A Matter of Money - Expenses

In my last post I wrote about the daily rates charged by various home based childcare providers but that barely begins to cover how widely net incomes can vary. I know some home based providers try to break down their income to an hourly wage and lament they earn less than minimum wage. I've also heard it said that unlike centre based ECE's whose wages and hours are set by their employer, home based providers have more control over their income, expenses and hours. For this scenario let's ignore the differences in number of spaces, the ages of the children in care, daily rates etc. Let's just consider how expenses and work hours can affect a home based childcare provider's income. What can be controlled and what can't be.

The Childcare Space - the building in which it is located. A portion of the cost of the childcare home's utilities, taxes and mortgage interest is considered a business expense but the amount is dependent on how much of the home is used for childcare and for how many hours per day. Do they have a large dedicated childcare space or shared childcare/personal space? What type of neighbourhood is the home located in (property tax rate)? Has the home been purchased recently or is it nearly paid off (mortgage interest costs)? Is the home large or small, old or new, energy efficient or old technology (utility costs)? All those factors will affect the total cost of operating the childcare home.

Does the childcare home have limited hours, offer flexible hours to accommodate parents working various shifts or maybe they are even 'open' 24 hours/day, 7 days/week. Offering extended hours does not generally increase income - in fact, the net income could actually be lower. Drop off times for evening childcare are usually earlier than pick-up times for daytime care so enrolling one evening child and one daytime child will still require two spaces due to the period of time they overlap. The provider does not have all the children present at the same time which results in a longer workday and higher expenses too.

In short - more space & longer hours = more deductions and lower net income.

The Learning Environment - my personal favourite topic - the toys, equipment and furnishings in the childcare space. Is it set up as a traditional home - living room, kitchen, bedrooms etc - are there simply a few toys stored in a corner, spare room or a closet? Is the home larger than the family that lives there needs - an extra room or unused basement has become childcare space. Has the provider given up much of their personal space to create multiple classrooms?

Did the provider make no real changes to their own space and simply accommodates the children like part of their extended family? Did they convert a large space into an elaborate facility - purchasing expensive, high end equipment and furnishings designed specifically for commercial childcare facilities? Did they opt for more economical furnishings and take the chance they will need to replace things often? Do they design and make their own toys and furnishings using recycled materials - very little expense but a lot of 'unpaid' work hours.

How long has the childcare program been operating at this location? How long do they intend to stay in business? Does/did the provider have their own children who have outgrown items which are now used for the childcare program? Is this a primary or secondary income for this household? All of these factors will impact the amount the provider has already invested or is willing/able to invest in the space now or in the future.

The Programming - what types of activities do they offer? Structured or spontaneous? Formal instruction or free play? Do they have all the latest technology available for the children to use with purchased curriculum software? Do they have regularly scheduled field trips, hire instructors or attend group classes for music, recreation, or art? Do they use printed worksheets, packaged product crafts, or watch movies/TV? Some of the most expensive activities will require the least amount of provider time/effort.

Training/networking - does the provider regularly attend workshops, conferences and meetings with other educators? These types of learning opportunities allow the provider to increase her own skills and be less likely to need to outsource programming. However, they can also be expensive. For the home provider there is not only the cost of course registration but also wages for substitutes, lost income for closures, or additional unpaid time after regular work hours.

Supplies - what does the provider require the parents to send with their child? Certainly parents are responsible for sending personal items like clothing, diapers and possibly bedding for their child but some providers may also have an additional supply list. These periodic supply lists can include items such as tissues, sun screen, glue, paper etc much like annual school supply lists. Some even ask parents to supply grocery staples like boxes of cereal, crackers, pasta etc or to pay additional fees for some provider supplied items or services.

Meals - does the provider supply all or some meals or is the parent responsible for sending food with their child every day? Many providers supply snacks but some also provide breakfast/lunch/supper depending on their operating hours. If they provide meals do they buy/prepare food in bulk to save money? Do they purchase individual serving sizes and many processed items to save time? Do they seek out the best quality, organic products that can be found locally? Do they offer alternatives for children/families with dietary restrictions?

What other tasks may a provider be willing to pay someone else to do? Bookkeeping/accounting? Cleaning? Again, this is a matter of making a choice between higher expenses/lower net income or longer work hours/higher net income. A provider may not feel it is necessary to pay high premiums for disability insurance and benefit packages if they have a spouse with coverage. If childcare is the main or only income for the provider's family then this insurance may be essential - or the premiums may be beyond the possibility of their limited budget.

So yes, home based childcare providers do have some control over how much or how little they spend on operating expenses for their childcare facility and how much they leave for salary. I think what is more important to note is WHY the providers are making the choices. Maybe the provider enjoys cooking for the children in her care or maybe she knows the food she gives them is the only healthy food they will get that day. Maybe childcare is the only income for this provider's family and the budget is too tight to afford any 'extras' for the program. Maybe the provider enjoys working with children but the second income isn't a necessity for her family - she spends more on her program specifically to lower her taxable income.

A long time ago I was told that childcare centres spend about 80% of their income on wages for their staff - I assume that number is still fairly accurate today. Maybe home based providers should try something similar.  Stop trying to take what little money is left after expenses, dividing it by the hours they work and complaining that it is not a livable wage. Instead, try counting 80% of your total gross income as your salary and pay the appropriate taxes on that income. Then take the remaining 20% and use it for your program expenses. Then you can start complaining about how little you money you have to operate a quality childcare program.