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It comes as no shock to anyone in the early education industry that the costs of operating a child care business are increasing significantly.
Published on March 13, 2025
Higher expenses create many challenges for business owners, including overall profitability and additional liability and property risks. These increases can be due to several factors, such as
- Facility costs – higher property and rent expenses, insurance premiums, and rising utility and maintenance bills.
- Equipment and supply costs – inflated prices for educational materials, food, cleaning, and office supplies, etc.
- Compliance and regulations – increased costs to meet licensing and safety requirements, like safety equipment upgrades and staff training.
- Staffing costs – higher salaries and wage increases because of labor shortages, increased demand for staff, and overall inflation.
Risk management considerations
Covering the increase in expenses has forced many business owners to raise their tuition costs, which brings new challenges to the forefront.
Families may not be able to afford new rates, resulting in potential customer loss. In a survey conducted by the National Association for the Education of Young Children (NAEYC) (2024) of more than 10,000 early childhood educators across the United States, 56% of center directors and family child care owner/operators said they were underenrolled relative to their current capacity, with the reasons varying from staffing shortages (89%), low pay (77%), and lack of affordability for families (66%).
Reduced profitability can make it difficult to provide quality care and address risk management issues; therefore, diligence in tackling potential issues before they arise and having an action plan can reduce the likelihood of further unexpected costs. Concerns that may arise include, but are not limited to the following:
- Liability hazards resulting from unmaintained equipment or facility components (e.g., slips/trips/falls, security lapses, inadequate fire protection measures, playground injuries, etc.)
- Liability hazards resulting from inadequate staff numbers, high turnover, or untrained/inexperienced workers (e.g., lack of proper supervision of children, mishandling of unique or emergency situations with children, discrepancies in following policies and procedures, etc.)
- Property hazards resulting from unmaintained equipment or facilities (e.g., water damage from bursting pipes, damage from harsh weather conditions, impeded fire protection measures, etc.)
Potential solutions
While there is no one way to solve the rising costs in early education, there are some strategies business owners can use to help protect their business.*
- Investing in staff training and support may improve retention of early educators and maintain a high quality of care.
- Maintaining building systems and the facility may reduce the potential for property losses and equipment breakdown.
- Exploring bulk purchasing options of educational, cleaning, and office supplies may aid is reducing costs.
- Ensuring open communication with customers about increasing costs and tuition adjustments may improve understanding and customer retention.
For more information on reducing risk in your early education business, view these resources from Markel.
*The checklist is not intended to be a comprehensive list of all items to consider.
National Association for the Education of Young Children. (2024). We are not ok: Early childhood educators and families face rising challenges as relief funds expire.