How Much to Charge for Home Daycare: Working the Weekly Rate Backwards

Most home daycare rates get set the same way: you look at what the provider two streets over charges, subtract a little because you are new, and that is your number for the next four years.

The problem with that method is not that it is unfair to you, although it usually is. The problem is that it never produces the one figure that would tell you whether the business works: what an hour of your time is actually paying.

Here is that arithmetic, worked forwards and then backwards. The figures are mine, chosen to be typical of a licensed family childcare home, and every one of them is an assumption you should replace with your own.

The Assumptions

Fifty weeks assumes two weeks closed and unpaid. If your contract charges for your closure weeks — and it should — use 52 and adjust.

Forwards: What $200 a Week Actually Pays

Now the tax side, which is not the same table. The shared-home deduction is a real deduction but it is not a cash payment — those household bills were leaving your account whether or not you ran a daycare. So it comes off the taxable profit and not off the cash:

Divide that last line by the hours the business actually takes — 58 a week, 50 weeks, 2,900 hours:

$15.96 an hour.

Not per child. Per hour of your life, after every cost, on a rate that sounds perfectly respectable when a parent asks what you charge.

And notice what the deduction did. Without it, the taxable profit would be $52,600.00, self-employment tax would be $7,432.03, and the cash left would be $45,167.97 — $15.58 an hour. The time-space percentage is worth $1,122.73 in self-employment tax alone in this example, before any income tax it also saves. That is the return on measuring your floor area properly once.

Backwards: The Rate Ladder

Same daycare, same costs, four rates. This is the table to rebuild with your own numbers, because it is the only one that answers the question you actually have:

A $20 hour lands at about $245 a week — a 22.5% rise on the $200 you started with.

That is the honest scale of the gap, and it is why rate increases in this business are almost always too small. A $10 a week rise, which feels significant enough to be nervous about announcing, is worth $3,000 of tuition a year across six children and moves the hourly figure by about $0.89.

The Four Levers, Ranked

Run each one against the base case and they sort themselves immediately:

The expense line is last, and it is not close. This is the opposite of most small-business advice, and it is a direct consequence of the shape of this business: your costs are small, your capacity is capped by licence, and the empty slot is free to nobody.

Which is why the single most valuable habit is keeping a waitlist with dates on it. One slot empty for three months is $2,600 gone, and it never appears as a loss anywhere in your books because nothing happened.

Setting the Rate Structure, Not Just the Rate

A number is not a price list. Five things belong alongside it, and each one of them is a leak if you leave it out:

Part-time above the full-time hourly. A three-day child at 60% of the weekly rate sounds fair and is not: that slot is harder to fill, often unfillable on the other two days, and costs you the same setup. Price part-time at 70–75% of full-time, or do not offer it.

Age bands. Infant care carries lower licensed ratios and more work per child. If your licence counts an infant against two slots, the rate has to reflect that or infants subsidise toddlers.

Registration and deposit. A one-off enrolment fee and a held deposit do two jobs: they cover the genuine setup cost of a new family, and they make a waitlist mean something.

Holiday, vacation and absence policy. Written, in the handbook, with the number in it. Absences billed. Your closure weeks either paid or clearly unpaid, decided once rather than negotiated annually.

Late pick-up, in the handbook and actually collected. In the worked daycare on the pillar page that line alone runs $807 a year — see the late pick-up fee policy.

A written annual review date. The rate rise that never happens is almost never a decision; it is the absence of a date. Put one in the handbook — “rates are reviewed each January and 60 days’ notice given” — and the conversation becomes procedural instead of personal.

Then Check It Against the Market

Everything above sets your floor. The market sets your ceiling, and you find it the dull way: ring or check the listings of every licensed home provider within a reasonable drive, note the rate, the hours, the age band and whether they have a waitlist.

The waitlist is the part people skip and it is the most informative column on the sheet. A provider who is full with four families waiting is priced below the market, whatever her number says. A provider with two open slots at a high rate has found the ceiling.

If your floor comes out above the local ceiling, you have a real problem and only three real answers: more children within your licence, a different age mix, or a reason to be priced above the market that a parent can see in ten seconds.

Where the rate sits in the rest of the books — attendance, invoicing, capacity and the time-space deduction it feeds: the home daycare spreadsheet.

Note that the self-employment tax rate and thresholds used above are United States figures and are set by law; they change, and they do not apply outside the US. The arithmetic pattern does.

Featured on ReadySheetGo

Home Daycare & In-Home Childcare Provider Business Tracker — $18.99

Your rate lives in one place — the Children roster — and every invoice pulls it from there, with the sibling discount applying itself at whatever percentage you set. Capacity & Waitlist sets licensed slots by age band against who is actually enrolled, so the open slot and the families waiting are on the screen instead of in your head. Tuition builds the invoices, adds that period’s late pick-up fees automatically and flags anything past your own overdue window. Attendance logs contracted hours against actual hours, which is where an underpriced family shows up.

Around them: Expenses with a Direct-or-Shared marker and mileage at your rate, a Time-Space tab that applies your percentage to every household line, a Food Program tab at your current reimbursement rates, Compliance countdowns, a Parent Statement and a Dashboard — 14 tabs and 4,451 working formulas, pre-filled with a complete sample daycare: 11 children, 552 logged days, 30 invoices.

Capacity, hours, grace period, late fee, sibling discount, overdue window, mileage rate and reimbursement rates are all labelled cells on the Settings tab. Change one and the whole file re-prices.

Works in Excel and Google Sheets. No macros, no add-ons. A record-keeping tool, not tax advice.

Get the Home Daycare & In-Home Childcare Provider Business Tracker →