Fees can be a difficult subject for any nursery. Price them too high and you risk being considered too expensive; set them too low, and you might be considered to be of 'poorer quality' by prospective parents.
However, getting them right is not only essential to attracting parents to your setting but also to the long-term sustainability of your business. Some nurseries set their fees in line with local market rates and what they believe parents can afford to pay, but this is not an accurate or viable way to calculate charges.
Private, voluntary and independent nurseries rely on parents' fees as the main source of income. It is therefore essential that this income covers outgoings. Many costs, including wages, rents and mortgage interest rates, business rates and utilities, have shot up. However, fees have not kept pace with these increases and as a result, many nurseries face an uncertain future with their long-term sustainability a major concern.
When costing services it is vital that a nursery sits down and looks honestly at their costs, and considers factoring in a profit and a contribution to reserves. It is essential to look at where your 'break even' point is in terms of occupancy, and explore what minimum fee levels will need to be to reach this point.
Profit should be part of the process, not only because you need a level of profit to invest back into improving your setting, but also because you need a contingency fund for unforeseen circumstances. In addition, profit shouldn't have to cover an owner or manager's wage - an appropriate salary should be costed into the price of the service to ensure that profits can be invested back.
There is, of course, a limit to what parents will pay, so it may be necessary to look at where you can cut costs to manage fee increases - for example, shopping around for cheaper utilities, and checking you are getting the best deal on services such as broadband, card payment or insurance. Ensuring you are getting good value from suppliers can make a real difference to your cost base. NDNA members can access a range of significant discounts through their membership.
Fee rises are unpopular with parents, but it is essential that your nursery business pays for itself. If you have to raise your fees, explain to parents why it is necessary and always provide information on sources of possible help, such as tax credits and childcare vouchers.
Charges need to be regularly reviewed to ensure they are at a realistic level. However, it can sometimes be difficult to recognise every cost that needs to be covered. To support this, under a contract with the Department for Children, Schools and Families, NDNA has been developing a costing model to help nurseries get to grips with calculating all their costs. This is currently being tested and will be available to providers later this spring.
Costs look set to rise further over the coming years due to new initiatives, and NDNA is calling for increased direct investment to support these rises without making childcare unaffordable for parents. However, it is essential that every nursery has an accurate picture of costs, and that its income meets these.
FURTHER INFORMATION
The NDNA runs a business development programme. Visit www.ndna.org.uk.
