The Right Way to Calculate Your School's Occupancy
Often, childcare owners believe their occupancy is higher than it actually is—as the industry norm is to calculate by counting full-time and part-time enrollments and comparing that to the licensed capacity to get an occupancy percentage. The problems that arise with this method are that other factors—like part-time enrollment, discounting, and utilization decisions—can significantly impact the financial picture of your childcare business while presenting the perception that you are fuller than actuality. Making decisions to operate at less than licensed capacity isn’t necessarily a bad thing as sometimes filling a classroom to licensed capacity just doesn’t make sense (and stressing teachers beyond their capacity is definitely not a smart move).
For Good Measure
The HINGE team uses a financial health measurement taking your net revenue (tuition + other charges - discounts), divided by your average tuition rate (typically the three-year-old, full-time rate) and the licensed capacity to get a financial health percentage.
For example…
Net Revenue (Tuition + Other Charges - Discounts for the year) … $1,500,000
Divided by three-year-old weekly rate (could also be monthly) … $287
Divide by the licensed capacity (actual—not how you choose to operate!) … 165
Divided by 52 weeks (or 12 months if your rate is monthly) … 52
Equals the Financial Health Measurement ($1,500,000 / $287 / 165 / 52) … 60.91%
This calculation is the basis for financial health and expense control. And at HINGE, we believe this number should be 70% or greater to have a baseline of cashflow that supports a strong curriculum, quality staff and a profitable business.
Breaking the Threshold
Knowing the financial impact of your decisions is critical! After all, you could make different decisions. Remember that the last one or two enrollments in each classroom is where your profitability resides. Maintaining a healthy occupancy is vital for financial success!
Is your school’s occupancy greater than 70 percent? What strategies do you plan to implement to break this threshold?