Income, Expenses, and Profit!
Many people ask us about how much a childcare centre should make. Every centre is a bit different depending on rent levels, type of staffing, the amount spent on resources, etc. A centre with a summary of typical income expenses and profit profile is as outlined below.
Please note that by far the biggest expense is wages and wages on costs. These must be constantly kept under control or the bottom line profit will suffer!
Income is basically the daily fee per child times by the occupancy. The expenses ratio suggested above will vary depending on the daily fees for the centre. For example, a centre charging $80/day at 70% occupancy will have similar wages to a centre the same size charging $110/day at 90% occupancy. The wages will be the same however the income will be much higher, therefore, the percentage of the wage will be significantly different.
Fixed Costs
These are costs that are the same whether the center is operating at a very low occupancy or a very high occupancy. Also, the main fixed cost is rent. Take note that if there is no rent as the building, and land are owned by the same party (or a related party to the one that owns the business) then a market rent should be allowed for to establish a true business profit. Rates and insurance are other examples of fixed costs.
Variable Costs
These comprise all the other costs primarily besides rent. Wages can only reduce if occupancy in a room falls below 50% for the age group. Staffing ratios are 1:4 for babies up to 18 months, 1:5 for toddlers 18mths to 3 years and 1:11 for 3-6 years.
