earlyyears.teachwire.net
49
nursery business
You need to understand
how much your nursery
costs and what parents
believe it is worth before
setting your fees, says
Chris Townson
...
S
o it’s time to review your fees,
but how exactly are you going
to decide upon what is your
major income stream. Are you
going to:
Ring up every nursery in a three-
mile radius and use their fees?
Set fees based on your costs alone
as you know them at the
occupancy level you expect?
Decide what you think you can
charge?
Guess and hope?
Reflect on the clearly thought-out
strategy you used when you first
opened to give you a reasoned argument
along with proper future budget
projections?
If you chose the last option, well done: the
most important thing to do is to have a
plan, decide your market position and
stick to it. Of course that’s easier said than
done. As someone who was corporately
trained, outside the childcare sector, in
sales and marketing I thought I was well
placed to understand market forces, but
we at Toybox Nursery went wrong in the
past by
not charging enough!
So here’s
what you need to think about...
WHAT’S IT WORTH?
Let’s start by introducing a very simple
sales rule that applies to everyone
paying for goods or services: whether it
involves conscious or subconscious
decision-making, there is a tipping point
past which people won’t buy something,
based on what they believe about the
product or service.
Am I charging
enough?
Cost vs value
This is the cornerstone of getting
your fees broadly into the right area.
Put simply, the cost of something you
want to sell has to be beaten by the
perceived value in customers’ eyes to
make them want to buy. Let me show
you two examples:
CUSTOMER 1
D
A customer perceives the value of
your full day care at £50.
D
You currently charge £60 per day.
The customer is
unlikely
to want to come
to your setting in this scenario.
CUSTOMER 2
D
A customer perceives the value of
your full day care at £50.
D
You currently charge £40 per day.
The customer is
very likely
to want to
come to your setting in this scenario.
Looking at this in a little more detail, let’s
review what happens if you have to charge
a minimum of £50 per day for business
reasons – the results are worrying:
It’s vital to decide
your strategy
about cost and
value before you
set an initial fee.
A
B
C
D
E
D
You have a low occupancy due to cost
versus value and in the end, a lack of
income to make strong investments in
your buildings and staff.
D
Perhaps worse still you have to cut
costs, not just investment, to stay in profit
or simply break even.
D
In the long term you are forced to invest
in the value side of the equation – driving
quality outcomes, staff and buildings, but
this requires time and money.
This simple conclusion shows how vital
it is to decide your strategy about cost
