Setting Best Prices and Billing for a Daycare Business
Most daycares set tuition by looking at the center down the street and shaving five dollars off. That is how you end up busy and broke, because your costs are not their costs. The right price starts from a single number you calculate before you glance at a competitor: what one filled slot actually costs you to staff, feed, and house per week. Price above that with a real margin, bill it in advance, and collect it automatically, and the business works. Skip the math and you are running a beloved charity.
Start from your cost per slot, not the competitor’s price
Your labor is the number that drives everything, because ratio dictates it. An infant room at 3:1 means one teacher’s wage is spread across only three tuitions; a preschool room at 10:1 spreads that same wage across ten. That is why a flat “we charge $250 for everyone” price loses money on infants and overcharges preschoolers, quietly pushing away the families you most want.
Build the cost per slot from the bottom: teacher wage per hour divided by the children that teacher legally covers, plus your rent, food, insurance, and supplies allocated per child, plus your target margin (a healthy center runs 10% to 20% net). Only after you have that floor do you look at the market to see how much room you have above it. The full profit picture is in how much profit a daycare can make.
| Age group | Typical ratio | Weekly tuition range (US) | Why it prices where it does |
|---|---|---|---|
| Infant (6wk-12mo) | 3:1 or 4:1 | $250-$450 | Tightest ratio, highest labor per child |
| Toddler (1-2yr) | 5:1 or 6:1 | $220-$380 | Still labor-heavy, high demand |
| Preschool (3-4yr) | 10:1 or 12:1 | $180-$320 | Ratio spreads the wage across more kids |
| Before/after school | 15:1+ | $90-$180 | Part-day, cheapest to staff |
Ranges vary widely by metro; a slot in San Francisco or Boston can run double a slot in rural Ohio.
Sell the slot, not the attendance
The single most important billing concept in childcare: parents are paying to reserve a specific licensed seat with a specific teacher, held for their child alone, every day. They are not paying per visit. That means tuition is due in full whether the child attends five days or two, whether they are sick, on vacation, or home with grandma. You cannot resell an empty seat by the day, so you cannot discount it by the day.
Put this in writing in the enrollment agreement in plain language: tuition holds the slot, is charged regardless of attendance, and is not prorated for illness or family vacation (many centers offer one discounted vacation week a year as goodwill, which is a choice, not an obligation). Parents accept this readily when it is explained up front and resent it deeply when it is sprung on them at the first sick day.
Collect automatically or you become a collections agency
The billing model that works is boring on purpose: invoice in advance (tuition for the coming week or month is due before care, not after), enroll every family in autopay by default, and set a written late fee that triggers automatically. Software built for childcare, Brightwheel, ProCare, or HiMama, runs the invoicing, autopay, and late fees for you and shows parents a clear ledger, so nobody argues about what they owe at 5:15pm during pickup.
The difference is stark. A center collecting checks and cash at the front desk typically carries 8% to 12% of billings past due and spends hours a week chasing it. A center on advance autopay carries 1% to 2% and spends that time on the classrooms. Getting families set up right is part of the broader operations covered in how to successfully run a daycare business.
Use subsidies and packages to fill the hard slots
Every state runs a childcare subsidy funded by the federal CCDF (Child Care and Development Fund), which pays licensed providers directly for eligible lower-income and working families. Becoming a subsidy-accepting provider opens a whole pool of families who cannot pay private tuition out of pocket, and it can fill slots that would otherwise sit empty, especially in mixed-income areas. The catch is cash flow: the state pays after care is delivered, often two to six weeks in arrears, so you carry the gap.
Beyond subsidies, thoughtful discounts fill seats without gutting your rate: a sibling discount (10% off the second child) fills two slots from one family, and a modest multi-day commitment or annual prepay discount rewards the families who stabilize your enrollment. Where subsidies fit into your launch is covered in the best way to start and get into a daycare business.
Accept state (CCDF) subsidy families
- A large pool of families the state pays for, which fills slots that private-pay demand alone would leave empty.
- Payment comes from the state, not the parent, so the tuition itself is reliable once you are enrolled in the program.
- It broadens who your center serves and can be a genuine community and marketing strength.
Accept state (CCDF) subsidy families
- Reimbursement lags 2 to 6 weeks behind care, so you finance the delay out of your own working capital.
- Subsidy rates are often below your private tuition, capping the margin on those slots.
- The paperwork, recertifications, and attendance reporting add real administrative time each month.
The story of a slot that cost more than it earned
Take a center charging one flat $230/week for every age. Their infant room runs 3:1, so a teacher earning $18/hour ($720 for a 40-hour week) is covered by just three infants paying $230, or $690 total, before rent, food, or insurance. That room loses money every single week. Meanwhile the preschool room at 10:1 collects $2,300 in tuition against the same $720 wage, a fat margin. The flat rate hid a room-by-room disaster: the profitable preschoolers were subsidizing the infants, and the owner had no idea which room to fix.
When they repriced to $290 for infants and held $230 for preschool, the infant room moved from a $30 weekly loss to a small gain, total revenue rose about $180/week per infant, and not a single family left, because $290 was still below the market for licensed infant care. The lesson: a flat rate averages your rooms into a lie, and pricing each age to its real ratio cost is how you stop bleeding on the seats you thought were fine.
Getting found is the part that decides everything
Even perfect pricing only works on a full building, and full starts with being found. Two free moves matter now: complete your Google Business Profile and list an honest tuition range so price-shopping parents self-qualify before they call, which saves you tours that were never going to enroll. And ask happy families for reviews, because a searching parent trusts other parents over any ad.
The higher-stakes piece is a website that does the selling. A parent comparing centers wants to see your ages, hours, tuition range, and a tour button in ten seconds on a phone. The gap between a site that books tours and one that just sits there is invisible until you count the calls. To have it built to convert, get a free website walkthrough. For Google Ads and local SEO, see our services. If you still need the numbers behind your plan, start at expntl.com.
Frequently asked questions
How do I decide what to charge?
Start from your cost per slot, not the competitor’s price. Divide a teacher’s wage by the number of children ratio lets them cover, add rent, food, insurance, and supplies per child, then add a 10% to 20% margin. That is your floor. Only then look at the market to see how much headroom you have above it.
Why do infants cost so much more than preschoolers?
Ratio. Infants require a 3:1 or 4:1 teacher-to-child ratio, so one wage is spread across only three or four tuitions, while a preschool room at 10:1 spreads the same wage across ten. Charging infants $60 to $150 more per week than preschoolers just reflects the real labor cost of the seat.
Do I charge parents when their child is sick or on vacation?
Yes, because they are paying to reserve the slot, not per day of attendance, and you cannot resell an empty seat by the day. State this clearly in the enrollment agreement. Many centers offer one discounted vacation week a year as goodwill, but that is a choice, not something you owe.
How do I stop chasing late payments?
Bill in advance, put every family on autopay, and set an automatic late fee, all run through childcare software like Brightwheel or ProCare. Centers that do this carry 1% to 2% past due; centers collecting checks at the desk carry 8% to 12% and lose hours chasing it.
Should I accept government subsidy families?
Often yes. State CCDF subsidies pay you directly for eligible families and can fill slots private demand leaves empty. The trade-offs are that reimbursement lags two to six weeks, rates can sit below your private tuition, and the reporting adds admin time, so size how many subsidy slots your cash flow can carry.
