How to Set Your 2019-2020 School Year for Financial Health

Now is the time to consider what your financial picture should look like for the coming school year. At HINGE, we find that childcare business owners are their own worst enemies when it comes to delaying annual tuition rate increases and charging the appropriate amount for the services they provide. In this strong economic environment, with unemployment rates at the lowest point in 50 years, occupancies should be strong and NOW is the time to change your financial picture.

Why do we think you should be more aggressive on tuition rates?

Stronger Programs. We understand that many owners hold rates lower than their center can support in an attempt to help the families they serve. And while this is a generous offering, this delay in increasing rates often impacts the owner’s ability to provide strong educational programs, build quality staff and curriculum, invest in facility needs, provide salary increases to deserving staff and take care of other financial obligations—not to mention, it sacrifices the owners themselves and their financial well-being. After all, can you possibly support the many staff, parents and children in your care if you are worried about making payroll and the mortgage?

Positioning your School in the Minds of Prospective Families. Falling behind the market can create questions in the minds of prospective parents about the value of your school compared to others in your area—stifling new enrollments.

Attracting Higher Quality Teachers. Higher tuition rates means increasing the pay and benefits of your well-deserving teachers.  In this competitive hiring environment, paying well is a must!

Consider these strategies to set your tuition correctly for the fall:

Know your “Competition” but don’t follow them! Always know what other providers in your area charge for tuition, but be sure that you are comparing yourself with others that are truly your competition in quality. Know your strengths, communicate them well, and don’t be timid about explaining why your rates are higher than others.

Create a Family “Legacy” Program.  If you have fallen behind in charging the true cost of care, consider grandfathering current families at a reasonable rate of increase, label them ‘Legacy Families’ and starting new enrollments at a higher rate.

Change Discounting Programs. Tuition discounting can often have a more dramatic effect on the financial performance of a school than tuition rates and is often hidden in the overall financial picture and the impact not understood. We believe that discounting should stay at or below 10% of total tuition charged. 

  • Staff Discounts. The main discount the early education industry uses is the staff childcare discount. It’s an easy benefit to provide and what owners could, historically, afford to give. And while it is a great incentive for attracting quality teachers, there is a limit on how much you can do while remaining profitable. One good idea is to limit the number of children an individual employee can have discounted to two. Also, consider limiting age groups—like infants and toddlers—that can be discounted as these programs are often not profitable to begin with.

  • Multiple Child Discount. This discount is typically market-driven and most schools allow for a 10-percent discount on the child with the lower tuition rate.

  • Industry Discount.  If you’re discounting a particular industry in your area (typically 10 percent), be sure you’re getting value from that industry in return. Are they promoting you to their employees? Are they providing you with positive press? Are they driving traffic to your school or website? This discount could serve you well and help increase enrollment if executed correctly.

  • Subsidy Discounts. Some cities and states don’t allow early learning centers to charge full tuition rates to children in childcare subsidy programs, so discounts are necessary. But use this discount to your advantage by including it in marketing materials: “We provided scholarships of more than X dollars last year to better support families in our area.”

  • Free Days. Your costs continue whether a child is physically at your center or not. Tuition should be due in full each week regardless of attendance. This discount is (thankfully) no longer an industry norm and makes a huge impact when removed from the school’s budget.

Now is the time to plan for fall tuition rates. HINGE has developed a budgeting spreadsheet that will allow you to play “what if” games with your tuition rates. If you would like a copy or would like us to analyze your financials, contact us at info@hingebrokers.com. Be Healthy Friends!!

Meredith Martin