Detemining Your Fees
One of the toughest considerations for new child care business operators is what to charge for their services. Charge too much and the fear is parents won't utilize your service. Charge to little and you might as well work for nothing. So just what should you charge for your child care services? The five tips below from Start & Run a Profitable Home Day Care, should help you get get your
calculator heated up and your rate sheet completed.
1) Check out the rates for child care in your area.
Be snoopy. Call around and ask about standard rates, rates for the different age groups and for families with more than one child. "Begin determining your rates by calling several daycare homes listed in your local newspapers, dayhome agencies advertising in the Yellow Pages, your local child care resource and referral agency, dayhome providers' groups in your area," writes author Catherine Pruissen.
2) Calculate your expenses.
Before you can even consider what to charge for care, you need to know how much it's going to cost you to operate your business on a per child or per month basis. "This way you can make sure that your rates cover your expenses as well as paying you a salary." says Pruissen. The book provides an Estimated Operating Budget worksheet that covers things such as food, supplies, insurance, advertising, utilities, equipment, supplies and so on. It also has a complete chapter on start up and operating budgets to guide you through the process in a systematic way, or you can use a service like Chrome River.
3) Place a value on your time.
"....many business owners don't think in terms of paying themselves an hourly wage; they concentrate on overall profits," Pruissen notes. She suggests estimating how many hours per week you plan to work including the time you need to handle your paperwork, bookkeeping and shopping duties. Then take that time and multiply it by the hourly wage you'd like to earn. For example, if you plan to work a 50 hour week, you need to multiply that by say, $10 per hour for a total of $500 per week. Finally, divide that total by the number of children you plan to care for, ($500 divided by 4 children =$125 per child per week).
4) Factor in the quality of the program you offer.
Your training, the programs you provide that perhaps some of the other child care operators don't such as field trips, bringing in outside resources such as a story teller, crafts person, etc., will obviously factor into your rates. "Your training and experience may justify charging a slightly higher rate since many parents will opt for paying extra fees if the provider is worth it." Pruissen writes. You certainly don't want to baseline your rates if you offer a great variety in your program and have extra training and skills that ultimately provide the children with a higher quality of care.
5) Planning for the unexpected.
In any business you have to be prepared to handle unexpected expenses. A child is absent from care for three days; a parent doesn't pay; holidays and vacations creep in when you weren't notified even though you were supposed to be by the terms laid out in your Parent Manual and child care contract; all these things eat away at your earning unless you provide for them in your fees ahead of time. Take a moment and write down the costs of an absentee child for 5 days of the month. Somehow, you need to figure that cost into the daily or monthly rates you will charge. If you prefer, you can tack on a simple surcharge to each monthly, weekly or daily rate you work out. If an absentee child costs you $125 monthly, divide that by the number of children in your care and the number of days you work each month ($125 divided by 4 children divided by 22 days per month = $1.42 per day).
Tally It Up
From your research you found out that child care in your area costs anywhere from $22 to $35 per day for a toddler. Now you need to put the five tips above together in a way that will help you see where you can fit your rates in that price scale.
Your estimated operating costs for the month per child are: $250x4=$1,000
Plus the minimum cost per child you want to earn for the week: $125x4=$500
Plus the added costs of running a higher than average program:
$100 per month.
Plus your charge for covering unexpected expenses: $125
Your total expenses: $1,725 divided by 4 children = $431 per month per child, or 19.59 per day based on 22 working days.
Now you can see that from your base rate of $19.59 per day, you have room to work within the costs charged in your local area and still make a profit. Keep in mind that these figures are only estimates and are conservative at best. The idea is to give you a way to calculate your fees that makes sense and to help you see that in the end, what you will charge parents is fair and justifiable.
Of course, using predefined worksheets, like the ones available in Start & Run a Profitable Home Day Care will help you to determine your fees a lot easier and let you look at your figures in a way that makes sense and puts the whole process into a viewable and understandable perspective. But a pencil, paper and calculator will work wonders too.