Rate increase amount

I want to increase my rate by $3 a day. Do you think that the jump is too much ?
I want to go from $32 --> $35 and $35 is pretty normal. The range in this area is $28-$40 but the average is around $33-$35.
I started lower at $32 because I was just getting started but now that a year is over and I have been able to attract new clients at $35 I want to raise the rate even for my existing daycare because it will mean over $100 extra a month.
I do feel a little guilty that the full time parents will have to pay $60 a month more but on the other hand - I need to make a profit too -right?
How much do you increase your rate and have you ever done $3?

How many families do you have at the lower rate and will you be keeping them a long time. Ex. I don't take kids in school so they come at age 1 and leave at age 3 1/2 or they go on maternity leave 12-18 months after starting.

A jump of $15 a week means you will probably anger and annoy some parents and they will leave care for the other ladies that are charging under $35 which means you will lose in the long run unless you are able to fill the spaces with higher paying clients right away.

I only raise my rates for incoming families and even then only do it every 3-5 years. At the same time I have been in care long enough that I find I have to scramble to find enough deductions in the sense that I have everything I need so my expenses are limited to consumables such as food, toilet paper etc. and craft supplies but with the little ones I don't use anything elaborate. I cut costs at one point by cutting back on craft supplies and my parents either didn't notice or didn't care.

I would probably rethink the increase based on how much you really need. Have your expenses really gone up $60 per child per month or is there a way to look at the total amount you need per month and then divide it out so there is a less increase per family. I understand how nice the numbers look when you take the full $35 and multiply by 5 but a sudden $3 per day is quite a percentage jump all at once for a parent's budgeting. Just start moving towards the higher rate for all is one option or let parents know as of say Jan 2011 that the new fees will apply and ask them to sign contracts by a certain date giving you time to replace if they wish to leave. Alternately you could take the risk depending on your area and say as of Sept 2011 the new rates will be and then replace anyone that disagrees and leaves. Hard call but I know how more money seems so appealing - but it isn't if families leave in anger saying they feel duped and accepted under false pretenses and the word is spread.

Rate increases are tricky business. They are necessary in the long run, but have to be handled carefully since they do, indeed, tend to tick people off. I was actually thinking the other day that it was something I should consider.
Myself, I think $60 per month/ family is a little steep. I understand the need for the extra income, but from their perspective, is it justified? If you believe it is, then do it. Ultimately, as we all know and love, you call the shots.
Here is what I think is important: I don't want to change rates on families already in care, unless it has been quite a long time. So I will be changing my rate schedule, but "grandfathering" (so to speak) the current clientele. Those folks will be given a 3 or 6 month heads up.
You said that you have now been in business for a year. Have you had all the same clientele for that period? I am guessing that anyone who has only been around a few months will be unhappy if their rates increase already. Do any of them have more than one child with you? For them that won't be a mere 60 bucks, it's 120, which may not be managable for them.
Believe me, I am not saying you can't raise your income, just hoping to point out some of the common issues with parents when you do so!! Good luck, and let us know how it goes.

Don't take this the wrong way. I think all daycare providers deserve to be paid fairly and if everyone started out at the same rate we wouldn't even have nickel and dimer parents or providers because daycare would just be whatever cost the market dictates in your area.

Now, here is the part where I say, don't take this the wrong way...............

I ALWAYS warn parents looking for care away from providers who start out undercutting everyone else in town. Because one of two things ALWAYS happens. Either the provider will quit because she is not making a sufficient profit to pay for her own living expenses or, as in your case, they increase the fees to a level that is comparable to their market. Either way the parents WILL and DO lose out on that "cheaper" care that lured them in in the first place.

Parents WILL be upset - at least some of them. Some of them might even leave. But, as much as I do think it is the providers "fault" (and I use that term loosely) for not anticipating a fair and equitable fee it is also the parents's faults too for taking on care that is so obviously cheaper than the going market value. They assume some risk by choosing the cheapest provider in the city.

The short answer is live and learn. You have now learned from your past mistakes of offering too low a fee for what you do. Now you are fixing your mistake and moving on. The parents are learning that cheaper care isn't really worth the risk and that all daycare comes at a cost because that cost is necessary.

You change your fees and move on - with our without your current families.

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Originally Posted by mom-in-alberta

Rate increases are tricky business. They are necessary in the long run, but have to be handled carefully since they do, indeed, tend to tick people off. I was actually thinking the other day that it was something I should consider.
Myself, I think $60 per month/ family is a little steep. I understand the need for the extra income, but from their perspective, is it justified? If you believe it is, then do it. Ultimately, as we all know and love, you call the shots.
Here is what I think is important: I don't want to change rates on families already in care, unless it has been quite a long time. So I will be changing my rate schedule, but "grandfathering" (so to speak) the current clientele. Those folks will be given a 3 or 6 month heads up.
You said that you have now been in business for a year. Have you had all the same clientele for that period? I am guessing that anyone who has only been around a few months will be unhappy if their rates increase already. Do any of them have more than one child with you? For them that won't be a mere 60 bucks, it's 120, which may not be managable for them.
Believe me, I am not saying you can't raise your income, just hoping to point out some of the common issues with parents when you do so!! Good luck, and let us know how it goes.

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I have had all the families with me since the whole year mark already and none of them are full time siblings so it shouldn't be too much of a burden on the full time families I have.

As Judy said - it is my own doing. I started off at 32 with the intent of raising prices once I 'lured' families in. I really always planned to get to $35. Heck I was paying $35 to my providers SEVEN YEARS AGO and prices of living have definitely gone up in the last 7 years.

I have seen providers start at $25, $28 around here when they first get started so I thought I was being more reasonable at $32.

I really am sort sof surprised (but not offended Judy !) that the responses are so cautious about rate increases. I really thought it was quite standard to raise rates once a year or so. I have used home daycares in the past and had rate increases while using them and it didn't get me to consider actually changing cares

For daycares that raise rates each year one of two things usually happens. It is spelled out in the contract at time of signing that rates are increased annually or the amount of increase each time is gradual so as to be insignificant and therefore tolerated by most families. You are seeking a pretty heft raise all at once. From a budgeting standpoint that is a lot to handle. A dollar a day is the cost of one less coffee for some a $3 raise is the cost of lunch. Another option is to do it in segments so do $1 in Sept , $1 in Jan and $1 in June with the idea that by next summer all families will be paying $35. It does come down to a reputation thing. As a parent I would realize that you need to use the money for the kids and personal but to give you an increase of $60 a month is more than some parents would get with their raise. Where was the last place you heard that got a 10% raise per hour which is what you are asking for. In the grand scheme of things a $5 raise per week x 5 kids is $25. That should be enough to feed them pretty much meaning the rest of the money you make now is pretty much yours for the house expenses. Which don't forget you would be paying whether you had kids in care or not so it is a bonus that someone else pays for some of your house expenses which comes out of your income portion. I get that most caregivers make $35 per hour and I do too just not sure how you are going to go about changing what has happened all ready without simply telling the parents ok look I have changed my mind and as of whatever date I want to charge what everyone else charges and you can stay or go or whatever and then be prepared for them to leave and go with the lady down the street also charging $35 but it is the dishonesty/mistrust they will now feel in you that will make them want to leave. Yes you should be making more just be careful how you go about getting it.

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Originally Posted by playfelt

For daycares that raise rates each year one of two things usually happens. It is spelled out in the contract at time of signing that rates are increased annually or the amount of increase each time is gradual so as to be insignificant and therefore tolerated by most families. You are seeking a pretty heft raise all at once. From a budgeting standpoint that is a lot to handle. A dollar a day is the cost of one less coffee for some a $3 raise is the cost of lunch. Another option is to do it in segments so do $1 in Sept , $1 in Jan and $1 in June with the idea that by next summer all families will be paying $35. It does come down to a reputation thing. As a parent I would realize that you need to use the money for the kids and personal but to give you an increase of $60 a month is more than some parents would get with their raise. Where was the last place you heard that got a 10% raise per hour which is what you are asking for. In the grand scheme of things a $5 raise per week x 5 kids is $25. That should be enough to feed them pretty much meaning the rest of the money you make now is pretty much yours for the house expenses. Which don't forget you would be paying whether you had kids in care or not so it is a bonus that someone else pays for some of your house expenses which comes out of your income portion. I get that most caregivers make $35 per hour and I do too just not sure how you are going to go about changing what has happened all ready without simply telling the parents ok look I have changed my mind and as of whatever date I want to charge what everyone else charges and you can stay or go or whatever and then be prepared for them to leave and go with the lady down the street also charging $35 but it is the dishonesty/mistrust they will now feel in you that will make them want to leave. Yes you should be making more just be careful how you go about getting it.

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Hmmm it is food for thought ...I do have more to think about reading all the responses

I have it clearly stated in my contract that rates may increase yearly in January when the contract is reviewed and renewed. That way it is no surprise to anyone if I do raise them. That being said, since I just started in March, I am not planning on raising the rates this year for anyone, but likely will the next year. I also stated the amount it may go up by. I think this is pretty standard, but the key is that the parents are aware of it and have agreed to it by signing the contract. Plus, I started out charging a fair rate, so I have no need to raise it immediately.

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Originally Posted by Spixie33

I really am sort sof surprised (but not offended Judy !) that the responses are so cautious about rate increases. I really thought it was quite standard to raise rates once a year or so. I have used home daycares in the past and had rate increases while using them and it didn't get me to consider actually changing cares

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I am NOT cautious about raising fees and I did NOT want my reply to imply that sentiment. I think you SHOULD raise your fees. I just wanted you to see it from "the other side" with regard to being a new provider and the error in your logic.;)

I raise my fees EVERY year. Yep, ALL my contracts expire Dec 31st of every year and the new contracts that come into effect Jan 1st always include a fee increase. Typically, unless something really strange happens in the world of finance etc, my fees increase by $1 per day per child every year. So, that is an additional $5 a week which I think is MORE than fair for a parent to pay more of every year. And that one dollar a day per child can make a big difference to a provider. That is an additional $25 a week, or about $1250 a year. BUT, the BIG difference happens cumulatively. For example. When I started 8 years ago at $30 a day my income would have been $37,500 a year (all assuming we are always full and working 50 weeks a year at five kids in care). NOW, 8 years later my fees are earning me $47,500. See the difference that ONE DOLLAR PER DAY can make over the long haul??

Something else I typically do is if I want to really increase fees when I feel inflation is costing me more to buy supplies and feed my own family, is to do a real fee hike to any new family coming in. So, while your fees might be $32 a day right now, you start newbies off at $35 a day (or more). I am actually doing this right now. My fees are currently $38 a day but any new family coming in will start off right now at $40 a day. It's just an easy way to increase your fees without anyone really realizing it because they are accustomed to paying that rate right off the get go.

Fee increases are a hard issue in childcare. I let the parents know individually about the increase then I give them each a letter, putting a copy in each of their files.
The average rate in our area is $40-$45 per day, with the big centres charging $60 for infants and $50 for 3+year olds per day. I remind that parents that they claim approx. 20% on their income tax, and that I supply the receipts at the end of the year. So, in actual fact they are only paying $40X80%=$32.00 per day. They hourly rate for a 10 hour day is $3.20 and I am sure that the parents would not work for this amount.
If the parent seems a little up set I remind them of what they pay a babysitter ($6-$10 per hour) and that I have more qualifications and experience than a babysitter and that I am receiving a lot less.
I have only lost one family because of fee increases and this is fine with me as I do not want the worry about my wage. This is a business and it is the parents decision as to whether this is an important issue to them, but I can guarantee you that if their favorite restaurant raised their rates or their favorite bottle of wine went up by a few dollars they would still spend their money on these things.

Horsegirl; I love your point about the 20% deduction! I never thought of explaining it that way to parents. :)

K. So then I have another issue/question....

I have not raised my fees in almost 4 years and to tell you the truth I haven't noticed until recently where all the kids are pretty big now and are eating like horses! lol
So my question is....If i have had the same families for 3 years and have never raised my prices can I do so now and for how much?
I am and have ALWAYS been the cheapest in my area. I never used it to lure people in as you say nor have I ever had the desire to raise prices (as they have been the same for 4 years). Even if I raised my fees I would still be cheaper than anyone else in my area. I am still worried however that the parents will be upset and I have no desire to upset anyone or just kick someone out for getting upset.
How much should I raise my price by and also how should I tell them and how much notice should I give?
Thanks!

I haven't raised my fees in a few years but I have added paid days off to my contract so I got a raise that way. I have already told all my families that when we renew our contract next Nov. 1st I'm increasing my rates $2 or $3 per day and I told them it is only to keep up with rising food costs. I think that if you tell parents you are trying to keep up with rising food costs and cost of living increases that is all the explanation necessary. If you are doing a great job then have confidence in yourself and know that you are worth the money.

My fees are on the lower end of the scale because I am a renter and run my daycare in my apartment. If I raised my rates to the higher end of the rate scale I would just be paying too many taxes.

$35.00 per hour!!? Geez, what am I doing wrong!? :confused: