The Hidden Impact of Discounting Tuition in Child Care

At HINGE Advisors, we have long counseled childcare clients on the hidden dangers of discounting tuition. We believe—in the delicate balance between revenue structure and healthy spending—discounts can put your school’s financial health at serious risk. In fact, tuition discounting can often have a more dramatic effect on the financial performance of a school than tuition rates—which is why we recommend setting discounts at 5% or less of the total tuition charged.

Current Trends in Common Discounts

Staff Discounts. This is the main discount implemented in the early education industry–and we don’t see it going away anytime soon. It’s an easy benefit to provide and a great incentive for attracting quality teachers. However, there is a limit on how much you can do while remaining profitable. One good idea is to limit the number of children an individual employee can have discounted to two. Also, consider limiting age groups—like infants and toddlers—that can be discounted as these programs are often not profitable to begin with.

Multiple Child Discount. This discount is typically market-driven, and most schools allow for a 10% discount on the child with the lower tuition rate. Thankfully, this discount is trending out with many schools no longer offering it.

Industry Discount. If you’re discounting a particular industry in your area (typically 10 percent), be sure you’re getting value from that industry in return. Are they promoting you to their employees? Are they providing you with positive press? Are they driving traffic to your school or website? This discount could serve you well and help increase enrollment if executed correctly.

Subsidy Discounts. Some cities and states don’t allow early learning centers to charge full tuition rates to children in childcare subsidy programs, so discounts are necessary. But use this discount to your advantage by including it in marketing materials: “We provided scholarships of more than X dollars last year to better support families in our area.”

Free Days. Your costs continue whether a child is physically at your center or not. Tuition should be due in full each week regardless of attendance. This discount is no longer an industry norm and makes a huge impact when removed from the school’s budget.

Eliminate the Negative

Some recent trends from childcare business owners have been to use the elimination/reduction of discounts as a strategy to increase income. Simple eliminations like this, used in conjunction with a tuition rate increase, can dramatically improve revenue.

Overall, consider how your discounting is affecting your revenue and which discounts you can discontinue providing to families who aren’t paying their fair share of the full services you provide. A simple adjustment in the discounts you offer can greatly improve the overall financial health of your school.

What discounts have you eliminated at your school? What was the impact? Let us know in the comments below!