There are a variety of factors to consider when setting your preschool tuition rates. It’s a must to be competitive in your market, and offering affordable pricing and fees will help classes fill up faster. Taking the following issues into account before determining how much to charge for tuition can help to ensure that your child care center or school turns a profit.

How many children can you accommodate?

Class-sizeIn order to determine an estimated cost of labor and materials, you must first determine how many students you can accommodate. Are you going to offer different rooms for children of varying ages? What will your child-to-caregiver ratio be? Keep in mind that there are state laws that dictate caregiver ratio and the number of children you can accept, so it’s important to make accurate calculations when it comes to enrollment numbers. If you are going to try to get advanced accreditation there may be additional teacher-to-child ratio standards to adhere to.

Labor costs

Once you’ve established how many children you can accept, you can then estimate the cost of labor and materials. Employee wages and benefits plus the payroll taxes you are required to pay for employees are all included in labor costs. If you take a salary as the owner, your income should also be included in total labor costs. Seeking the advice of an accountant who can determine the most cost-effective way to collect income from your business will help make calculating your labor cost easier.

Most preschools pay their employees an hourly rate. Do some research to get an idea of the standard hourly rate for teacher and caregiver positions in your area. To calculate, consider this: if your hourly labor cost is $14 for a 6-to-1 teacher ratio, then the labor cost would be $2.33 per child per hour. Remember to include payroll taxes and benefits in your total labor costs.

Labor costs are the largest expense and determining the tuition rates and fees for your preschool but if you are in a competitive market you may need to pay a little more for quality teachers that are in demand.

Cost of materials and supplies

At this point, you should have a carefully planned curriculum in mind. Make a list of all the materials you’ll need and how much they’ll cost. It’s vital to include the cost of furniture, toys, books, art supplies, snacks, drinks, cleaning supplies, and anything else you can think of that you’ll use in your day-to-day operations. To estimate your cost of materials and supplies, 45 percent of labor cost is a good number to consider until you’ve been open for a while. Most of these expenses are one-time expenses (you shouldn’t need new toys, books, and furniture every month) but some will be monthly or quarterly expenses. You can calculate your on-going expenses like snacks, drinks and other supplies but a rule of thumb for one-time expenses is to make your money back within 2-3 years (depending on how aggressive you are). So for set-up, decor, furniture, storage, books, and toys you can divide that by 24 or 36 months and add that to your monthly expenses.

Overhead

Overhead includes all ongoing business expenses not including or related to direct labor or direct materials. Rent, utilities, insurance, maintenance, administrative costs, and marketing materials can all be considered overhead expenses. Overhead should be about 30 to 40 percent of your labor and materials costs. Any technology or child care software (like tend.ly) would also be calculated in the monthly overhead budget.

Do your research

Before you even consider setting the tuition rates for your preschool, do some research on how much comparable preschools in the area are charging. It’s important to take into consideration the specific services and the type of education you are providing.

What’s your target market? Local income statistics such as Census data and income ranges can help you figure out approximately how much families in your community are able to pay. Keep in mind that some families may be eligible for government tuition payment assistance. If you want to serve lower-income children, it’s important to make sure you thoroughly explore the government subsidy programs that may be available including the tracking and submission requirements to get reimbursed.

Determining tuition rates

Preschools and early childhood education centers often follow a fee structure similar in design to a private school. A preschool should pull in a net profit of at least 9 to 14 percent of its gross revenue. Look at your total costs, the desired amount of profit, and your community’s average tuition rates to find a number you’re comfortable with.

Consider any additional features you may offer that your competitors don’t. Will you be open late or early that might warrant higher costs? Do you have advanced curriculum and highly trained teachers that can justify a higher rate? Are there activities or development tools you use that would be considered a premium? This is why you need to understand your potential customers in your community. Sometimes even with all of the best advancements and highest quality of education available, families can only pay what they can afford. In more affluent areas parents may pay nearly any price for the best learning experience for their children. In fact, if you set your preschool tuition prices too low it may create the perception of lower quality – even if it isn’t true.

Most preschools also set rates according to the child’s age. Very young toddlers and infants require lower adult-to-child ratios, which raises labor costs. Care for children who aren’t potty trained typically costs about 20 percent more than care for children who are a little bit older.

Depending on the model of your preschool, whether you are also providing child care services, and the ages of the children you serve, you can decide whether you want to charge by the term, month, or week. Parents often think of their costs as monthly even if the payment schedule is different, so make sure you have the breakdown when you create your pricing plans and rate cards. For children who attend preschool for a set amount of days each week, term rates are much easier to work with. A reasonable one-time enrollment fee will fairly compensate you for the cost of your time, paperwork, and special attention you provide to each potential student.

Once you’ve carefully analyzed all these factors and have decided how much profit you wish to make along with the price that will fill up your classes, set the tuition for your preschool and don’t look back. Don’t worry too much if a competitor changes their rates unless your tuition is set abnormally high. Success may not happen overnight, but with a solid plan in place, you can withstand any growing pains your preschool may experience in the first year or two.

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