The ability to recognize the ability of your students. Some are talented and some are not. You have to adjust to their ability and also their goal.
The adjustment, however, should go hand in hand with your goal. If you want to be known as a piano teacher who produces great pianist, first you have to be selective in choosing your student and also in forcing them to follow the regimens that you believe will produce a great pianist. But if your goal is to provide services to all kinds of people, you need to be much more flexible.
There is no one answer for this....Again, it depends on what you want to achieve.
To give a serious piano lesson is much more difficult task than to provide merry and cheerful piano lesson. It does not take a lot to be easy going.
From my experience, normal kids do not learn fast. Because they have normal ability and they do not practice seriously. If most of your students are in this category, you should not be too demanding...Otherwise, they will quit!