Giving yourself a raise

[ttremble88]

One of the joys of being self employed is being in charge of your pay. From reading other threads, some have touched base on raising their rates. So I am curious, how do you go abouts making more money?! Here are two that come to mind that I have read on this forum at one point or another:

1) Raise your rates $1 each year
2) Change your rate only when a new family starts

What do you do?

[5 Little Monkeys]

I just recently raised my fee. It is only for new families though. The rate you sign on with is the rate you will always pay.

HOWEVER, I haven't thought about what if a family has a new baby and they both come here. I am leaning towards keeping the rate the same as their older child as I personally like the benefits that come with multiples in one family. (like same time off and such)

[mickyc]

When I started I was charging $27 a day. I did increase my wage last year to $28 for my current families although I gave them 6 months notice. At that time I also told them that their fee will be increasing to $30 on July 1, 2015 (so 2 years notice lol). I then began charging all new families $30. I am also thinking that I am going to change my rate again with any new families to $32 for children under 2 and continue charging $30 for 2 and over.

I had a family who was paying $28 for their oldest and when the new baby started it was at the $30 rate for her.

[Judy Trickett]

1) Raise your rates $1 each year
2) Change your rate only when a new family starts

What do you do?

I do a combo of those things. For existing clientelle I raise my fees by $1 per day, every single year. And, for anyone coming into the daycare as a newbie I start them off at my next anticipated fee increase rate.

So, for example, I am now at $42 a day. Anyone new coming is right now will pay that fee as well. But anyone I take, this year, after, say, about June, will be paying the January 2015 rate of $43 a day. And, in January, all my existing clients will be bumped up to $43.

This has always worked for me. And we SHOULD be giving ourselves a raise either by increasing fees for existing clients or charging more to new clients EVERY year because inflation increases every year. And that means you are actually making LESS money every year that you DON'T raise your rates. That loaf of bread you feed the dckids goes up so you should recoup that cost by passing it on to the parents because it's THEIR kid. You can not work year after year and take home LESS money. That would be the dumbest, and worst business plan ever.

[cfred]

Like Judy, for existing clients, it goes up by $1/yr. But I've been slowly increasing my rates since I moved to a new area to see how far up I could get it. Have stopped at $5 above local rate....now I see others starting to follow suit since I spoke with a couple local providers about my fees. They'd been at $40 for years, I guess too scared to try an increase. I'm happy to see this change happening It's nice to see people starting to command more for a tough job....glad I got to be part of that!

[Judy Trickett]

Here is a perfect example of inflationary prices. According to the Bank of Canada, they forecast, for 2014, that compared to just last year, 2013, that for every $100 you spend it will now cost you $101.48.

That's a 1.48% increase. So, that means that in order for you to pay your bills and purchase food and supplies for the daycare etc it will cost you $1.48 for every hundred DOLLARS you spend MORE than last year. So, let's say you grossed $35,000 last year. THIS year, in order to have as money left in your pocket as you did last year you need to earn a gross salary of $35,518.

Now, it get even better. The rate of inflation between 2012 and 2014 is 2%. Imagine you didn't raise your fees at all (or for some of your clients) in the last two years. That means that $35,000 now needed to be $35,700. So now you have gone two years and lost out on $1200 just to cover the cost of increased cost of living. You still haven't given yourself an actual raise! You have absolutely no more money in your pocket! Those increases ONLY pay to keep you in bread and milk by last year's prices!

So, see? That is why you need to raise your fees! The average Ontario provider has the ability to work five days per week for 50 weeks at five kids. That means she has the ability to have 1250 "daily payments" every year. If you ONLY raise your fees by $1 a year you are merely making an extra $1250 a year. And, of course, for 2014, as I stated, you are spending $500 of that on the increased cost of living leaving you with only a $700 raise for YOUR pocket.

[ttremble88]

Thanks ladies. I will be open for my 1 year mark on September 01st 2014. So from what you have all said I have 2 questions:

1) Do I raise my rates at MY 1 year mark or when the family started year mark?
2) Many of my part timers are b/a school students, and I charge by the hour. Do you think a $0.50 raise per hour is fair? Most are here for a combination of 2 hours a day, so that would equal to be $1 raise per day.

[Judy Trickett]

Thanks ladies. I will be open for my 1 year mark on September 01st 2014. So from what you have all said I have 2 questions:

1) Do I raise my rates at MY 1 year mark or when the family started year mark?
2) Many of my part timers are b/a school students, and I charge by the hour. Do you think a $0.50 raise per hour is fair? Most are here for a combination of 2 hours a day, so that would equal to be $1 raise per day.

You should have a signed contract with each family and that contract should have an end date. I date every contract to end on Dec 31st. That means I am free to issue new contracts every year, that come into effect on January 1st with any changes I want in them. If the parents don't like the terms of the new contract then we part ways and I fill their spot (never actually had that happen, though).

So, when your contracts expire you change your fees on the new contract. If your contract doesn't have an expiry date, then you can issue new contracts and hope for the best, or you can start with new clients.

As for hourly school-agers. I think the hourly amount you raise your fee will depend on the demand in your area for B/A school agers. If it is a high demand area then, yep, you could go with 50 cents per hours. But, if you look at it from the stand point of normal daycare wherein you raise your fees $1 per day, per year, then a 50 cent per hour raise on B/A school care is kind of high considering they are there a fraction of the time a normal daycare child is there. Normal dckids are in care about 9 hours or so and only getting their fee increased by a dollar a day. But then a B/A kid is there for two hours and getting the same dollar for dollar increase. So, just be prepared for that math to come up from a parent.

[cfred]

I just picked a time of year to make all changes. For current clients, they all know the increase is going to happen September 1st. I will adjust prices at any time for spaces that open up. For example, if one of my clients dropped out suddenly, I will charge whatever I want for the space. I think it's a good idea to tinker around with rates every now and again to see what comes of it. Don't go too crazy, but within $5 or so. I started with jumping from $40 to $42. It filled really fast, so I jumped to $45. Those filled fast too. Sooooo...I would probably bump up another $1 or $2 to see if I get any bites. If nothing, I'd drop back down to $45. My space coming available in Aug 2015 is listed at $47 to keep up with the $1/yr raise. I also stipulate that anyone signing on has their current rate guaranteed for at least 6 mos. So if someone signs on in June, I won't increase their rates till December. I feel that's reasonable, and so do they.

[bright sparks]

Here is a perfect example of inflationary prices. According to the Bank of Canada, they forecast, for 2014, that compared to just last year, 2013, that for every $100 you spend it will now cost you $101.48.

That's a 1.48% increase. So, that means that in order for you to pay your bills and purchase food and supplies for the daycare etc it will cost you $1.48 for every hundred DOLLARS you spend MORE than last year. So, let's say you grossed $35,000 last year. THIS year, in order to have as money left in your pocket as you did last year you need to earn a gross salary of $35,518.

Now, it get even better. The rate of inflation between 2012 and 2014 is 2%. Imagine you didn't raise your fees at all (or for some of your clients) in the last two years. That means that $35,000 now needed to be $35,700. So now you have gone two years and lost out on $1200 just to cover the cost of increased cost of living. You still haven't given yourself an actual raise! You have absolutely no more money in your pocket! Those increases ONLY pay to keep you in bread and milk by last year's prices!

So, see? That is why you need to raise your fees! The average Ontario provider has the ability to work five days per week for 50 weeks at five kids. That means she has the ability to have 1250 "daily payments" every year. If you ONLY raise your fees by $1 a year you are merely making an extra $1250 a year. And, of course, for 2014, as I stated, you are spending $500 of that on the increased cost of living leaving you with only a $700 raise for YOUR pocket.

Great explanation...thank you