs. So for example if your mate was your boss would you be willing to take a pay cut?!

So for my 2nd business (covers band business playing special occasions such as 30th, 60th parties and weddings) friends will be paying a lump sum of money for a very special occasion.

Say if for example I charged a friend £800 for a wedding instead of a standard price of £1200. Based on market research £1200 seems to be fairly standard for a 4/5 piece wedding band.

So say if we did 50 gigs a year @ £1200 = £60k

If 20 of these were offered at mates rates = (800 x 20) + (1200 x 30) = £52k

That means the band has missed out on £8K.

In the covers band business there are a lot of costs that many people booking will not be aware of

£1200 will take into account rehearsal fees of around £200, band payments £375, P.A hire £250, Van hire £50, website, business cards, insurance etc etc £75)

As you can see from the above costs if we were to offer £800 we’d actually make a loss on the gig.

So conclusions:

  • If you wanna be a real mate – pay the full prices 🙂

Hope you’ve found this blog useful – more guitar related posts next!

Many thanks

James

 
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Posted by on September 4, 2013 in Business

 

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