Business development

Nursery fees: 10 Ideas for a smarter pricing model

Inspiration to restructure your fees and improve your revenue
November 30, 2022
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In a rush? Here's the quick run-down:

  • Just because you've always charged a certain way, doesn't mean you always have to. If the money isn't adding up, it's time for a change.
  • Take a close look at the rules about what you can and can't charge for when three and four-year-olds are receiving funded hours. For example, optional consumables charges are allowed, but top-up fees are not.
  • Many parents rely on Early Years settings for childcare, early education, and family support so can really struggle if they feel priced out of access to quality provision. When talking about raising fees, do so sensitively and transparently.

Whether you're a managing director of a huge chain of Early Years settings or the leader of a one-site pack-away playgroup, the one thing you have in common is having to make the maths work.

The battle between trying to cut costs, make government funding work for you, as well as pay business rates (and your staff), can feel like a losing battle. But often, things can be improved simply by looking at how you charge.

We've gathered smarter pricing suggestions from settings all over the UK so you can get an idea or two for getting your income in line and here are 10 of the best.

1. The pricing model: fixed session prices

This is the nursery fees pricing model that the vast majority of settings begin with. You charge for morning sessions, afternoon sessions, or full-day sessions.

How does it work?

The pricing structure is purely based on the session alone so all consumables like snacks, lunch, services, and other consumables are included within this, and parents can choose to use their "free" hours on whichever sessions they like.

Why does it work?

This pricing structure offers flexibility for parents who might not need full daycare. Choosing nursery prices where everything is included makes your accounting easy and keeps it nice and simple for parents too.

However, as simple as it is, offering everything all-inclusive could mean you lose out financially. Look carefully at whether your all-inclusive fees really cover all the services you're offering.

2. The pricing model: pricing by age groups

You price based on children's different ages, usually in line with the ratio of adults required. Younger children require more adults to work with them, so you charge a higher rate for their care.

How does it work?

Often you have one price for infants and children under two, then a slightly lower price for 2-3-year olds, and then a lower price again for children over three. Some settings split these into babies, toddlers, and preschool, but you don't have to have defined, age-based rooms in your setting to charge different price points.

Why does it work?

You can choose how to charge based on which age group you know is a bigger burden on your revenue - the increased staffing needs for younger children and babies, or the underfunded 3 and 4-year-olds.

3. The pricing model: full-time packages

One thing to consider adding to your pricing plan is a full-time package that offers a slight discount for parents paying for a full-time place. This may be especially useful for families where both parents work full-time hours.

How does it work?

You charge a set price for full-time care, which amounts to slightly less than 5 full days priced individually or if you added up the hourly rate.

Why does it work?

For working parents, this option to cut costs can be a real incentive, because childcare costs can add up quickly. Plus, by offering packages at a slightly discounted rate, you’re ensuring reliable occupancy across the week, and keeping things simple for the type of parents that need that care.

4. The pricing model: hourly rates

If you want to offer parents and carers complete flexibility, you can offer bespoke, per-hour sessions.

How does it work?

Essentially, you'd be setting an hourly rate and allowing parents to choose how many hours they'd like to book. This can be perfect for parents working unusual shift patterns.

Why does it work?

Given the added flexibility, there is a strong case for making these sessions more expensive, as little more legwork to organise. As a result, they can be a great revenue stream if you have parents who are happy to pay more for a more flexible service. That being said, you might also need very flexible staff to match. Without a smart system to organise when people are coming and going, getting those staff ratios right can be difficult. Plus having parents and carers collecting and dropping off at all hours can be disruptive.

5. The pricing model: add late fees

‍It can feel a little punitive, but if you have persistent late collections, a financial penalty can sometimes help reduce them.

How does it work?

You create a charge for each amount of time a parent is late to collect by, such as £5 for every 5 minutes, or simply have a more standard fee for picking up after a certain time.

Why does it work?

If you’re constantly having staff stay late when parents aren’t on time, or having to adjust your ratios just in case parents don’t make it, there’s no doubt it’s costing you money. This is a way to recoup a little of that lost revenue. That being said, some parents may just see it as the cost of extra childcare, so turn up late to get their money's worth.

6. The pricing model: charge for consumables

Under the rules of the 30-hour funding, you can ask parents and carers to pay for consumables used in their child's "free" sessions. This is not the same as charging 'top-up fees' for "free" childcare, which is not allowed.

How does it work?

While you cannot make it a condition of taking up funded places, you are allowed to charge for consumables. This means food, such as lunch and snacks, or nappies, wipes and any other consumable resources you offer in your setting.

Why does it work?

With the shortfall in government funding for the 30 hours of "free" term time early education, many settings have a large gap between what the session costs to deliver and the money they receive to actually deliver it. Charging parents for consumables, which are not intended to be included in the 30 hours offer, is one way you can try to make up for the shortfall. You may want to only include consumable charges for those taking up funded hours, and keep it simple with an all-inclusive price for non-funded packages.

"It is not intended to cover the costs of meals, other consumables, additional hours or additional activities. Parents can therefore expect to pay for any meals offered by the provider alongside their free entitlement. Parents can also expect to pay for other consumables or additional activities offered by the provider, such as nappies or trips."
Early years entitlements: operational guidance For local authorities and providers

7. The pricing model: charge more for ad-hoc sessions

Busy working parents may sometimes have a change in schedule and need last-minute childcare providers. For that reason, offering ad-hoc prices allows you to add sessions or products to parents on a one-time basis.

How does it work?

You’ll need a strong understanding of what sessions you have available, but you simply have to let parents know they can contact you and book in ad-hoc sessions.

Why does it work?

Because of the demand, you’re able to offer these sessions at a higher price point, and so generate more revenue. Many parents will understand that if they want to book a session at shorter notice, they will have to pay a little more for the privilege. Just make sure your educators know they have an extra child to include in their planning.

8. The pricing model: offer discounts for more sessions booked

It may sound counter-intuitive to offer money off, but a little financial incentive can encourage parents to take up those available extra sessions.

How does it work?

You could offer sibling discounts to encourage parents to enrol future children, or volume pricing, where the more sessions a parent books, the cheaper they are. You could even offer a one-time refer-a-friend discount.

Why does it work?

Quite simply, if it’s encouraging an increase in your children on roll, or your day-to-day occupancy, it’s probably going to be worth the cost.

9. The pricing model: offer fewer sessions

If you have less popular sessions that no-one seems to want, simply stop offering them.

How does it work?

Famly customers Little Beehive did exactly this. Where more families wanted full-day sessions, a lone morning or afternoon session meant the full day couldn't be sold, as it would have pushed the room over ratio. Now Little Beehive nurseries offer an early finish, from 8:00 am to 4:00 pm, and a full day, 8:00 am to 6:00 pm.

Why does it work?

Fewer sessions on offer and fewer hours the setting is open means no occupancy gaps where previously sessions blocked one another. Fewer transitions for the children, no gaps in revenue and occupancy, and a full, unbroken day of teaching for the staff.

10. The pricing model: raising your prices

One final point to consider – are you charging enough for your current sessions? We know that parents sometimes struggle with early education and childcare costs, but you have overheads too. Your income should meet your costs and then some, as this is what allows you to continue to provide the service you're offering.

How does it work?

There are two main ways to work out your prices:

  • You can start with your nursery costs and calculate what you need to charge to have a strong profit above that.
  • You can look around at your local area, understand your own position within that market, and choose your nursery prices based on what value you are offering compared to others around you.

Why does it work?

Many nurseries are undervaluing themselves. By at least assessing how high you could raise your nursery prices, you may realise that you can keep happy parents, still provide a great service, and make more money to put back into your business. It’s never easy to raise prices, but if you can explain the benefits of doing it, with plenty of warning, it’s often much smoother than you might think. Will you be raising staff wages, so they're no longer earning minimum wage? Will you be offering additional training to upskill your team? Let parents know!

Look back to how long your prices have remained the same and inform them of this too. People are not unreasonable and will understand that when your nursery costs are steadily rising, you can’t afford to be charging the same.

The big ideas

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Official Danish Government Reopening Advice

Guidance from the Danish Health Ministry, translated in full to English.

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UK Nursery Covid-19 Response Group Recommendations

The full recommendations from a working group of over 70 nursery chains in the UK.

Please note: here at Famly we love sharing creative activities for you to try with the children at your setting, but you know them best. Take the time to consider adaptions you might need to make so these activities are accessible and developmentally appropriate for the children you work with. Just as you ordinarily would, conduct risk assessments for your children and your setting before undertaking new activities, and ensure you and your staff are following your own health and safety guidelines.

Learn more about Famly

Find out below from Neil Leitch about the impact of Famly at the Early Years Alliance, and see what we can do for you in a personal demo.