Do you charge enough for tuition at your childcare?  Have you struggled with raising your rates?  Do you think you will lose clients due to a rate increase?  Those are questions many providers ask themselves and struggle with.  Today let’s talk about just how to raise childcare rates.

Just how do you increase your rates?

The simple fact is just about every year we have greater expenses than we had the year before.  Prices go up, items need to be replaced and more supplies might be required.  Maybe you have hired an assistant.  More expenses mean a need to increase the income that the business brings in.

I know!  

It can be a touchy subject.  Not just with parents but with providers as well.  We simply are uncomfortable asking parents to pay more.  

But in many cases, we are actually charging much, much too little in the first place.  This can cause problems.  Especially when the business is not covering the costs.

How much do you make?

I will never forget the day when I sat down and actually figured out what my hourly salary really was.  It was an eye-opener for sure!  Not only that but heartbreaking at the same time.  Maybe you should do the same thing.  

It’s actually very simple.  Just take the weekly tuition rate that you charge a client, then break it down to a daily rate.  Now break that daily rate down to an hourly rate by dividing it by the hours you work in a day.  That, sadly, is your hourly wage.

Now I know some might argue that the rate we just calculated is inaccurate because most providers have multiple clients, so the wage would increase many times over.  

True!  

But think about this, if you were to lose many of your clients all at once (it happens), you would be left with what you charge the remaining client(s).  You cannot increase your remaining clients’ rates enough to make up for the tuition loss by the clients that left.  So in reality, what each client pays is how I determine my rate of pay.

Related Reading:

• Preventing a Mass Exodus

Parents wouldn’t do it

Most parents only see the lump sum they are paying on a weekly or monthly basis.  They do not take the time to break it down to an hourly rate.  Which like I said can actually fall far below even the minimum wage.  I am sure that if they were aware of that, they might have a little more appreciation for what we do.  

Because the fact is I don’t think many parents would work for the wages we make.  raise childcare rates

That being said, most industries provide increased wages and raises periodically to employees with expanded experience and skills.  It should be no different for childcare professionals.  

Each year you become a more seasoned, experienced professional and thereby warrant a higher rate of pay.

So what if you do decide it’s time for a raise?  Well, there are many ways of going about it.  So let’s explore some.

Check out this short video by Child Care Marketing Solutions addressing just how to confidently and effectively raise childcare rates.

How to Raise Childcare Rates

When should you raise them?

There are many schools of thought on just when is a good time to raise your rates.  The consensus is that an annual increase is best.  It establishes more of a yearly cost of living raise that most people are accustomed to.

The specific timing is ultimately up to you.  However, it is advisable to avoid the end (or the beginning) of the year when families’ budgets might be stretched thin by holiday spending.

Telling your clients

I know you are probably thinking “YIKES”!  How do I tell my existing clients that their rate is going up?    

Yeah, that can be hard at least at first.  But there are ways to notify parents without causing panic within the hearts and minds of parent or provider.

If you do decide to adopt an annual rate increase one of the easiest ways is to put it right in your contract.  Tom Copeland advises adding a new term to your parent contract.  Include a line that states that “tuition rates increase annually”.  You could simplify it by making the increase effective annually on a certain month and day or the anniversary of a child’s enrollment.

Send out Notifications

Even if you decide to incorporate rate increases into your contract, it is probably a good practice to also send out notification of an upcoming change in rates.  

Written notification is best and potentially avoids awkward conversations that might break down into negotiations.  Plan to send notifications out at least 30 days prior to the effective date.

How much should you raise childcare rates?

Ok, so you have established that an increase is in order.  You have even decided how you will advise your clients.  Now the BIGGIE – How Much?

Another YIKES moment?  

Well, it doesn’t need to be.  Just look at how businesses typically determine rate hikes and follow their lead.

If you use the annual option, stating that a certain percentage increase will be in effect is probably the most effective.  This is also one of the easiest ways to incorporate it into your contract.

Related Reading:

• How to Raise Your Rates by Tom Copeland
• Setting your rates & when to raise them, Part 1
• Getting tuition payments on time
• How to make policy changes

Caring for Our Business

I know for many providers, myself included, raising our rates can seem intimidating at times.  

But it shouldn’t be. 

We provide a specialized service that not everyone is qualified to do.  We run our own businesses and must learn to care for them as much as we care for our clients.

Now we know the How, When & Why we might want to raise childcare rates.  Let me know in a comment below if have found it difficult to raise your rates and if this post has helped you in any way.