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.