Driving Schools price war

Over the past few months, Bournemouth and Poole has become flooded with new driving schools. All of which are attempting to break into the market by offering ridiculously low prices. Since I've been running Impact I've noticed this happen every single year towards the end of the summer months (I'd love to know if this is the case all around the country). The sad truth is most of these instructors don't make it past Christmas, as low prices is NOT the way to break into the driving school market.

As the owner of a driving school that trains and franchises new instructors I feel that the main downfall is a lack of business sense, which should ultimately be taught alongside the instructor training. Most new instructors decide to charge these low prices for their driving lessons thinking to themselves "I'd be happy to make £15 per hour", but this is just turnover and not profit.

Lets look at the best case scenario and say the instructor gets themselves well known quite quickly and are very soon doing 25 hours per week (I'd like to add in an overcrowded market this is incredibly unlikely).

The real costings will be as follows -

Lesson income per hour £15
Fuel (most do take this into consideration but consider the current high prices) -£3
Proportion of car HP/Lease (say that cost £200 per month @ 100 hours per month) -£2
Proportion of Advertising (as a starter company you need to get yourself known) -£1
Proportion of servicing, tax, MOT(if necessary)  and Insurance -£1

So that means we're earning £8 per hour, which is reasonable, however we also need to consider travelling time between lessons. With good diary management, and assuming all your pupils are in the same area, this can be kept down to 15 minutes per pupil. In your first year of business, you'll probably have to have a large catchment area and a relatively disorganised diary, meaning 30 minutes per pupil. So now your earning £8 for one and a half hours work, so now we're down to just under £5.50 per hour. If we multiply this by the 100 hours per month that's £550 a month which makes £6,600 per year. If you worked a full week on minimum wage you'd make more.

I'm afraid there's also a lot of costs I've not yet included, both in time and money:

• Income tax (which is not a lot on your low income!)
• National Insurance
• Preparing accounts and tax returns, or paying an accountant to do so
• Taking bookings from new pupils (done properly this should take half an hour per pupil)
• Sometimes booking tests for pupils
• A severely increased phone bill
• Spending time discussing your pupil's other driving issues (eg theory test, licencing etc)
• Reduced income from cancellations by pupils (can be reduced with good business training)
• No income during holidays (if you can afford one)
• Car cleaning/valeting
• Teaching materials

To become a recognized, reputable driving instructor who gets the majority of new pupils through recommendations, these are all things that you will be doing.

You would have to think to yourself is all of this worth £6,600 per year. You may also think that it will only be for a while and then I can put my prices up, but it's not that easy, bearing in mind to make significant profit you will have to make some quick dramatic price rises. Should you just increase the price for new pupils, remember where your pupils come from -  if a pupil was recommended to you, and their friend is paying £15 per hour, they will be very upset if they then have to pay £20 per hour. You will also have varying prices for different pupils, you will realise that when you look at your main pupil demographic (17-20 year olds in one or two towns), a lot of them will meet (school, social and sporting events, ETC) and when they discover that some are paying less than others, this won't do your reputation any good. If you decide to increase all prices at once, which I personally think is a better idea it has to be done very gradually, maybe a couple of pounds over the course of a year. I needn't say how a pupil would feel if their price increases from £15 to £20 in the space of a few months, you would have to be an unbelievably incredible instructor to keep that pupil.

I don't want to scare people off starting in the industry, as done right it can be a wonderful, profitable career, and if your capable of passing the very difficult DSA examinations, you're obviously a smart and capable person, as I mentioned I feel all that is lacking is the business training.

So what is the best way to start out as a driving instructor? It takes an incredibly shrewd and clear thinking business mind to start a business independently. Also it takes either a lot of time or cash, but if this is what you decide, price should not be a compromise, think of something different you can give pupils to provide them with a better service than other instructor's. Alternatively you can sign up with a driving instructor franchise scheme, this would mean for your franchise fee the company would pay for advertising, a car, insurance, repairs, tax and MOT, you would also be safe in the knowledge that you would have a reasonable amount of work right from the start without having to charge low prices. This will take away almost all of the risk in your first year, if you choose a local company, the franchise should not be astronomically high and they would have a vested interest in you being successful in your first year, they should provide the business training required to assist you in making your business profitable, with assistance with diary planning, dealing with pupils, producing accounts and tax returns, understanding the roads and traffic in the area you are working in, telling you good areas for manoeuvres, providing CPD and of course, supplying you with pupils.

I'd love to hear the opinions of other ADIs, PDIs and people looking at driving instruction as a career about these points.

Andrew Dickins ADI