Setting Rates and Fees for a Child Daycare Center

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The number one reason that childcare providers choose to leave the business is that they do not make enough money. Health and safety regulations limit the number of customers that child care providers can serve, so a child care business is naturally limited in its earning potential. It cannot grow simply by increasing the customer base as other small businesses can. As a result, pricing has to be on target to produce the income you want. Consider your income needs and goals carefully when setting your rates and fees you will charge.

Price maximums and minimums vary with the neighborhood. You need to consider the going rates for daycare in your area. Your local Child Care Resource & Referral Agency will have information about local child care rates. State agencies that administer childcare payment programs set the rates that they will reimburse providers for care to eligible children. Compare prices, hours and services with those of other child care providers in your area.

Project out your expenses, and your income under different rate choices. Use realistic numbers that assume at least a 10% vacancy rate, and that allow for the slow months of childcare.

You may want to charge higher rates for specialized services like infant-care, special curriculum, before- and after-school care with transportation. These specialized services usually involve higher costs, so make careful projections.

The best practice is to set rates for all children by half or full days, not by the hour. If you do agree to hourly rates, set a minimum number of hours that will be charged each week regardless of the child's hours. Keep in mind that hourly time-keeping is expensive, and it encourages parents to use alternative free care whenever it is available to them, at your expense.

Part-day rates should be higher per hour than full-time rates because a part-time child often keeps you from taking an additional full-time child who would bring in more revenue. Set a minimum level of daycare that you can provide, as well as a minimum payment. For instance, many providers have a minimum of half-time care. Parents may use only three hours per day, or only two days per week, but they will pay for half-time care.

Set fixed days and hours for the part-time children to avoid the scheduling frustration of being a "drop-in" daycare provider and define the number of hours that constitutes full-time care. Include an hourly rate for additional hours in the contract you sign with the parents. Set the schedule and charge late fees when parents do not meet it.

Charge for reserved care whether it is used or not, except for the number of allowed absences set up in your contract. Otherwise you may be frustrated by losing income when relatives visit or parents have work vacation days.

Additional children from the same family can be great since you can save money by having one less set of parents to bill and to coordinate with. But you should be careful - your cost savings may not warrant deep discounts for multiple children.

Charge supplemental fees to cover your cost for swimming, outings, and other special activities.

As a professional provider you must be comfortable talking about your business. Talk value, and emphasize the benefits parents and children receive from your care. Understand parents' concerns when they ask about prices. For many families, daycare is a major expense, and a source of anxiety. Plan and rehearse an understanding answer to concerns about pricing. Think about what your doctor, Sears, or the phone company would do if they were not paid appropriately. Parents who really can't afford your care may be able to offer bartered services such as volunteering, building or other skills.