Daycare Budget: Forecast Next Year's Tuition Revenue

It's October. Next year's budget is open on your laptop, and the expense side is mostly done. You know what rent is. You know what payroll costs, give or take the raise you're still deciding on. Then you get to the revenue row, type licensed capacity times tuition times twelve, multiply by 0.9 because nobody is ever completely full, and move on.

That one cell carries the whole budget, and it's the one built on a guess. Here's how to replace it with something you can actually plan around, using information you already have.

Why a single occupancy percentage misleads you

The occupancy guess isn't crazy. Early childhood finance experts Louise Stoney and Libbie Poppick, who developed the widely used Iron Triangle framework, put full enrollment at the center of a center's finances. A Nebraska explainer of their work notes that centers can be financially sound with enrollment between 85% and 95%. Stoney has also said that some experts think a well-run center can operate at 95%, while others suggest budgeting around a more achievable 85%.

So 90% sits in a sensible range. The problem is what a single number assumes: that your empty seats are spread evenly across every room and every month. They aren't. Your infant room may be full all year with a long waitlist behind it. Your Pre-K room may lose half its kids to kindergarten in one week in August. A flat percentage averages those together and hands you a number that's true of no room and no month.

Stoney's own warning is the reason it matters: any time enrollment drops below the budgeted target, the program is losing money. If you don't know which months will dip, you can't see the loss coming.

Build the revenue line room by room, month by month

You need one row per room and one column per month of your budget year. It takes an afternoon the first time. After that, it's an update.

1. Start with the seats you can actually fill. Not licensed capacity, but the number you staff and plan to. If those numbers differ, our post on licensed vs. staffed vs. operational capacity explains which one belongs in a budget.
2. Put today's roster in. Every child currently enrolled in the room counts in every month until you have a reason to take them out.
3. Mark each child's last month in the room. Use birthdays against your room's age range for move-ups, your kindergarten cutoff for the oldest kids, and any departures families have already told you about.
4. Add the move-ins from the room below. Every child who ages out of the toddler room shows up as a new child in the twos room the same month. That chain is the classroom move-up cascade, and it's why one kindergarten exit can open seats in several rooms at once.
5. Decide how long outside openings take to fill. A seat that has to be filled from your waitlist doesn't fill on day one. Use your own history (more on this below).
6. Multiply each month's head count by that room's rate, and add up the rooms. That's your revenue line, with its shape intact.

A worked example: one Pre-K room

Here's a simple example with made-up numbers. Say you have a Pre-K room with 18 seats at $1,000 a month. Full all year, that's $216,000. The 90% shortcut budgets $194,400, or $16,200 every month.

Now build it from the roster. The room is full from January through July. At the end of July, 12 children leave for kindergarten. Six children move up from your threes room in August, which leaves six seats that need outside families. Looking at last fall, you filled roughly one of those a month. So the room runs like this:

• January to July: 18 children, $18,000 a month
• August: 12 children, $12,000
• September: 13 children, $13,000
• October: 14 children, $14,000
• November: 15 children, $15,000
• December: 16 children, $16,000

The year adds up to $196,000, within $1,600 of the shortcut. If you only looked at the annual total, you'd think the guess was fine. But the guess says $16,200 in August, and the room brings in $12,000. Twenty seat-months sit empty between August and December, and you don't even end the year full. And the threes room those six children left now has six openings of its own in August. The shortcut can't tell you any of that.

That's the real value of building it this way. You see the dip, you see which months it lands in, and you can see whether your cash reserve covers it before it arrives.

The three numbers you'll be tempted to guess

A room-by-room forecast is mostly facts: birthdays, room ages, a kindergarten date. Three inputs are still judgment calls. Base them on your own records instead of a rule of thumb.

How long an opening takes to fill

This varies by room more than anything else. Pull the last handful of openings in each room and note how many weeks passed between the seat opening and the new child starting. A room with a deep waitlist may refill in a week or two. A room where families have already made other plans by fall can take months. Budget each room with its own number. If you want a dollar figure for each of those weeks, the free empty seat calculator will give you one.

Surprise departures

Families move, change jobs, or find a grandparent who can help. You can't predict which family, but you can count how many left last year for reasons other than move-ups and kindergarten. If your toddler room lost three children that way last year, take three seat-months or so out of next year's toddler row. It's an honest allowance, not a precise prediction.

When rates change

If you're raising tuition, apply the new rate only from the month it takes effect, and only after families have had the notice your agreement requires. Our tuition increase letter guide covers the timing. And remember that a forecast is what you bill, not what you collect. Collecting fees in full and on time is the second side of the Iron Triangle, so if you serve families on subsidy or have families who pay late, plan for that gap separately.

Turn the forecast into decisions

A month-by-month revenue line is useful for more than the bottom of the budget:

• Cash flow. Add up the gap between your expenses and the low months. That's the reserve you need going into August, not a vague cushion.
• Staffing. The same head counts tell you how many teachers each room needs each month. A dip in one room can be the right moment for a teacher to move with the children instead of hiring.
• Outreach timing. If you know six Pre-K seats open in August, you can start talking to waitlisted families in spring, while they're still deciding. Every week you shave off the fill time is revenue back in the budget.
• Tuition. If the numbers don't balance at current rates, you'll know in October, with plenty of time to give notice, instead of finding out in March.

Keep it current after the budget is approved

A budget is a snapshot. The forecast behind it changes every time a family enrolls, withdraws, or gives notice. The Nebraska Iron Triangle explainer recommends tracking your vacancy rate by classroom every week. At minimum, compare each room's actual head count to the budget at the end of every month. When a room falls behind, you want to find out in time to act, not in the year-end numbers.

This is the part that falls apart in a spreadsheet. The forecast is built once in October and goes stale by Thanksgiving. It's the problem enrollment forecasting software is built to solve. Seedlist works from your live roster: children's birthdays, your rooms' age ranges, and the departures you've recorded. It shows which seats open over the next six months and suggests waitlisted families who fit each one. It doesn't move children or contact families for you. It shows you what's coming so you can decide. Seedlist is $59 a month flat, with a 30-day free trial and no credit card to start.