Daycare~ Raising Rates

[daughtersrus]

I have been a home daycare provider for about 16 years now. In that time, I have only raised my rates a handful of times. The last time was over 3 years ago.

After much thought and discussion with my husband, I have decided that it's time to do it again. I've checked what others in my area are charging and I am currently lower than all of them. Some by $10/week and others by more than $50/week. I've decided to raise them $20/week/child.

The hard part I'm having right now is trying to come up with a letter explaining the change. I plan to let the parents know this week and have the new rate start the first week of October. This will give parents time to do some research on their own and decide if they want to continue with me or to look for care elsewhere.

I think that they may be a little upset in the beginning but it's something that I need to do. I know for a fact that all of them have received raises over the last few years. As a matter of fact, three of my moms have made comments on how much less they are paying compared to friends and family.

I'm really having a hard time coming up with the right words to say. I've become very close with not only the children but the parents as well and I think that is making it more difficult for me.

If anyone has a sample letter or words of advice for me, I'd appreciate it!

Thanks!

 

[kydisneyfans]

I'm not sure where you are or what rates you are charging, but in this economy, $20 a week may be a steep increase for many parents. Our in home daycare provider did a $20 a week increase a few years ago and several parents, ourselves included, pulled our children. I would look at lessening the increase or postponing until things improve.

The letter we received was just straight and to the point, these are the new rates, they go into effect on this date, and it had to be paid the same week.

 

[Piecey]

How much of a % does that mean you're increasing by?

I think I'd probably pull my kids, too.
Can you maybe structure the increase.... to where it's a more gradual change and it allows people to adjust to the increase a bit better? I think a lot of people, in this economy, are going to struggle to come up with that much extra money a week!

 

[merekc]

I assume you are providing lunch, snacks, drinks throughout the day. I think it is safe to soften the tone of your letter by saying something along the lines of...I strive to keep my rates affordable for the families in my daycare, however, it has been over three years since my last rate increase. Due to the increase in costs associated with providing quality daycare for your family, the weekly cost of care for your child will be increasing to $X starting on X date. I appreciate the trust you put in me to watch your child.

I think I would leave it at that. Then if anyone complains, be prepared to indicate that you compared your prices to other in home daycares and feel that the new rates are comparable to what others in your area are charging. Also, point out the increase equals $4 a day. This truly only helps cover the increased cost associated with feeding each child.

I agree with the PP $20 at once seems like a lot, but make sure you break it down for people. Also, $20 is different depending on the dynamics of your customers. If they are lower income, you might consider $10 this year and $10 next year unless you are ready for them to freak and bolt. If your customers are middle class or higher, $20 might irk them but not necessarily sending them scrambling.

Good Luck!

 

[NHdisneylover]

I think you are absoltely right to raise rates periodically and it sounds like it has been a looong time since you did which means $20 a week is probably totally fair. On the other hand, as pps have said that is a lot to adjust to all at once ($80 a month for one kid) and families may not be able to do it. If you can afford to adjust the rate slowly over time I think it would be better. Send a letter explaining what you have explained here about needing to raise rates, and what you need to get to, but also explain that you know that is a big adjustment. Therefore you will be raising the rate by $5 a week each quarter until it has gone up the full $20 per week (so $5 each in October, January, April and July). This will also make it easier on parents who use a tax free cafeteria plan at work to pay for daycare--they will not ahev put away enough for 2009 with the increased rates but for 2010 they can adjust their contributions acordingly. After this I suggest you reevaluate and raise your rates (by a smaller amount) once a year--probably best to "announce" the rate change in the fall effective January 1 (to accomidate those tax free plans. . .).

 

[kwelch10377]

One thing that I would do is list in your letter the current rates of other local daycares so the parents can see that even with the increase you are still lower than other options that are current out there.

I do like the PP idea of doing the increase gradually.

Do you also have any extra charges that parents may incur, ie late pickup. You could also raise those extra charges and reduce the amount that you would raise the weekly rate.

 

[SpecialK]

I think if you do it incrementally, you're just giving parents who are going to leave more time to find another daycare. Not knowing what you're charging to begin with, it's difficult to give an opinion.

 

[Mickeypooh99]

I have been a daycare provider for 10 years, and my rates are lower than any center, but about average with home daycares. I don't raise rates a lot, but my last increase was $2.00 per day for 18 months and up. I raised the infant rate by $5.00 per day. I only take 1 infant at a time, so I just waited to raise the infant rate until I was ready to accept a new infant.

I have never had anyone complain about the rates or take their children elsewhere. If you have a good relationship with your families they should understand. I have had mothers tell me they will pay me whatever I want, because they don't want to take their children anywhere else.

When I raise rates I give plenty of notice, and I always mention rates at other area daycares. Most people are already aware of the going rate. I think a lot of people aren't aware of all the expenses involved in running a daycare. Food, home repairs, damaged toys and equipement that needs replacing, expensive insurance, training classes, and much more. Sometimes I feel like I really don't make any money at all!

 

[LisaNJ25]

Thats only an extra $4.00 a day. The parent can bag a lunch or cut own on a coffee.

It amazing me that some parents will go out and blow more in one night at dinner and a movie than what they will pay for a week of child care.

 

[daughtersrus]

Thank you all for the advise.

I'm in the suburbs of Chicago where daycare rates vary considerably depending on where you live. In my immediate area, the rates are running around $165 on the low side and over $200 on the higher side. If you go to the town just 1/2 mile from my house, the low rates are $200 with some close to $300. The town just south of us by about 6 miles is pretty close to those in my area.

Right now, I'm at $150.00. A couple of my mom's are public school teachers. I do not charge them for summer or school breaks to hold their spot where most, if not all of the others in our area do. Teachers here are pretty well paid here (I know that's not the case in all areas) and I know that they've gotten over 5% raises the last several years. The other mom is a corporate employee and she's made a comment to me that she "makes a very good wage". The company that she works for has not been hit by the economy and has not gone through any lay-offs. That being said, I know that no one likes to pay more for anything. I sure don't!

I think that I'm going to try a draft a letter explaining that it's been a long time since I've increased my rates. That my expenses (gas, utility bills, taxes, food, supplies...) are constantly going up and that I must make some adjustments. It really is a difficult decision because relationships have developed and it's so hard to separate the business from the friendship.

 

[Jennasis]

When I had to raise my rates for my clients, we composed a letter that essentially said "To be able to continue to provide the outstanding level of service and care we have been providing, we need to raise our rates beginning X month. The newe rate will be X." Then I laundry listed EVERY other business in a 20 mile radius, all of which will STILL be more expensive than we were even with the increase.

Nobody left.

Still I was sad to have to raise prices. I know it's rough out there.

 

[IDoDis]

I think that $20 per week is a huge increase. I'm not saying you aren't deserving of the money because I'm sure you are, but that is a big increase. As for what others are making, I honestly don't know any teacher in the country who has gotten a raise this year -- most have gotten pay cuts. Add to that the rising health insurance premiums and the take home pay is going to be even less than the pay cut this year.

My DS's guitar teacher recently raised his rates from $16 per lesson to $20 per lesson. That was almost a 25% increase! While I knew we wanted to stay with him and he was less expensive than paying for lessons at the guitar stores, I was very disappointed in such a huge increase. He did allow the parents to gradually increase the amount each week though. I pay him every two weeks, so for the first 2 weeks, I added 1/3 more, the next two weeks another 3rd more and now we are up to the $20 a week.

I'd probably pay your rates with the increase, but I'd probably go home in tears and frantically start finding things to sell on Craig's List. If you have compassion for your families, do the increase gradually say $5 more a week and then increase by $5 every 2 weeks.

It's not just the money, so make sure your services are just as good as the daycare providers who are charging more. Are your hours just as long? Do you provide hot meals? Is your adult to child ratio low? Are you licensed and CPR certified? Do you do lessons & crafts with the kids, take them to the park? All of those things would factor into your rate increase otherwise you're not comparing apples to apples when you are just looking at a weekly rate. I certainly wouldn't want to pay those rates and have my provider on the Dis Boards while my kids were there.

I had one day care provider who only had my two kids and no one else. She took them to the zoo, to the mall for lunch, to the park, did crafts, etc... Then when she had to go back to work full time, I put my kids in another home where the cost was less but there were more kids and mine didn't get nearly the attention they got from the other provider.

 

[daughtersrus]

I just wanted to clarify that I'm only posting on the board today because I do not have any children at my house right now. School has not started yet so the teachers are still off and the other child will be arriving late because they had an appointment this morning.

At times, I do post during "work hours" (6:30am-6:00pm) but only at nap time and if all of the children are asleep.

Also, in our area the teachers have received raises each year as stated in their union contracts. As a matter of fact, the office staff also got substantial increases with the contract that they signed last year. My DD will graduate in Dec with a degree in education so we're pretty familiar as to what the salaries are in our local area. Since teacher salaries are public record, it was very easy for her to find. Please don't get me wrong, I believe that they are worth every penny that they are paid. If not, I would never have encouraged my children to go into the field.

 

[sbell111]

One thing that I would do is list in your letter the current rates of other local daycares so the parents can see that even with the increase you are still lower than other options that are current out there.

I wouldn't do this. You would be basically helping those parents who want to pull their kids. Let them do their own research.

 

[sbell111]

One thought about raising rates:

If you are 'full' and having to turn families away, it might be time to bump your rates, even though you will chase away some of your current customers.

 

[HM]

Don't feel bad about having to raise your rates.

I think you got a couple good ideas above for wording for your notice. You can also add in about rising costs of goods and your own overhead that you need to cover as well.

In the future, you should have a yearly increase of a small amount, so that you aren't forced into making a larger one every few years.

Good luck in this. I hope all your parents are supportive.

 

[Lisa_M]

I think raising rates is fine, but $20/week is a lot of money. If our daycare did this, we would be in trouble, even if I get the raise I think I'm getting because DH's hours got cut significantly. Just remember because one parent's company is doing well, doesn't necessarily mean the other's is. Also, just because these teachers get paid well doesn't mean they don't have student loans to pay off or other expenses.

I think easing into this would be best, but be prepared that some may leave.
If you could afford to do a small increase now and another later, it would soften the blow and give these families time to re-allocate their money. Our daycare raises rates at the end of every August (beginning of the school year). The rates typically go up $5-6/week and we also don't have to pay for DD not being there in the summer.

I guess if you have to raise rates you have to, but raising $20/week is a ton. Good luck! I hope you don't lose families over this.

 

[clutter]

I agree that you should adjust annually, and I'd inlcude that in your letter.

I might also consider stepping the increase. If someone was with you the last time you raised rates, they get the full amount, but maybe less for someone who just started. The ones that were around benefitted from your not raising your rates more than the others. Or, since it's been a while, you might consider increasing by $5 every few weeks.

You did compare yourself to home daycare providers, not centers, right? Traditionally home care is less expensive.

 

[Mom2Nick]

OP are you a licensed provider? DO you pay taxes on your earnings so the parents can claim the child care tax credit? If so then I think you are safe to try and raise your rates to at least be equal with the next guy up. If you are not then you need to tred lightly.

I think the $20 is a bit high though. I'd go a little less extreme and go with $10 - $15 per week - however I would word it as a "daily rate" so it stings less - lol. Ie In thes tough enconomic times, I am unfortunately in the position where I have no choice but to raise my rates from $30 per day to $33 per day/per child.

 

[Jennasis]

I think raising rates is fine, but $20/week is a lot of money. If our daycare did this, we would be in trouble, even if I get the raise I think I'm getting because DH's hours got cut significantly. Just remember because one parent's company is doing well, doesn't necessarily mean the other's is. Also, just because these teachers get paid well doesn't mean they don't have student loans to pay off or other expenses.

I think easing into this would be best, but be prepared that some may leave.
If you could afford to do a small increase now and another later, it would soften the blow and give these families time to re-allocate their money. Our daycare raises rates at the end of every August (beginning of the school year). The rates typically go up $5-6/week and we also don't have to pay for DD not being there in the summer.

I guess if you have to raise rates you have to, but raising $20/week is a ton. Good luck! I hope you don't lose families over this.

Rates go up $5-6 a week? That's only a $1 per child. HArdly enough to cover the rising costs of operation I would think.

While I feel for the families, it has to be profitable (or at the very least, breaking even) for the provider.

Wanted to add: Have you considered doing a $20 increase for NEW clients, but a smaller (incremental) increase for existing clients? Say $5 a week now, then another $5 a week in 3 months, and so on and so on.