What to charge? From the smallest family child care program to the largest child care center chain, figuring out the answer to this question is important–and seldom as easy as it may seem at first glance. Set your tuition too low and you won’t be able to break even; set your tuition too high and no one will enroll.
Small or large, for-profit or not-for-profit, if an early learning program is to continue operating for any length of time, attention must be paid to this question’s answer: Is program income equal to or greater than program expenses?
If the answer is no for too long, the program will not survive.
The remainder of this post will dig into some things to consider when setting your tuition
Know Your Expenses
First off, you need to know what it costs to run your program. Make a detailed list of your operating expenses. Things like rent, staff salaries, and utilities are easy to remember to add to this list.
Some programs forget about the less obvious expenses: snow removal, replacing playground much every few years, glitter. The cost of these smaller items can add up fast and impact your bottom line.
Factor in long term planning. Is there a new piece of equipment you’ll be needing or a desire to expand the playground? These things should be considered when determining your expenses.
Understand Your Income
Will your program rely solely on tuition for income or will there be funding from other sources? Other sources may include:
- Local, state, or federal grants
- Program fees
- Scholarship programs
- USDA Child and Adult Care Food Program
- Private Fundraisers
- Alternative funding sources (For example, some programs rent out their play spaces for children’s birthday parties.)
If there will be other funding sources, how reliable are those sources and how dependent upon them do you want to be? Many programs have been in situations where they grow reliant on outside funding and, after a number of years, the funding source disappears–leaving the program in a tough spot.
Will the work involved in procuring the funds be worth the effort? Use The Hoop Test when considering outside funding. Ask yourself how many hoops the funding source would require the program to leap through and determine if you are ready, willing, and able to make those leaps. The truth is that some funding options are more work than they are worth.
Be realistic when looking at additional funding sources. It’s easy to budget $35,000 for the annual Teddy Bear Ball And Silent Auction, but it’s a lot of work to assure that event hits it’s goal every year.
Survey The Area
When setting your fees, you need to determine what the families in your area can afford. One of the easiest ways of doing this is to look at what other programs in the area that offer similar services are charging.
With a bit of online detective work and some phone calls you can come up with a pretty good idea what the average tuition is in your area. While you probably shouldn’t set your rates based on what others are charging, this information will help you know if the tuition you determine is right for your program is in line with what families are willing and able to pay.
Figure Your Tuition
Use all the information you’ve collected to calculate the tuition for your program. Again, be as realistic as possible. It’s easy to make numbers dance to the tune you choose, but in the end you want the program’s bank account to have a positive balance.
- Many programs and centers charge different prices for different ages – generally, infants are the most expensive (due to the level of care required), then toddlers, then preschool age children and school age children.
- How often will you review your tuition rates and make adjustments? If you need to change how much you charge for tuition, how will you notify families?
- How much cash on hand do you want your center to have, and how will tuition help supplement that?
- There are services that – for a fee – can help you set up these kinds of budgets. You can also see if your local licensing agency offers any child care business classes or seminars to help you get your finances in order.
- Who will be involved in the process of setting tuition?
Setting tuition rates can be a miserable process for someone who’d rather be finger painting with a room full of toddlers, but many early learning people find themselves involved in the process from time to time. With a little forethought and organization you can wade through the process and get back to finger painting.
We’d love to see your thoughts, ideas, and questions about setting tuition rates in the comments section.
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