How To Price Your Indoor Playground Business Services Based On Profit Margin

So often I get questions on my Youtube Channel or in my Instagram messages saying, “hey Michele, I am thinking about offering X— what would you charge for this?”

And the latest example of this was on my youtube channel on my 2023 Indoor Playground Business Trends video, so shout out to Elizabeth for being the inspiration behind this episode. And PLEASE– read this one until the end. There are some really key takeaways I need you to hear and we are going to wrap this all up with a neat little bow so just make sure you stick around, it will be worth it.

And if you prefer to listen instead of read– you can do so on my Profitable Play Podcast here.

So often people forget the basic principles of business when it comes to pricing and I am just here to tell you that is OK– that’s what I’m here for. 

I would say a vast majority of owners in this business come from the early childhood development space or are parents who simply wanted to create a positive impact on the families in their community with their business. They didn’t go to business school like I did, and that is exactly why I created this podcast and all of my courses and programs, really. 

Back in episode 137 of my Profitable Play podcast I talked about how, when you are looking for a business mentor or coach or consultant, you should try and look for someone who fills in the gaps that you might be lacking or areas where you might not be as strong. 

For me, I had ALL the business acumen and know-how but I needed a lot of help designing my play space so that it would be accessible and developmentally appropriate for the ages I’d be accommodating and what type of play I wanted my play cafe business to feature. And I still follow so many play experts for that reason– it’s not my area of expertise, so I am always LEARNING and looking to grow in this area.

And even though I did have a masters degree and business experience I still hired another indoor playground owner as a consultant because I saw really quickly how nuanced the indoor play industry is and I knew I could get to a place of success a lot quicker if I learned from someone who went before me and had all the insider secrets I was craving. 

Now I won’t get into my whole spiel– instead, you can learn about how much time and money you can save by investing in my play cafe academy course which has over over 70 detailed lessons and comes with all the time-saving templates you need to operate your business with more efficiency and ease– just know that you’d have to pay a 1:1 consultant tens of thousands of dollars to get that same amount of information and resources on my Play Cafe Academy program page here. 

And some people find that a combination of my course and personalized mentorship is the best fit, which is why I created my Play Maker Society program, a membership just for current owners and Play Cafe Academy students where both myself and over 200 current owners are ready and waiting to generously share their expertise and guidance. 

BUT ANYWAY. Let’s get back to the main topic, shall we?

If pricing feels really confusing to you– that’s OK and you are not alone. It’s still one of the most commonly brought up topics in Play Maker Society– and for good reason. If we were running product based businesses, it would be a lot easier. There are pretty consistent industry standards when it comes to profit margins and pricing. 

But with service-based businesses like ours, it becomes a little more subjective. Much of the value we provide to our customers isn’t quantifiable, nor does it have a direct cost to us– like it would if we were selling a toy.

For example– for open play. If one more person comes in the door, it doesn’t technically have a direct cost to us. Sure, we have to staff our space. We need to pay rent. We need to purchase cleaning supplies to tidy and sanitize when they leave. There’s heat and air conditioning we need to be sure is on to welcome guests. We need to purchase bathroom supplies they’ll likely use– and let’s not forget all of the start-up costs we sunk when we first launched our play spaces.

BUT STILL– that one person or family walking through the door has no direct cost to your business. Sure, they will be contributing to your operating costs as I described above– but it’s not like you’ll be following them into the bathroom and measuring how much toilet paper they use– nor should you.

This is one of the key things I teach in my paid programs but I wanted to give you an example of what I recommend to my students here today– and I am going to use the example Elizabeth from youtube asked about.

She said, “Hey! How much would charge on the monthly parents night out thing? Out of curiosity. We have a place here that does them now and then for $45 per kid but no monthly things”.

Now I first mentioned that we stopped doing kids night out for so many reasons– but since it does work for other spaces– I told her that we can reverse engineer the answer to her question. 

I told her, your cost really depends on your local wage rates (in NY our minimum wage is very high, making our costs much higher!)-- but assuming a $14 labor rate and 2 people working — if they each work a 4 hour shift for a 3 hour drop off period that is $112.

Food and crafts/ activities will likely be another $50, bringing your total DIRECT cost for this drop off service to be $162. A direct cost simply means that the bill or cost would not exist if you did not offer this service. It’s not like rent, which is a bill you get regardless of whether or not you even welcome any customers or not.

Now, I always teach my students to work-in a minimum 60% profit margin for all services.  And the details again are in my paid program– but just know that in my almost 8 years of experience, this is a good profit margin number that accounts for contributing to operating costs, your owners compensation, recouping your start-up costs– all that. 

Now, of course, this is assuming your operating costs are within a healthy range and that your owners compensation expectations are realistic and on-par with your revenue– but again, more on that in my paid program I couldn’t possibly get through all that here.

But let's assume your direct costs for this service are $162.  So if you can accept 12 kids safely (and this will depend on your local child to adult ratios and their ages— this will vary GREATLY since younger kids will need more adults present)— then charging $40 and over per child puts would put Elizabeth within the desired range of profit margin. 

If she charged $40, she would be at a 66% profit margin. If she charged $45, she’d be at 70% profit margin. 

Now, as we all know, not everything works like they tell us it will in business school. So if you’re doing your calculations and come up with a magic number you should charge– you still need to gut check it or reality check it, if you will.

So for example, if you do this calculation and realize you’d need to charge $75 per child to make this service fall within the healthy profit margin range– and all of the other competitors in your area charge $40 for a similar service, you might need to re-evaluate.

Now maybe you serve a different type of clientele and maybe people WILL be willing to pay your higher prices because of the extra value you provide or because they love your space.

My recommendation is to always start a bit on the low side– because it is always MUCH easier to raise prices for a service than to lower them. If customers see you lowering prices too often– that may give them a sense of unease and especially when it comes to drop-off care– they might lose confidence in you.

But if they see you RAISING prices this signals to them that people are really happy with your service and that, because demand is high, they better grab their ticket or membership while they can!

So, as I said, if you do this calculation and realize you’d need to charge $75 per child to make this service fall within the healthy profit margin range– and all of the other competitors in your area charge $40 for a similar service, you might need to re-evaluate.

Maybe you need to INCREASE the amount of kids you can take- maybe by making the age requirement a bit older (since older kiddos are more independent). Maybe you need to scale back your offer a bit and not include pizza with the drop off service. 

There are ways to tweak your offer so that it IS profitable and sustainable for your business and this is exactly what we workshop in Play Maker Society and that’s when it becomes so helpful to hear from others who are a few years ahead of you and have already gone through all this trial and error.

And the same is true if you do your calculation and it says you only need to charge $10 but your competitor is charging $50. Maybe you need to include a bit more to stand out or maybe you are under-selling your value.

The key takeaway I want you to get from this episode is that you should be pricing based on YOUR OWN business numbers. 

Your own costs and desired profit margin. If you price JUST based on competition, it’s like trying to shoot an arrow in the dark and expecting to hit a bullseye. 

You have NO idea what’s going on behind closed doors. Social media is FAKE and let me tell you from experience– SO many indoor playground businesses who look extremely successful on the outside, are anything but when I dig into their numbers. Who knows how they arrived at their prices and if they are even seeing a profit from that service– or, if they’re struggling. 

And you also don’t know if they were “gifted” their businesses or if they have loans or if they even take home any income as an owner. You JUST. CAN'T. KNOW.

So while it is a good idea to again gut-check your prices against your competitors– do not let THEIR prices dictate yours. 

If you serve a different ICA than them, maybe you should be priced much higher or must lower. And if you need a refresher about ICAs, go back to episode 139 on my Profitable Play Podcast– it’s a good one. The key is you need to price your numbers based on YOUR business numbers- and you need to be able to justify your pricing through effective messaging and marketing if it’s different.

And if you want to see what’s working for real-life indoor playground owners RIGHT NOW in 2023, download my free “What’s Working” guide below!