Starting a childcare business can be a profitable venture, especially if you conduct thorough market research and financial planning and focus on quality care and a safe environment for children. However, there are other strategic ways you can make your business more profitable beyond tuition. 

In this article, we present some ideas for enhancing your center’s profitability by implementing new revenue streams. From forming strategic partnerships to exploring enrichment programs, we'll explore how to increase your daycare profit margin while maintaining excellence in childcare.

Are daycares profitable in 2024?

When managed well, childcare businesses can be profitable, making an average profit of $37,000 annually. While some daycare owners make over $60,000 in profits, others make $20,000 or less. Diversifying revenue streams for small childcare centers is crucial to profitability. Alternative revenue sources, like strategic partnerships and enrichment programs, can also help small daycare centers grow and gain financial stability. 

Relying solely on tuition fees can make a childcare center vulnerable to enrollment fluctuations, seasonal changes, and economic slumps. Diversifying your income streams spreads the risk across multiple sources, providing financial stability and building resilience.

Best ways to grow new daycare revenue streams

Increasing your daycare’s revenue enables you to employ well-trained quality staff, buy efficient equipment, and make improvements to your facility. Here are some of the best ways to increase your income streams:

Explore enrichment programs

Enrichment programs enhance children’s creativity and help them explore and nurture their natural abilities. These programs will attract more families to your business and increase your enrollment rates, helping you generate additional income. You can partner with local vendors or use your staff to help organize and provide well-structured and age-appropriate enrichment activities like art, music, dance, sports, cooking, foreign languages, and science. 

Form strategic partnerships

Partnering with local businesses that target children and families, like toy stores, pediatricians, and clothing businesses, can help promote your center to their customers. In exchange for referring your services, you could offer their employees a small discount on your services or refer their business to your network. 

Having a parent referral program helps to bring in a steady flow of clients who already trust your services, thanks to your existing families raving about your business. These referrals are a cost-effective and reliable way to increase enrollment and income. While some parents might refer your daycare to their networks without being prompted to do so, setting up a formal referral program with incentives, like a discount on rates, a gift card, or other type of reward, will go a long way.

Implement additional services

Offering more paid services will draw in a larger clientele of families and boost your revenue. Parents who need to be at work early and leave late will appreciate services like early drop-offs and late pick-ups. You can also offer a “night out” care service once a month or provide extra diapers. If your daycare is eligible for meal reimbursement, you can provide dinners for the children. 

Specialized classes like speech, reading, and math for children with learning delays and cognitive disabilities are also great add-on services. Be sure to pay attention to parent feedback and suggestions for the best additional services to add to your business and implement them one at a time to determine their sustainability. 

Consider online platforms and courses

Providing paid courses on a quarterly or biannual basis for childcare professionals and parents can also help grow your revenue. Consider offering courses to parents that will empower them to engage in their child’s learning, support their development, and understand their behavior. You can also offer professional development courses to your staff on topics like empathy building, trauma-informed care, and technology in the classroom. 

Using online childcare management platforms will help you spend less time and money on tasks like invoicing and billing. A tool like brightwheel’s billing software automates and simplifies processes like payroll, billing, invoicing, reporting, and attendance tracking, saving you time and money.

Marketing strategies for diversification of income

Implementing effective marketing strategies is crucial for diversifying income in a childcare business. A well-executed marketing plan can help reach potential customers, create brand awareness, and build a positive reputation in the community. Try the below strategies to attract a larger client base, increasing enrollment and revenue: 

Digital marketing

Digital marketing is an affordable and essential strategy for promoting new revenue streams because digital platforms are easily accessible to existing and prospective families. You can market your business through:

• Your website 
• Blogging
• Email newsletters
• Social media platforms like Facebook, Instagram, and YouTube

Community engagement

Attending events organized by institutions and people in your community can lead to new revenue streams. You can host regular events like educational fairs and family picnics to reinforce your presence, familiarize the community with your programs, and introduce your new ideas. You can also distribute brochures and enrollment forms for your new enrichment programs, courses, and additional services. Remember to gather contact information for follow-up.

Word of mouth

Happy clients are your best advocates. Make a name for yourself by offering programs, courses, and services that people will talk about. Parents who experience exceptional services will share their experiences with their families, friends, and social media connections. Encourage your parents to share images and video content of their experiences on social media, provide testimonials, or leave positive reviews on sites like Google or Yelp.

Financial planning for diversification

When incorporating new revenue streams, it’s important to appropriately plan and create a budget for your childcare center that will ensure a viable venture. Here are some tips to consider:

Estimate your expected revenue and profits

Use market research to estimate the average revenue you can expect from each new income stream. Categorize your ideas using criteria like frequency and predictability. For example, early drop-offs and late pick-ups might be a daily income stream, while online courses could be a quarterly income stream.

Some enrichment activities might be more profitable during school breaks than during the regular school year. Estimate how much each stream brings in monthly, quarterly, and annually, and determine what your profits will be. 

Consider the risks

Every income stream has a certain level of risk. Consider the risks and costs of each income stream to determine how it will affect the business.

For example, offering discounts and gift cards to parents and community members is a cost that, if not managed properly, may negatively affect the business financially. Other risks include offering refunds on enrichment programs or courses for which you’ve already spent resources.

Plan ahead

Be sure to determine your goals and priorities, then allocate your resources and expenses accordingly while planning for risks. Also, monitor your current performance and compare it to your projected performance. 

Planning ahead will help you improve your decision-making about the right diversification strategies and options. 

Overcoming challenges

The common challenges you may face when diversifying revenue include:

• Lack of expertise in the new services, creating costly mistakes or delays
• Diluting your brand identity
• Increasing your costs, for example, hiring vendors to offer a service
• Facing more competition
• Straining operations
• Failing to meet customer expectations
• Multitasking among employees, reducing productivity
• Short-term capital needs

Possible solutions to the above challenges include:

• Creating a clear and compelling vision and aligning your diversification strategy with it 
• Conducting extensive research and analysis of your environment to identify the benefits and drawbacks of diversification
• Testing and validating your assumptions and hypotheses about the performance of your new markets, products, or services
• Learning from your diversification experiences and making necessary adjustments 
• Monitoring and evaluating your results and being flexible and willing to change course if necessary

It’s crucial to develop a proactive and adaptable mindset before and during diversification for successful implementation. When your staff notices your growth mindset, they’ll adopt the same mindset and support your ideas.

Increase your daycare profit margin

Diversifying your revenue sources through additional services, enrichment programs, and strategic partnerships can not only increase your income but also meet the varying needs of the community. This can help make your daycare more profitable while enhancing your commitment to excellence and dedication to providing exceptional child care.

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.