Why Raising Tuition Rates is Essential for Your Daycare

Sep 28

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Now, let’s talk about raising tuition rates for your daycare or child care center.

If you are an owner or director of a child care program, it's no secret that your business needs to bring in more revenue if you want to continue providing quality services. The best and fastest way to do this is by raising tuition rates. Many daycares and child care centers are hesitant to raise tuition rates, but there are several reasons you need to increase your rates every year or every other year.

This blog post will discuss the importance of raising tuition rates, when and how often you should increase tuition, and the surefire way to increase rates without losing families.

Why should you raise tuition rates?

The number one reason you should raise your tuition is simply inflation. The price of food, gas, utilities, supplies, and wages rise, but for some reason, we in early child care tend to think that we shouldn't raise our prices. This is primarily due to the fear of losing enrollment. This way of thinking is based on fear and is a scarcity mindset. After all, it is sometimes necessary to raise your rates to sustain your business and provide quality care.
Another reason to raise your rates is to hire and retain quality staff. Our teachers and staff work hard, and days can be long and stressful. According to a report from CNBC, most childcare workers are underpaid compared to the national average. Child care workers remain nearly at the bottom of all U.S. occupations when ranked by annual pay.

We must increase compensation for the early childhood education workforce, or many of us will be forced out of business due to staff shortages.

How much should you increase your tuition rates?

ECE programs should increase rates every year or every other year by 2-5%. Your initial tuition increase may be substantially more than a 2%-5% increase to combat the staffing crisis, especially if you have not raised your rates in several years.

I recently heard several centers in a staffing crisis raising their rates by 20- 30% per week and did not lose 1 parent! The tuition increase was necessary to raise their starting wages to obtain qualified staff and give their existing team a $3-$4 hourly increase.

I'm not saying to increase your rates by 30%, and I'm not saying that you won't lose any families when increasing tuition, but I am saying to lose the fear of rate increases and do what is necessary to hire and keep quality staff.

How can you raise rates without losing families?

I always hear, "I can't afford to raise rates. My parents won't pay more." Then I hear, "We are comparable to the area, so we can't charge more." Yes, you can, and you should! Here's the truth, most people spend $10 or more a week on Starbucks and convenience store snacks.

You can charge more if you have a clean, inviting facility, loving professional staff, provide quality care, and offer something unique that sets your center apart. As a result, your families will adjust and pay what needs to be paid. If you are missing one of these essential aspects, make corrections so that you can charge more.

So what can you offer to make your program stand out from the rest? Read this article to discover How to Make Your Childcare Business Stand Out: 13 Ideas That Parents Will Love.

Also, did you know that almost 9,000 childcare centers closed between December 2019 and March 2021, according to ChildCare Aware. Now, many parents are facing waitlists that are at least two years long.

You have the upper hand if you have a waitlist like most programs these days. If you raise rates and lose a child or 2, go to your waitlist. If you do not have a waitlist, you may need to make your program more desirable.

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When is the best time to raise tuition rates?

If you're raising tuition or fees across the board, the best time to announce it is when you open registration for the summer or the next school year, before the current school year has ended. Parents will be more receptive when you make the change effective at the start of the new school year. In fact, if the rate increase is outlined in your policies or parent handbook and mentioned during tours, many of them will expect it.

If raising rates mid-school year is unavoidable, be sure to give plenty of notice between the time you announce it and the time the new tuition scale takes effect. I recommend no less than 30 days, preferably 60 – 90 days, so parents can budget accordingly.

How should you communicate a rate increase? Should You Give Tuition Increase Letters to Parents?

I usually send an initial email and then several more as the date gets closer. I also send home a written letter and post a sign on the front counter and/or door to ensure parents get the message. You can also send a reminder through the app if you use a parent communication app.

In the increase notice, keep it simple but be transparent and communicate the reason for the increase. You can download my FREE rate increase letter to give to parents here.

When you communicate your new rate to families, don't apologize. Remember, this part is all business.

Should you offer existing families a "grandfather clause"?

Some providers have asked whether they should allow current families to continue to pay the old rate and only raise tuition for new families. This is sometimes referred to as a grandfather clause. However, this way of raising rates is too confusing to keep up with for larger programs and defeats the entire purpose of raising tuition, which is more revenue. For these reasons, I would steer away from the grandfather clause.

Conclusion:

If you want to keep quality staff and improve the quality of your child care program, make raising tuition rates a normal part of doing business. Be transparent with families, give them plenty of notice, and don't apologize for charging what your program is worth. When you do these things, you will be on your way to generating the revenue you need to sustain and grow your childcare program.

If you have any questions or comments, please reach out. I'd be happy to chat!

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