How To Price Child Care Service In 6 Steps

Pricing child care services can seem like a tricky job. We know you have been juggling multiple questions trying to figure it out.

“Should I charge to make a profit or be affordable to the community?
Should I charge as much as my competition or price according to my unique values?
Hourly vs. standard package rates?”

The truth is, it is simple when you know the answers to certain questions. Hence, we created a step-by-step childcare pricing guide to help you charge your childcare service in under 30 minutes. Whether you are an experienced childcare provider looking to implement new pricing strategies or a new in-home childcare provider, this 6-step guide will make sure you have a thriving pricing strategy set.

How To Price Child Care Services

This step-by-step Pricing strategy for childcare businesses guide combines a local-first approach with best practices to help you develop a data-driven pricing strategy for your daycare. By the end, you’ll have a clear roadmap to set competitive yet profitable rates that attract families in your locality.

Step 1: Know Your Costs & Value

A. List Your Expenses

Fixed Costs: These are expenses you incur regularly, regardless of the number of children you care for. Examples include:

• Rent/Mortgage (if applicable): Factor in the portion of your home used for daycare.
• Utilities: Estimate the increase in utility bills (electricity, water, gas) due to running a daycare.
• Insurance: Consider liability insurance and any additional coverage needed for your business.
• Licenses and Permits: Research licensing requirements and associated fees in your area.
• Subscriptions/Memberships: Include any ongoing costs for professional memberships or online resources.

Variable Costs: These expenses fluctuate based on the number of children and activities offered. Examples include:

• Groceries and Meals: Calculate the average cost per child per day based on their age and dietary needs.
• Educational Supplies: Factor in the cost of arts & crafts materials, books, and learning toys.
• Diapers and Wipes: Estimate the cost per child based on average usage. (For older children, consider toilet paper and hygiene products.)
• Activity Supplies: Include costs for outdoor play equipment, musical instruments, or any specialized materials for enrichment activities.
• Cleaning Supplies: Factor in the cost of cleaning products and paper towels used for maintaining hygiene standards.

B. Calculate Your "Bottom Line"

Once you have a comprehensive list of the expenses, add them all up to get your total monthly operating cost of child care services. This represents the minimum amount you need to earn monthly to cover your business expenses and keep your doors open.

Here is a blog that will help you to prepare and manage your daycare budget efficiently.

Step 2: Data-Driven Benchmarks – Setting the Baseline

While you’ve gathered valuable insights, national data still plays a role. Resources like the Child Care Aware of America Cost Calculator can provide a national baseline for childcare costs based on age group.
Use the national averages as a starting point, and adjust them based on your findings from local market research (might be higher or lower depending on your area). This will give you a realistic target range for your pricing.

Here is a guide to childcare costs by state in the USA.

Step 3: Local Market Research – Understanding Your Community

Remember, national averages won’t tell the whole story. Local pricing is one of the key factors that make or break your childcare service. Here’s how to get a pulse on your local market:

• Online Sleuthing: Visit websites and social media pages of other providers. Look for services offered, rates, and parent testimonials.
• Review Sites: Check Yelp, Google My Business, etc. for reviews and identify potential areas to stand out.
• Community Connections: Join local parenting groups online or network at events. Discreetly inquire about other in-home care experiences.

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Step 4: Craft Your Value Proposition – What Makes You Shine?

Attracting families in a crowded childcare market requires a clear understanding of what makes your daycare unique. Your value proposition should communicate this distinctiveness while addressing the needs of parents.

1. Identify Your Strengths:

• Specialized Skills: Do you have experience caring for children with specific needs like multilingual development or dietary restrictions? Highlight your qualifications to demonstrate a tailored approach.
• Flexible Scheduling: Can you accommodate working parents with non-traditional hours? Emphasize this if it fills a local gap.
• Outdoor Focus: Does your program prioritize nature exploration and outdoor play? This might appeal to families seeking a more holistic approach.
• Educational Activities: If your care goes beyond basic supervision, quantify the value by researching the typical cost of similar enrichment programs.

2. Highlight Unique Selling Points:

What truly sets you apart? Do you have a beautiful backyard perfect for exploration? Are you a certified yoga instructor offering mindfulness exercises for children? Showcase these unique features to differentiate yourself and attract families seeking a special environment.

Step 5: Actionable Strategies for In-Home Care – Tailoring Your Rates

With your costs, market knowledge, and value proposition in hand, it’s time for setting daycare prices that attract families and ensure your financial sustainability. Here are some actionable strategies to consider, along with different pricing models you can explore:

Childcare Pricing Strategies:

• Competitive Pricing: Analyze the rates of other in-home childcare providers in your area and set your prices at a similar level, with adjustments based on your unique value proposition.
• Penetration Pricing: Consider offering a lower introductory rate to attract new families and build a client base. This can be a good strategy if you’re just starting.
• Price Skimming: This might be an option if you have a highly unique and sought-after service in your area. You could start with a higher price point and gradually lower it as more competition enters the market. However, be cautious as high prices could initially deter families.
• Cost-Plus Pricing: Start with your total monthly operating cost (calculated in Step 1) and add a desired profit margin to arrive at your pricing. This is a straightforward approach, but it might not fully consider market demand or your value proposition.
• Dynamic Pricing: This involves adjusting your rates based on factors like time of day, seasonality, or even the number of children enrolled at a given time. While uncommon for in-home daycare, it could be explored for special events or last-minute care needs.
• Premium Pricing: If your experience, qualifications, or unique offerings position you as a high-end daycare option, you can set premium pricing to reflect that exclusivity.

Pricing Structures:

Here, you can create different service packages that combine pricing strategies:

• Weekly Rates: Ideal for full-time care (typically 40+ hours per week) and offer predictability for both you and the family. You can price these packages competitively or with a slight premium if your value proposition justifies it.
• Hourly Rates: Suitable for families with part-time needs or unpredictable schedules. Consider offering competitive hourly rates, or implementing value-based pricing if you have unique strengths (e.g., special dietary management).
• Standard Packages: Create pre-defined packages with set rates based on:
  • Number of Children: Offer packages for single children or multiple children (with potential discounts for siblings). Apply competitive or value-based pricing depending on your strategy.
  • Hours of Care: Create packages for full-time, part-time, or extended care needs. You can price these competitively or with a premium for extended care to reflect the additional time commitment.
  • Additional Services: Include packages with or without add-ons like meal prep, educational activities, or transportation. Price these add-ons competitively or with a value-based approach depending on their perceived value.

Choosing the Right Mix:

• Market Research: Analyze the typical childcare needs in your area. Identify if there’s a demand for full-time, part-time, or a combination of both options.
• Target Audience: Who are your ideal clients? Working parents with predictable schedules might benefit from weekly rates, while families with more flexibility might prefer hourly or part-time packages.
• Your Preferences: Evaluate your comfort level with administrative tasks. Weekly rates offer simpler management, while hourly rates require detailed hour tracking.

Step 6: Optimizing Profitability – Making it Sustainable

Having a solid pricing strategy is crucial, but true financial sustainability requires ongoing efforts to maximize the profit margins of your childcare business. Here are some key actions you can take:

Cost-cutting strategies:

• Smart Sourcing: Research and compare costs for supplies, equipment, and food. Consider buying in bulk (if storage space allows) or joining buying cooperatives with other childcare providers to negotiate better deals.
• Utilize Tax Advantages: Familiarize yourself with tax deductions available for childcare businesses. This could include expenses for educational materials, equipment, or a portion of your home utilities. Consult with a tax professional for specific guidance.
• Grant Opportunities: Research grants or subsidies available in your area that support childcare providers. These can help offset operational costs and make your services more accessible to families.

Maximizing Revenue:

• Offer Flexible Scheduling: Consider catering to families with non-traditional work schedules by offering early morning drop-offs, late pick-ups, or even weekend care (if regulations allow). This can be an additional revenue stream.
• Manage Waitlists Effectively: Maintain a waitlist for potential clients and offer priority enrollment for siblings of existing clients. This ensures a steady stream of new families and minimizes vacancies.
• Upskilling and Specialization: Consider taking courses or obtaining certifications in specialized areas like early childhood education, special needs care, or multilingual development. This can allow you to offer premium services at higher rates.
• Host Occasional Events or Activities: Organize occasional enrichment activities (e.g., music classes, art workshops) for an additional fee. This can be a fun learning experience for children and generate extra income.

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By strategically combining pricing approaches with well-defined structures, you’ll create a plan that attracts families seeking top-notch childcare services while ensuring the long-term success of your in-home childcare business. Remember, the key is to find the sweet spot – offering competitive or value-based rates within a flexible and informative structure that caters to the diverse needs of families in your community.

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