How to Calculate Occupancy Percentage for Your School

Often, childcare owners believe their occupancy is higher than it actually is. That’s because the industry norm is to count full-time and part-time enrollments and compare that to the licensed capacity to get an occupancy percentage. The problem with this method is 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 you really are.

Making decisions to operate at less than licensed capacity isn’t necessarily a bad thing. Sometimes filling a classroom to licensed capacity just doesn’t make sense (and stressing teachers beyond their capacity is definitely not a smart move). However, these decisions should be made with full visibility into accurate occupancy levels.

How Do I Calculate Occupancy Percentage?

To calculate your occupancy percentage the traditional way, use this simple formula:

Occupancy Percentage = (Total Full-Time Equivalent Enrollments ÷ Licensed Capacity) × 100

This means converting all part-time students into full-time equivalents (FTEs) and comparing that figure to your school’s licensed capacity.

For Example:

• You have 80 children enrolled:

  • 60 full-time students

  • 20 part-time students (assume each part-time child is counted as 0.5 FTE)

• Licensed capacity is 100

FTE Calculation:

• 60 full-time students + (20 part-time students × 0.5) = 70 FTEs

Occupancy Percentage:

• (70 ÷ 100) × 100 = 70% Occupancy

Keep in mind, this percentage gives a rough idea of how full your school is but doesn’t take into account nuances like tuition rates, discounts, or part-time ratios that can affect your bottom line. That’s why HINGE pairs this metric with a more financially focused occupancy measurement (outlined below) to help owners make more informed business decisions.

A More Insightful Way to Calculate Occupancy

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

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?