But, if you don’t set a goal for what you want to earn, you probably won’t earn as much as you would like.
Let’s say your goal is to earn $8.00 per hour. (Federal minimum wage is $7.25 per hour, although many states have a higher state minimum wage.)
What did you make per hour last year?
If you were in business in 2013, look at your IRS Form 8829, line 4. This tells you how many hours you worked in 2013. Then look at your 2013 Schedule C, line 31. This tells you how much profit you made in your business.
If you worked eleven hours a day caring for children, and an additional ten hours a week on other business activities when children were not present in your home, that is equal to 65 hours a week.
If you worked 50 weeks a year, you worked 3,380 hours in the year (65 hours x 50 weeks = 3,380 hours). If your profit from Schedule C was $25,000, you earned $7.40 per hour ($25,000 divided by 3,380 hours = $7.40).
If you wanted to earn $8.00 per hour in 2015, (assuming you will work the same number of hours) you would need to earn $27,040 in profit.
To meet this new goal, you would need to earn an extra $2,040 ($27,040 – $25,000 = $2,040). If you cared for four full-time children you would need to charge an extra $10 a week to meet this goal ($10 x 4 x 50 weeks = $2,000).
What if, after calculating want you want to earn next year, you don’t believe you can raise your rates to reach this goal next year? You could decide to reach your goal in two years, and spread the rate increase over two years.
Or, you could try to reduce your expenses. Reducing your expenses by $2,000 would have the same effect as raising your rates by the same amount.
Tom Copeland – www.tomcopelandblog.com
Image creidt: ppc-coach.com
For more information about how to set your rates, see my book Family Child Care Marketing Guide.