Different Types of Billing Models and The Pros and Cons of Each

You’ve got a general concept for your online teaching business. Some of the biggest questions remaining revolve around pricing and billing. How will you price your lessons, how will you bill students, and how will they pay you? Today we’re going to look at different billing models and their pros and cons, broken down into how you can use them to collect payment from students. The goal is to identify the model that most cohesively fits into your business and requires the least effort from you and your students.

One-time charge billing

Let’s say a teacher has an online course, and wants to sell it for $10. A customer pays one time, has access to the course, and that’s it. Hopefully, the teacher retains their email address to inform them of future products or offers. Overall, however, it’s a straight forward and simple transaction.

When working with a site like Udemy or Lynda, customers will pay via the site’s payment portal and you will receive your portion of the sale. Check out this article for more. For those selling via their own website, there are a few different approaches to closing the sale.

  • Accept payment via PayPal. More info on PayPal can be found below in ‘Recurring Billing.’ PayPal links to your bank account, and can also hold money for you via its own
  • Set up an online store. Ecwid is a great platform for this. It’s simple to use and setup, and allows customers to pay right there. You receive a notification when a sale happens, and can follow up with contact and deliverables. Not great for recurring billing.
  • One-off billing also works for general lessons and instructions, particularly If you sell lessons by group or topic, instead of on an ongoing or as-needed basis. For instance: a teacher offers a course on the fundamentals of starting a business. It is comprised of ten one hour audio lessons along with PDF documents corresponding to each, delivered once per week. Throughout the course, the teacher and student interact via Skype for Q+A sessions, and to discuss the student’s progress.

Fixed Recurring billing

In every possible circumstance, your aim as an online teacher should be to have students sign up for recurring billing. That way, you’re getting paid each month without any hassle.

  • PaySimple and Cayan allow online teachers to accept credit card payments through their website. This is great for recurring billing. If your student attends a lesson once per week, and you bill them once per month, they can opt to have a recurring payment setup. If not, they can pay once per month on their own.
  • PayPal is a strong option as well. It allows for easy transfers of money from student to teacher. PayPal allows businesses to set up invoicing and recurring payments, and provides instant receipts for all sales transactions. The con here is that PayPal does take a cut of the sale, either from you or the customer depending on how you request or make payments.

“Freemium” model

This is a popular pricing model for streamlined products and services. A popular example is Wix. Setting up a website on is free and incredibly simple. But to link it to your desired domain (without having to follow it with .wix.com, and without Wix adds appearing on the site) costs money. Adding additional features, more storage space, and upgrades is how the company is making a profit. The basic service is free, everything else costs money. They’re betting that a enough users will opt for the premium services that they’ll make a strong return. For those who don’t, hey, at least they’re having a positive experience using the service and broadcasting Wix ads out to anyone clicking on their site.

If you’re online teaching platform is built around customers obtaining media from you in order to learn, this can be a good way to generate some business. Perhaps you offer a set of blog articles on your site for free, then charge for a downloadable audiobook that rounds out the knowledge. Or the site itself contains information to get visitors interested in the paid service, then hooks them with a strong sales funnel or pitch somewhere on the site. After signing up with a credit card or PayPal, they have access to the members-only area of the site where the real value is.

The downside here is that this setup only works for certain types of online instructors. This isn’t the best approach for those working directly with students.

Volume and Tiered pricing

As on online teacher, you probably won’t use volume or tiered pricing. Volume and tiered pricing is more useful for those selling physical products. Basically, the formula is the general concept of the more you buy, the cheaper it gets. There are two scenarios where I can envision either of these methods being applicable.

  • if you create online courses, and you develop enough of them to sell in bulk. Or, you have multiple levels of courses, such as a beginner, intermediate, and expert level course.
  • If you offer some type of a bulk discount, such as “buy ten lessons, get one free.”

The pro of using volume or tiered pricing lies in the fact that it encourages customers, whether B2B or the public, to purchase more of something in order to get a better deal. In that way, it helps to scale a product by pushing more of it out the door without upping the seller’s cost per unit. More units out the door equals increased production and more money coming in.

On the con side, it eats into the seller’s profitability on each unit sold.

Seat-based model

The seat-based model is another rarity for online teachers. It allows the seller to charge based on how much the client is using the product or service. This can be discouraging and often confusing for students, who typically prefer to know upfront how much their course or lesson is going to cost.

The one scenario where it could be productive is if your teaching business takes the angle of a consultant. Picture this: You’ve decided to offer an online consulting program for entrepreneurs growing a business in your field, and plan to work live with students via Skype. The program will include interactive feedback, one-on-one problem solving, and direct communication with each student, based on their needs and budget. As the instructor/mentor, you only have so much time available, so pricing will be based on how in-depth the student’s needs are (and ultimately, how much time it takes you compared to the total time you have available). Basically, how many ‘seats’ they will occupy at the table.

Finding what’s best for you

Depending on the type of teaching you are doing, either ‘fixed recurring’ or ‘one time charge’ are likely the best option for starting an online teaching business. As your teaching business grows, you may need to adapt your billing model to keep things easy and organized. The more streamlined the process, the better. Customers don’t like to receive repeated notices of payment due any more than you like to send them. Recurring billing, or options that allow the customer to pay up front, are the best way to go. If you’re willing to pay for a SaaS (software as a service) program to help you set up recurring payments, check out services such as Recurly – they offer multiple billing models.

Ray is the founder and creator of Teacher Indie. He is an award-winning entrepreneur who has created online education businesses that have appeared in publications such as Entrepreneur Magazine, Inc Magazine, Buzzfeed, The Boston Globe and many others. His goal is to help teachers from around the world get online and gain the financial independence they deserve.

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