Building a Profitable Daycare Business

How to Calculate Your Childcare Center's Price

Calculating the price to charge for childcare services

The average charge for child care at a center across the United States is $212 per week. Keep in mind this charge can vary widely from State to State. At a whopping $688 per week, Washington D.C is one of the highest charges for child care. Among the lowest average charge for a State is Mississippi at $153 per week.

Research the area you are opening your daycare to see what the competition is charging. Be careful not to fall into the trap of being the cheapest option. It is best to calculate your costs then charge according. The U.S. Department of Health and Human Services considers 10 percent of a family’s income affordable child care, but parents are ultimately spending much more, on average. Parents should be expecting to pay between 16-26% of the household income toward care for their children. Do your research and calculation to put yourself in the best financial position from day one.

How to Calculate Your Childcare Center's Price

First, research the charges of other daycare businesses in your area. Obtaining prices can be difficult as many daycare businesses do not publicize their price structure. Some facilities will give pricing information over the phone. Be friendly when you call and keep your questions to a minimum. As a last resort, you can recruit a friend with children to schedule a tour to gather the information. Personally, I never felt a reason to hide our pricing. We listed it on our website. Listing our child care prices cut down on the number of inquisitive phone calls, especially the ones from other daycare businesses.

Now that you have the high, low, and average charge for your area, it's time to calculate your pricing structure.

Employee cost will be your most significant expense. A general rule in a for-profit childcare center employee expenses should amount to 50-60% of your income. The net income after your employee expenses will cover other costs such as rent, food, supplies, and of course, the owner's profit. Your State's child per provider ratio will also play a roll in this calculation. Check with your local child care licensing agency.

Childcare pricing calculator

Calculator Key

Age Range - The age range of children in the classroom

Wage - Enter the amount your paying daycare teachers. This is the gross hourly wage you are paying your childcare teacher. Include the taxes, insurance or any other costs you pay

Hours - The number of coverage hours. Generally nine because a class still needs covered when a teacher takes a lunch.

Total Pay - This is the total amount you'll need to pay for the employee

Ratio - Enter your state ratio. The child to teacher ratio allowed by your local government.

Daily Rate - The amount you plan to charge a parent for the number of hours in the third column

Gross - The gross income from a classroom at the state approved ratio

Net Revenue - This figure is the net profit after paying your employee.

Do I charge per day, week, or month?

How you set up your child care center's pricing structure largely depends on the clientele you are targeting and the local job market. If your new child care business is located near a large employer with set shifts, then it may be to your advantage to match those weekly work hours and charge accordingly. In Las Vegas, where we opened our first 24/7 childcare facility, we found it best to charge per day to accommodate the ever-changing shifts of casino workers. Doctors, Nurses, First Responders, and employees at large 24/7 department stores need this flexibility also.

You'll need to have clear credit policies for cancelations when charging for a week or month in advance. Provide this information upfront on the registration paperwork to avoid confrontations. Clearly spell out how far in advance a parent needs cancel their scheduled care to receive an account credit. I would avoid offering actual refunds to simplify your bookkeeping.

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