Rate Change - How To Explain Steep Increase

[Lefse&Kids]

I am needing to raise my rates - not until the start of the school year but I am torn about how to explain this to parents.

When I started I charged well below the average for the area. I offered flexible hours, low rates and occasional care. Pretty much made myself an ideal candidate to get people through the door. (not for money, but I needed to get people in my daycare to build a reference base, I give lots of love here).

I have a parents that love me, and love that the kids don't want to leave. The problem is that in order to provide enough for my family my rates would need to increase nearly 50-60%.

I justify this raise based on the following.....

1. My mind would be less preoccupied with my personal money issues and instead on the children in my care.
2. I'm adopting a Montessori/Waldorf inspired program and it cost a bit more for those types of toys and supplies.
3. I'll be providing mostly organic meals, which cost me more too.
4. I provide great care and do not want to take on more children just for more money.

I understand there needs to be a balance between cost and care but as my sisters told me "anyone that charges that low of a rate, I would question the type of care provided"... They know I love kids and care for them well, but most parents out there would probably think the same thing.

My questions.....
How would you explain this to parents?
What has been your experience after raising rates?

[Blackcat31]

Pretty sure most parents already understand that expenses grow each year and that it is only the natural progression for any business to need to charge more or do less for the services they provide.

I raise my rates as needed. Over the last 20 years I have raised my rates several times. Some times those raises were closer together than others and once I went 6 years without raising rates a single cent.

What I do though when it is time to raise rates is say something like ".....like anything having to do with the economy, there is an ebb and flow and what I am currently charging and/or bringing in as income is no longer enough to continue to provide the type and level of care you are accustomed to so I have made the decision to raise the rates I am charging for my services."

Then I let them know when and how much.

Sometimes if the rate is a big change, providers ease into it by raising the rate in small increments over time until they are at the desired rate.

Other times, providers just say the new rate will be $xxx and will start on XXX day.

I would definitely NOT over-explain to parents why you are raising rates, but I would maybe try and show them that your rates are currently well below the norm for your area so that parents know that if they choose to leave because of the rate change, they probably aren't going to find anything cheaper.

Sometimes, you just need to do what you need to do (financially) to survive and hope for the best. You may have parents leave and you may not. There is NO guarantee in this business so all you can do is do what works for YOUR family budget and let other's do what they need to do for theirs.

[cheerfuldom]

Dont over explain. Write a letter to the parents the briefly describes the new items you are adding to this program. Outline your new rates. Do not apologize or explain everything. Give a deadline when they must decide if they want to remain with the program (I would give one week from the date of the letter) If they do not confirm their intent to stay or they say nothing, care will end on X date (three weeks from the date of the letter). New rates will begin on X date (four weeks from the date of the letter). Dont feel you have to give months of notice for these changes. With what I recommended, its at least two weeks notice to find care if they decide not to go with you but actually its three full weeks if they get the letter and know immediately if they are willing to pay for that care or not.

keep in mind that you are a business. When your utility rates are increased, no apologize or huge explanation is given. you get a brief notice saying rates will be x amount beginning x date. thats it.

[itlw8]

a 50% rate increase do be prepared to lose some of your clients. step one is raise you rates for all future clients. then let your current clients know what the new rate is for new clients. I would then raise the current ones slowly

How much depends on how much that 50% is... $100???? $50???? $25???

in dollars what are we talking

[wdmmom]

a 50% rate increase do be prepared to lose some of your clients. step one is raise you rates for all future clients. then let your current clients know what the new rate is for new clients. I would then raise the current ones slowly

How much depends on how much that 50% is... $100???? $50???? $25???

in dollars what are we talking

How much money are we talking here???

A 50-60% increase is pretty drastic. Do these families have careers that can accommodate such an increase?

I would agree with a gradual increase. For example: Issue your notice and list the reasons just as you have above. Tell families to accommodate the change, there will be a $25 per week increase on all families beginning August 5th. Another increase of $25 per week will take place beginning November 4th.

Just remember, you say your families love you but they may not so much after this notice. Families love cheap daycare providers. They feel like they are getting a deal because they are! As soon as you talk money with them, I bet their tone changes really fast! Be prepared to lose clients and start advertising.

[Lefse&Kids]

It would be about a 35 dollar per week increase for full time and part time. I'm going from 125 to 160 /wk for full time and 85 to 110 for part time.

Most places charge between 140 and 150 per week around here. Most do not do a Montessori/Waldorf type daycare (in fact, we only have 1 and its a preschool only and its always full - they have a waitlist a mile long) so I think its a demand here.

I expect to lose parents due to cost. I know financially some of them are strapped. The way I see it though, if I am willing to put my own family in hard times what am I doing to the kids I watch? I accept financial assistance for childcare and am willing to try and offer workable programs for the financially strained. But my business needs to grow first and I need funds to do that.

"How can you feed a horse with out first growing crops?"

I will have to try hard and no over explain anything. I am the one that wants everyone to see my passion and why I do things, when in the end it comes down to the dollar figures.......mostly.

[bunnyslippers]

I wouldn't give any reasons for the increase at all. If you explain that you are raising costs b/c you are adding in more services (like organic meals) you are opening yourself up to the argument that they don't want the organic meals, etc.

Dear Parents,
Due to cost of living increases, I will be raising my rates, effective September 1st. The new rates are 160 per week for full time, and 110 per week for part time. Please plan accordingly. Thanks.
Regards,
Your awesome provider

[itlw8]

well that is not 50 to 60 % question is that the going rate for centers or family childcares? and are you a family childcare... if it is a center rate what is the average family childcare rate?

People do expect to pay more for center care. That does not mean you should not charge the same or more than the centers just it is a harder sell

I would post a sign and send home a note.

If you want to explain something like I am glad everyone likes the changes and improvements in my Preschool program. I am enjoying teaching your preschoolers in a Montessori /Waldorf program. With the added expenses in the upgrade of the program a price increase will go into effect on Aug 1st.

[harperluu]

When I make a rate change, the change affects incoming (new) clients. For current clients, the change affects them as they move through the different age brackets. For instance, if I had toddler rate of $155 and I was changing my toddler rate to $165, any currently enrolled infants would be grandfathered in at $170 and when they jumped to the toddler rate the new rate would apply.

I find this ideal for rate changes, because I have a contracted amount for a child and my rates change as they progress through each age bracket. Nowhere in my contract does it say you are guaranteed these rates across all age brackets for the rest of your time with me.

[Laurel]

Personally, if I was raising it that much then I'd feel like explaining. I know I wouldn't have to but I just feel like I'd want to. If you feel the same, I'd just say what you said in your original post. "I was just starting out and it was necessary for me to get my business off to a start by offering more competitive rates. Now I feel like maybe I asked too little compared to what I offer and also would like to start offering more services so need to charge more."

Laurel

[Lefse&Kids]

Makes sense. I'll have to sit down and really figure out the most effective way to set up the financial aspect of it. And looking at it again, it wasn't close to the 50% (quick math is NOT my thing)

I like the "grandfathered in" idea. I'll need to find a way to make it work - the age bracket idea is good too. I have a few who will reach that in just a couple of months too.

It will be hard not to take it personally if parents decide not to stay. I put my heart and soul into what I do. Its just the nature of the business I know though.

[2grls4us]

As a parent and daycare provider I would want to know what my extra money is going toward. If you are providing healthy meals and snacks and teaching them it does cost more. I would use this as a time to remind parents why they are staying with you for the quality of service you provide.

I am not familiar with this type of teaching or supplies is there a way to have some items donated from the parents or have some sort of fund raising event that could help? I would rather pay a one time fee rather than have cost increase on a monthly basis.

[AmyKidsCo]

Wow, I would hesitate to raise my rates that much in one shot. When our older children were in DC I couldn't have afforded a 50-60% hike. Can you raise them 20-30% for your current clients over the next few years instead? New clients can be brought in under the new rate structure right away - you don't have to charge all families the same.

In any case, I'd focus on #2 & #3 on your list and not mention #1 & #4. IMO it's not a good thing to tell parents that currently your mind is preoccupied with finances and not their children. And as much as parents value our great care, when push comes to shove they're not always willing to pay for it.

[Lefse&Kids]

Thanks so much....I keep revisiting the rate change, I don't want to change it if I don't have to but it will go up.

I think I will try to reorganize the fees and rates before I just raise them.

The Waldorf/Montessori is kind of like play-based care but in a very rich sensory environment. Toys are made of natural materials (woods, wool, silk, etc). Its a way of learning using a child natural creativity.