What Do I Do When My Rate is Not Competitive?

In our last installment we discussed what to do when your calculated weekly tuition is not competitive in your market! In instances where your rate is much lower than the competition go back and calculate your labor, materials, overhead and profit to make certain that you are not missing any key expenses. A good example of this is home based child care businesses where the owner does not include the cost of their own labor. You would expect to be paid if you worked for someone else, you must be paid when you work for yourself! Another consideration is the expected age of the children you intend to care for. If they are very young and are not toilet trained you should expect to be paid 20 to 25% more and these young children have lower child to child care worker ratios that will contribute to higher fees. Be sure that you are taking these costs into consideration. If after reviewing your costs you still find that you are less than the competitors in your market place you have the luxury and flexibility to adjust your rates. If you are too much lower than the competition your potential clients may wonder what you are leaving out of your program or perhaps your staff and training is inferior to the others. It is better to be just slightly less than to be considered a bargain!

On the other hand, what we most frequently find is your rate comes in higher than your competitors and sometimes much higher! You may be thinking, how are my competitors able to work at much lower rates? Are they better than me in controlling costs, do they hire employees at a lower wage? Do they accept only older children? Just as I indicated in the last example go back and review your forecasted expenses to see if there is an error. However, don’t be surprised if there are no errors and your expected weekly tuition is higher than the competition. It may be that they have all based their rates on the competition instead of doing their due diligence and calculating the actual expenses. Still, if you find yourself higher than the competition your first consideration may be to cut your profit and work for less money. I would urge you to not do that and to consider what would make your business value added over the competition. Make a list of all the things that you plan to do with your children that they may not get at another care facility. Be prepared to share with a potential client when they ask why they should pay more for your service than going somewhere else.  If you are only slightly higher than the competition it should be relatively easy to make the case why you are worth more than the competition and parents and guardians will pay more for better care for their children.

However, if you are quite a bit higher than the competition the potential for securing new clients is much more difficult. Either you must accept that it will take longer to build your business and truly offer a distinctive care plan that sets you apart from the competition or you must revise your profit analysis and accept less income. There are people who want only the best for their children and are willing to pay for it. If you can make the case that your program is the best in the area you can succeed and thrive however it will take more time and effort and you must be able to demonstrate day in and day out that your program is superior.

In our next installment we will be discussing how to select the market that you will serve and how sometimes your market selects you.


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