I differ slightly in my view of this Colin. The Instructor should never be taken as part of the aircraft costs. They are a seperate entity. So if you charge £100/hr and make £80k a year, that is all down to the aircraft.
The FI should be a totally seperate charge, so that the FI is never left picking the up simply "what's left".
£35/hr is a very sensible figure and I wish there were more school owners like you around. Mind you I suppose that's what comes when a schools is owned by an experienced instructor rather than someone with no real experience of flight instruction other than as a student.
p.s when is the fly-in at Strathaven this year? I'll try and make it, but since the nasty Mrs CAA person took my medical away, I won't be flying unless I can get a lift!