Let's say you were a small organisation with 6 aircraft and flew them for 250 days of the year, getting 4 hours a day out of each aircraft. That's 6000 hours total which is probably extremely optimistic when weather, unserviceabilities, routine maintenance etc is factored in. Your cost price is probably about £70 per hour. You then need to add a profit margin and something for FI salary. If you had 6 instructors at £30K per annum each, that means £180K in salary costs - or an extra £30 per hour to be added to each flying hour if you're going to recover the salary bill directly from the customer before you start to make any profit!! Hence all the other income streams needed - fees, subscriptions, merchandising....but the demand is non-linear, so if you double the price you won't get half the customers! So you probably check what the opposition charges, guess how many hours you're going to fly in the year, see what income that would yield and then see what salary bill you could afford to pay. Then you divide that by the number of FIs you need.....and end up not being able to pay them very much without driving all your customers elsewhere.
How else could you improve matters? Getting rid of VAT on fuel and flying training and getting rid of fuel tax would help considerably; £27 per hour is about what the fuel costs to buy - more than half of that is tax! An extra £14 per hour available to use for FI salaries would give another £14K to each FI - and an annual salary of £44K wouldn't be too shabby for SEP instructing - but then there are lots of other 'employment' requirements to worry about if you are employing full-time staff.......