Understanding Break-Even in Your Child Care Business

Understanding Break-Even

Break-even is the minimal amount of income/revenue a child care center must earn to cover all expenses without losing money or making money.  Therefore, all income above the break-even point would be profits.

To calculate your center’s break-even, add up all of the operating expenses for a month, i.e. labor, supplies, rent, insurance, etc.  The total expense number should be divided by 4.33 to determine a weekly break-even.

Example:            All operating expenses for one month = $50,000 (monthly break-even)

                        $ 50,000 (operating expenses)   = $ 11,547 (weekly break-even)

                                  4.33    (weekly)

You would also want to calculate the enrollment needed to break-even.  For example, if your average weekly rate is $ 100.00 x 4.33 = $ 433.00 monthly

$ 50,000 (operating expenses) = 115.47 break-even enrollment

                             $ 433.00 (monthly average rate)

In order to break-even, your daily enrollment would need to be approximately 116 children.  With an enrollment of 116 you would not lose money, but you would not make a profit.  Of course, the goal of a business is to make a profit.  The break-even point is a variable number and can increase and decrease based on operating expenses.  You should calculate your break-even at least once every quarter.  Knowing your break-even can assist you with:

• Determining your rate schedule
• Making adjustments to labor based on enrollment
• Decreasing expenses to lower the break-even point
• Increasing enrollment to reach the break-even point and above to make a profit