Students want to know what they are buying and what they will get for their money. If you tell them that you charge $25/hour, they will understand what they must pay you but nothing else. How many hours will they need? How often will they meet you? What happens after the first hour?
If sell your services for $25/hour, you will get $25. If you want another $25, you will need to sell your services again, either to the same student or to a new student. That's a lot of work for $25.
You can turn your service into a product by creating a package. Instead of charging $25/hour for "tutoring," charge $200 for an "eight-week learning program that includes eight 60-minute, one-to-one, weekly tutoring sessions."
If you make your service into a product, you will make more money, spend less time on planning, and grow your business more quickly. More importantly, your students will know exactly what they are getting for their money. They will be willing to pay you more because you are offering something of value that they can clearly understand. They will also be more willing to pay you in advance, which will keep them committed to learning and attending sessions.
Determining pricing is never easy, and determining pricing for small groups can be especially challenging. There can be hidden costs with small groups, including printing/copying costs for materials, additional planning time, additional time spent grading student assignments, and time spent on classroom management. I have found that the following pricing strategy works well for both me and my students.
When you are considering how to price your small-group lessons, do not just divide your hourly price for individuals by the number of people in the small group. If you do this, you will leave money on the table. That is, you will be making less money than you could, and you will likely not cover all of your costs.
Instead of splitting your price, multiply it. Find the sweet spot between your hourly price for individuals (one-to-one lessons) and what the group members will consider to be a valuable discount on that price. In other words, if your hourly charge for an individual is $10/hour, $5 per person for a 2-person group/hour is not enough. Instead, try charging $7 or $8 per person/hour. Your income will increase to be $14-$15 per hour for the group. This is a 40-50% increase in revenue for you! Meanwhile, each individual will be paying only $7-$8/hour, which is 20-30% less than they would pay for an individual lesson. Everyone wins.