Managing your childcare center's finances well is essential to running a successful childcare business. To make your business lucrative and earn the most profit possible, you must balance profit-boosting activities with cost-cutting measures that remove unnecessary spending while still providing quality care to the children in your center. Learning to maximize your profits while minimizing your expenses will lead your childcare business to financial success.

In this article we discuss cost-cutting strategies and ways to boost your profits while maintaining a high-quality childcare program. 

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Understanding your childcare business finances

Before you can maximize your childcare center's profits and cut costs, it is important to understand how your center makes and spends its money. Creating a budget for your center will help you assess your business' finances to find ways to adjust your spending habits and income goals to increase your profits, decrease your expenses, and improve your business's financial health without diminishing the quality of the care you provide.

A childcare management software like brightwheel billing allows you to automate your billing and invoicing process, saving you time and making payments easier for families. Brightwheel also integrates with QuickBooks directly, so you can monitor your center's cash flow and view a dynamic record of its finances from a single dashboard.

Monitoring your business' financial metrics

Monitoring your childcare business' financial health by keeping track of your goals and financial metrics will help you find opportunities to curb unnecessary spending and increase your business' profits. You can use brightwheel's billing dashboard to track balances, payments, and cash flow in one place and get a complete view of your center’s finances.

Consider your center’s revenue growth, expenses, tuition, and fees when assessing the financial health of your childcare center.

Revenue growth

Your center's revenue—the total income it generates—is one of the most important financial metrics used for monitoring because it provides insight into the overall health of your center's sales.

Understanding how your revenue fluctuates monthly will help you determine areas of your business that can be improved and optimized to increase your profits and lower expenses. For instance, if your budget shows that your center's revenue has decreased over several months, you may want to consider adding additional revenue streams to increase your profits, such as hosting paid seminars for families or selling digital products for educators.

Expenses

Monitoring your expenses, including staff salaries, rent, utilities, supplies, customer acquisition costs, and maintenance costs, will help ensure the health of your childcare center. Using a budget to keep track of the money you spend on your childcare center each month will help you find and cut unnecessary expenses that won't diminish the quality of your care, so you'll have more money to spend on resources that can increase your center's profits.

Tuition rates and fees

The tuition and fees you charge for your services are a major component of your childcare center's revenue. Increasing tuition rates and charging families fees for registration, late pickups, and supplies can quickly boost your center's profits. Consider raising your center's tuition and fees every year to protect your center from debt caused by rising costs and inflation. You can use brightwheel to streamline your enrollment process with online applications and waitlists and enroll your families in autopay to ensure you get paid on time, every time.

Common financial pitfalls for childcare businesses

Childcare business owners who don't manage their finances efficiently and plan their spending carefully may face unexpected costs that put their businesses at risk. You can protect your business from unplanned debts by avoiding common financial pitfalls.

Underestimating startup costs

Understanding the true costs of starting a childcare center before opening is vital to the success of your business. While exact costs vary depending on your location and the type of childcare facility you open, startup costs often include utilities, rent, insurance, supplies, food, furniture and equipment, advertising and marketing expenses, and licensing and inspection fees.

Underestimating your business' startup costs or neglecting to sufficiently budget for your startup costs can increase your business' debts and force you to delay the opening of your center. Researching the startup costs for a childcare center in your state and adjusting your center's budget to accommodate the expenses will help you avoid unnecessary debt so your center's early revenue can go toward improving your business instead of settling debts.

Budgeting inefficiently

Without a carefully planned and managed budget, it can be difficult to anticipate costs and set aside money to cover unforeseen expenses, such as emergencies or new licensing requirements. Failing to create an efficient budget and regularly updating it may lead to cutting quality services to save money and cover unexpected costs. This will ultimately reflect poorly on your business as families pay for fewer or lower-quality services for their children as a result of those cost-cutting measures.

Neglecting marketing

Marketing your childcare center is an essential profit-boosting strategy for your childcare business. Without marketing, you may have trouble enrolling new families in your program because they aren’t aware of the services you provide.

Neglecting to market your center to families in your community or relying solely on your families to market your center via word-of-mouth reduces your profit-building opportunities and slows the growth of your center. It is important to research the needs of the families in your community so you can develop messaging and communicate how your center meets those needs.

Cost-cutting strategies

Implementing cost-cutting strategies for your childcare business will help you save money that you can use to improve and expand your center's services. By improving your center's efficiency, reducing unnecessary expenses, and making cost-effective purchasing choices, you can reduce your center's costs without lowering the quality of the care you provide.

Streamline operations for efficiency

Improving the efficiency of your childcare business by streamlining your operations can help you save time and money for your childcare business. For example, you can streamline your center's communication with families using communication apps. Instead of sending your children home with letters to their families at the end of the day, you can use technology like brightwheel's communication feature to message families in real-time and share updates on their child’s daily progress. 

In addition to streamlining communication, a childcare management software like brightwheel can simplify your billing, admissions, and check-in processes by generating reports in one click, automating administrative tasks, and saving each staff member 20+ hours a month. 

Implement cost-effective scheduling 

Implementing cost-effective staff and student scheduling is essential for efficient operations at a childcare center. One approach is to utilize scheduling software or applications that help optimize staff allocation based on class sizes and daily demands. This ensures that the center has an appropriate number of staff members present while avoiding overstaffing, which can lead to unnecessary expenses. 

Additionally, considering flexible schedules and part-time staff options can be cost-effective, especially during periods of lower enrollment. Cross-training staff members in multiple roles can also enhance flexibility and reduce the need for additional staffing. When it comes to student scheduling, grouping children based on age and developmental needs can facilitate efficient use of resources and staff time. Moreover, implementing structured routines and activities can help streamline transitions and maximize learning opportunities for children.

Reduce waste and unnecessary expenses

Reducing your center's waste and unnecessary expenses is a simple way to cut costs. By closely monitoring and tracking supplies, such as food, you can avoid overstocking or wastage due to expiration. Additionally, implementing environmentally-friendly practices, such as recycling and reducing paper usage, not only helps reduce waste but also lowers expenses associated with purchasing and disposing of materials. 

Another way to cut unnecessary costs is by optimizing energy consumption through energy-efficient appliances, smart thermostats, and lighting systems. Embracing digital solutions like brightwheel for administrative tasks, such as online admissions and payment systems, can significantly reduce paperwork and streamline processes, saving time and money.

Make smart purchasing decisions

An efficient inventory management system can allow you to make smart purchasing decisions. Monitor your inventory on a regular basis and check your supplies before restocking to ensure you're only buying items you need and aren't over-purchasing.

When buying furniture and decor for your center, consider purchasing low-cost and discounted items from thrift stores. This is a great way to save money while supporting your community.

For lesson plan and activity inspiration, consider searching online for free printable activity worksheets you can use. Or purchase a complete curriculum system like brightwheel's Experience Curriculum that combines digital lessons in the brightwheel app with hands-on learning materials shipped to you monthly. Your teachers can spend less time planning and prepping activities and more time with the children in your program. 

Buy supplies in bulk and negotiate with suppliers

Buying in bulk or from wholesale suppliers and keeping stockpiles of supplies will help you save money and give you reserves that you can use when your center's funds are low.

Supplies you can buy in bulk include:

• Nonperishable food
• Notebooks
• Craft supplies (e.g., markers, crayons, construction paper, paint, colored pencils, glue, safety scissors, modeling clay, glitter)
• Tables and chairs
• Toiletries
• First aid supplies
• Cleaning supplies

Negotiating prices with suppliers can help you get the best deals for your center's supplies. Try the following negotiation tactics to cut costs when buying supplies and equipment:

• Build a positive relationship with your suppliers: As you negotiate, keep in mind that your suppliers are people like you who want what's best for their businesses, and it's easier to come to an agreement when you view negotiations as conversations about finding what works best for both your center and your supplier's business. So be friendly and remember to make a connection with your suppliers before negotiating prices.
• Research the costs of your supplies: Before negotiating with suppliers, it’s important to do research into the costs of what you intend to buy to help you gain an understanding of the market so you can determine what price ranges fit your budget and what prices are beyond the typical cost of the products. Knowing how much other childcare centers pay for the supplies you want to buy will help you determine a fair price you can present to your supplier during negotiations.
• Don't limit yourself to one supplier: Buying your supplies and equipment from multiple suppliers will give you more options for the best deals. For example, if one of your suppliers offers prices that are well within your budget but they've repeatedly sold you low-quality products that wear down quickly and require constant repairs, and another supplier offers higher prices but their products are higher quality, you may want to consider buying from the second supplier when your budget allows you to spend more. Finding suppliers whose products meet your quality and pricing expectations—even if you have to shop around—will help you create the best childcare experience for your families.
• Buy supplies during slow seasons and take advantage of deals: Buying your supplies and equipment during slow periods may help you get better deals. Look for deals on supplies when your business slows down, such as during the summer. Suppliers may have more inventory they're willing to sell for lower prices when the demand for childcare business supplies is lower. You can also cut costs by taking advantage of deals. During the end of November and beginning of December, for instance, you may be able to take advantage of Black Friday deals on toys and games for your children.

Choose cost-effective equipment and supplies

Buying high-quality equipment and supplies will help you save money on repairs and replacements. For instance, buying high-quality, long-lasting markers for arts and crafts will save you from having to buy new markers frequently.

Buying equipment that isn't likely to break, such as sturdy chairs and durable toys, will help keep your children safe from injuries and save you money on repairs and replacements. More durable and longer-lasting equipment and supplies may be more costly initially, but they're a long-term investment that will save you money and stress during the school year.

Embracing technology and innovation

Embracing technology will make your business more efficient and will save time and money. Using technology to automate your business will help you increase profits while also saving your staff time and labor spent on administrative tasks.

Automate administrative tasks to reduce costs

Automating your center's administrative tasks, such as taking attendance, billing families, sending progress reports, and paying your staff, will help you reduce your expenses and save time. Childcare management software like brightwheel has countless features to save you time and efficiently manage your program. With automated invoicing, payment notifications, and autopay, on-time payments are increased, and with easier tools to customize curriculum and make observations, your teachers can reduce their workload.

Use technology for marketing and customer engagement

Using technology to market your center to your community and engage with families will help you grow your audience and bring in new business to boost profits. Creating business profiles for your center on social media will give prospective families an easy way to reach out to you with questions they may have about your center and learn more about your services. 

Ask your current families to leave a review or testimonial about your program on sites like Google or Yelp to build your credibility and stand out to prospective families. 

Optimizing staffing and human resources

Optimizing your center's staffing procedures and human resources can help you increase staff retention, thus saving money on staff onboarding and training. Technology like brightwheel can prevent over-scheduling staff, simplify your payroll process, and streamline communication with staff members.

Effective staff management and scheduling

Effectively managing your staff and your center's schedule will help you avoid over-scheduling your team and help prevent burnout among your employees, which will increase your retention rates and keep employee morale high. Childcare centers that do not manage their staff effectively risk losing families because of personnel changes and high staff turnover.

Using technology to create and manage your staff's schedules will help your employees stay informed about scheduling changes. Childcare management software like brightwheel ensures proper staffing to maintain each room’s target ratio and makes it easy for your employees to view their schedules.

Professional development on a budget

Offering professional development opportunities to childcare center staff is crucial for their growth and the overall quality of care provided. Even on a limited budget, you can still provide valuable learning experiences. One cost-effective approach is to organize in-house training sessions led by experienced staff members or external experts who are willing to volunteer their time. This allows for knowledge sharing and skill development within the center itself. 

You can also encourage staff to participate in webinars, free online courses, or virtual conferences, which often have lower registration fees compared to in-person events. Additionally, tapping into local resources such as libraries, community centers, or government agencies can provide access to free or low-cost training materials and workshops.

Volunteer and internship programs

Implementing volunteer or internship programs at your childcare center can be a cost-effective way to enhance staffing and save money. Establish partnerships with local high schools, colleges, or vocational training programs to create internship opportunities for students pursuing early childhood education or related fields. This allows your center to benefit from additional help while providing students with valuable hands-on experience. 

In addition, reaching out to community organizations, such as senior centers or service groups, can help recruit volunteers who are willing to contribute their time and skills to your center in exchange for the opportunity to engage with children and support the community. You can even ask your children's parents and family members to volunteer at your center to boost family engagement.

Enhancing revenue streams

Adding additional revenue streams to your childcare center can help boost your profits and attract new business. Diversifying your income sources and offering new services to your community can help you market your center to new audiences. You can also bring in new revenue for your center by applying for government grants and subsidies.

Diversify income sources

Diversifying your income by offering additional services beyond early childhood education will help you maintain a steady flow of revenue and sustain your profits if your business loses a significant source of revenue. For instance, one option is to rent out your facilities during weekends or holidays for events, workshops, or birthday parties. By leveraging the available space, you can tap into the event hosting market and generate supplementary income.

Add new services or programs

Adding new services or programs to your business can boost your profits and transform your childcare center into a major facility for all children. You can extend your reach by offering summer programs and enrichment activities, such as sports and art lessons, to school-aged children in your community. Offering new programs shows that your center can evolve and grow with your community and support families even after their children outgrow your childcare program.

Explore government grants and subsidies

Grants and subsidies are financial assistance programs that government organizations, foundations, or corporations provide to childcare centers and daycares. For example, the US Department of Agriculture (USDA) offers a meal subsidy program called the Child and Adult Care Food Program (CACFP) that provides reimbursements for nutritious meals to eligible children at childcare centers.

Unlike loans, government grants do not need to be repaid. Applying for government grants and subsidies can help you save money on resources for your center. You can contact your state's childcare services department to learn more about the grants and subsidies that your center may be eligible for.

Pricing strategies for childcare services

Your daycare's pricing strategy will influence how families pay for your services. The best pricing strategy for your center will depend on the type of program you have, the number of children you have enrolled, and the types of services you offer.

Market rate pricing

Market rate pricing uses the prices of competitors in your area to determine an appropriate price for your services. To implement market rate pricing, research the tuition and fees of daycares and childcare centers in your area. Note whether the center is a home-based program, or small or large center-based program because this will influence pricing. Then compare the pricing of centers similar to yours to the prices you've set to determine the appropriate price ranges for services in your market.

Penetration pricing

Penetration pricing is a good option if you're trying to attract your first few families to your center. To use penetration pricing, set your center's rates lower than your competitors' rates to attract customers and then increase your rates after a set period of time.

Versioning pricing

Versioning pricing may be a good choice for your center if you provide services to various age groups. Versioning pricing uses a tiered system to charge families based on their child's age. For example, a family that enrolls an infant may be charged $1,500 monthly, while a family that enrolls a preschooler may be charged $900 monthly. Versioning pricing accounts for staff-to-child ratio requirements and the amount of care and attention children need at different ages and points of their development.

Value-based pricing

Value-based pricing factors the perceived value that families receive from your services into your pricing structure. For example, you may charge higher rates because you offer a specialized curriculum or serve high-quality, organic meals to your children. Many families will be willing to pay higher prices because they know their children are receiving a level of care they may not receive elsewhere.

Cost-plus pricing

Cost-plus pricing charges families a fixed percentage of the cost of caring for their child. To implement this structure, calculate how much profit you need to make after covering your expenses and add this percentage to the cost of caring for a child. For example, if you need to make a 25% profit every month and your center's cost per child is $700, calculate $700 plus 25% ($175) for a total of $875 per child per month.

Balance your profit-building and cost-cutting activities to protect your center's reputation and finances

Making enough money to keep your center running smoothly while also turning a profit and saving enough money to cover unforeseen expenses can be a challenging balance to find. By monitoring your center's finances, spending wisely, and using technology to lower your costs, you can provide families with high-quality care and achieve the financial stability you need to grow your business.

Brightwheel is the complete solution for early education providers, enabling you to streamline your center’s operations and build a stand-out reputation. Brightwheel connects the most critical aspects of running your center—including sign in and out, parent communications, tuition billing, and licensing and compliance—in one easy-to-use tool, along with providing best-in-class customer support and coaching. Brightwheel is trusted by thousands of early education centers and millions of parents. Learn more at mybrightwheel.com.