Whether you are a brand new program or one that’s been around for a while, it’s important to have a good knowledge of how to set your tuition rates. This is one of the most competitive types of business, and you want to make sure you are not undercharging or overpricing your rates. There are a few ways to make sure you are doing this the right way, and every program is different. Depending on your location and type of program, pricing will be very different across the board. Here are some ways to make sure your tuition rates are both reasonable and profitable.
1. Figure out the costs of running your childcare center
Before you can do anything, it is important to know what your expenses are, including rent/mortgage, utilities, salaries, curriculum, etc. This will help you to know how much you need to bring in to turn a profit. If you are already an established program, you still need to have a grasp on your annual budget to make sure enrollment is still up and to have a good knowledge of any increases in your monthly expenses.
2. Research your competitor’s tuition fees
This is a big deal, and you should do this at least annually. Make phone calls to local childcare centers that you consider your competition.
- What are their weekly or monthly rates?
- What do they offer for that rate? (some programs offer full breakfast and lunch programs while others offer no food.)
- What are the qualities of their staff?
- Do they offer specials? (art, music, gym, etc.)
Try to gather data from at least 5 local competitors that are most similar to your program. This will help you figure out where to place your rates once you figure out your budget.
In my experience, I have always tried to make our tuition rates somewhere in the middle to upper level of rates, but never the most expensive. Use this Daycare Fee Sheet to keep track of your rates and expenses. It’s great to stay competitive, but please do not sell yourself short! Which brings us to the next point…
3. Know your worth as a childcare provider
I can recall when I started our program back in 2010, and I priced our tuition super low because I wanted to attract as many families as possible. So I made tuition to cover all costs and bring in just a little bit of profit.
One day, I was giving a tour to a family, and they were so impressed with our beautiful facility and the quality of our staff. The mom stopped me mid-tour and asked, “Okay, what’s the catch? Why are you so cheap? That concerns me.”
I was so surprised by this, but it had me thinking- I didn’t know our worth. Here we were, three years in, with high enrollment, little to no turnover in staff, and immaculate facilities, and we were selling ourselves short.
Prospective families will be suspicious if you have your tuition too low because of the old saying, “You get what you pay for.” So be sure to set your prices high enough to reflect your worth!
When asking yourself, “What is our worth?” also ask yourself, “What sets us apart from other programs?” The answer to this question will really help you justify your rates.
For example, at our center here, we offered specials each day- music, art, physical education, and language (sometimes Mandarin and sometimes Spanish). We also had every lead teacher have at least his/her Bachelors degree in the field. In addition to that, we had a full-time custodial crew.
4. For childcare tuition increases, always have a reason
It is perfectly reasonable and expected to increase tuition annually on a very small scale to compare with cost of living and increase in life expenses.
However; if you find that you need to do a significant increase to your daycare center fees, make sure that is communicated with families with plenty of notice as well as with reasons as to why the increase is occurring. For example, if you are looking to add a lunch program to your center or specials to your center; then you can explain that in your communication.
When we had major renovations done where we added bathrooms and sinks to classrooms, we made sure to include photos for parents so they could get excited about these changes that greatly benefit their children.
Having a good plan in place for setting your tuition rates is very important. If you, like many directors and owners, do not have a business background, it’s perfectly acceptable to consult with someone who can help with this. If you have an advisory board, that’s a great resource to help make these decisions.
Looking for more advice on the business of childcare?
Check out How to manage your childcare center budget.