Daycare Business Plan Financial Model
Operating and starting a daycare business is a pretty challenging but rewarding business. This work requires a clean bill of patience, dedication, and love, as it may be utterly overwhelming at times, with more-than-8-hour working days and all the paperwork that comes along. However, watching how the kids develop as they become older is worth all the efforts, isn’t it?
If you have a great desire to begin but don’t know how to start daycare from scratch, this article will help you put all the things right. First of all, we’ll go through a step-by-step process of starting a daycare business, from assessing the need for the service to conveying a relevant startup idea and running up to the opening day.
By clicking the green button below, you’ll find a daycare business plan financial model Excel template available for download, which will most likely become the cornerstone of your future successes. Thus, let’s start the ball rolling, exploring the need for daycare services.
The Outlook For Childcare Business
The U.S. Bureau of Labor Statistics indicates that daycare businesses are likely to encounter one of the fastest-growing employment rates out of all professional fields by 2020. The reason is obvious, as the demand for childcare services strongly depends on the number of working parents, which is continually increasing.
Nowadays, among married couples with children under 18, 96.8% of families have one parent employed and 61.1% have both parents working. Thus, the employment opportunities evolve, and working parents need more professional people to take long-term care of their children, and here a daycare center comes to help out. It means that the best time for entering the child care market is right away.
Set-Up Stage With Real-Life Examples
Let’s take a look at a real-life case that proves that entering a market successfully is absolutely possible with minimal original assets and maximal use of strategic planning.
Mr. Smith wants to open a new locally-owned, nationally accredited Kids Care Center, focusing on the provision of day-to-day full-time care and a loving environment for children aged from 1 month to 60 months. He can skip many complicated licensing and paperwork issues by purchasing a franchise, but the cheapest option starts at $70,000 and may cost up to $3,5 million. As Smith’s budget is limited, buying a franchise is cost-prohibitive, that’s why he decides to start daycare from scratch.
Mr. Smith finds the idea of a childcare home more convenient than the franchise, as it has many benefits: more convenience, more flexible hours, and much fewer expenses, which’s the most important.
The Kids Care Center Business Idea
It’s a childcare facility, prepared to provide daycare services for children from 1 to 60 months old. Based on their age, the kids visiting the center should be divided into 5 groups:
nursery (1–15 months), junior toddlers (15–30 months), senior toddlers (24–36 months), pre-kindy (30–36 months) and kindergarten (36–60 months).
For setting up the business, Mr. Smith needs to rent a house, hire child care professionals trained in early learning programs, and calculate the overall daycare startup cost. Only after that, Mr. Smith can start looking for funding from an investor or lender, interested in a profitable startup idea. But how to prove that his business is worth lendable funds?
Before You Have A Plan
First of all, Mr. Smith defines primary and secondary expenses. The primary expenses include renting costs and wages of staff, while the secondary ones consist of costs of food, driving, nappies, etc. Having calculated the approximate first-month expenses, Mr. Smith cannot make a child care business plan on his own, as there are so many twists and turns to consider that he doesn’t know what to begin with!
So how to start a daycare at home, proving to investors that your idea is worth their money?
Getting A Detailed Business Plan
As Mr. Smith can’t estimate the sample budget for a daycare center independently, he asks a professional financial modeler to prepare an investor-ready business plan. The main questions Mr. Smith wants us to answer are as follows:
What are the overall costs of launching a startup?
What is the estimated revenue?
How long is the investment payback period expected to be?
The plan should consider all these things because Mr. Smith wants to know how much money he can make owning a daycare center. Besides, he wants to find out, whether or not the overall startup idea is profitable. In addition to that, Mr. Smith wants to consider different scenarios to choose the most cost-efficient and quality-friendly one. Read on to find out how to start a childcare center with the help of business modeling.
Childcare Business Plan Description
Here’s a piece of detailed information about the building blocks of the model designed for Mr. Smith.
On the model dashboard, you can see the detailed description of the business plan. In particular, it includes:
age and demographics info;
The content illustrated on the dashboard depends on the needs of the client. In Smith’s case, it was necessary to compare different financial scenarios, that’s why this function was added to the dashboard. Thanks to it, Mr. Smith can see the costs of leasing a bus, using it, providing food and nappies for the children. Based on this information, he can understand what he may realistically afford.
Finally, the core financials section is also presented on the dashboard, as it summarizes the main financial plan statements.
Furthermore, the KPIs (key performance indicators) are included in the daycare business plan financial model, so that one can see, which variables impact the business more or less considerably.
This part of the model always deserves a great bill of attention, as it consists of the core financial assumptions, with which your future business will run around. As one of the essential requirements was to calculate the wages for different personnel members, it’s necessary to focus on the following criteria:
billable working days per month;
occupancy rate / its change through the years;
the total amount of working hours;
monthly workload per person;
Based on these and some other variables, the wages for Kids Care Center personnel were calculated. As result, the expenses on wages and the number of child care professionals were shown.
This section of the model includes the cash flow statement, income statement, and balance sheet for the following three years of business activity. Based on the variables described above, the overall yearly data was calculated and narrowed down into monthly statements.
As the result, Mr. Smith sees the established financial goals, estimated revenue, and required investments for each month separately. Such a structure of financial summary makes it easier to track the goal-achieving process.
Daycare Business Plan Financial Model Usage Benefits
Now when you know how to start a daycare center with the help of proper modeling, we can summarize the main financial model use perks.
First and foremost, planning helps to organize all ideas properly for running a business. Additionally, it may help you to stay on track even after the business is launched. Besides, it can assist you in efforts to meet both long-term and short-term financial goals. Finally, it can help you to prove to the leaders that your idea is worth their investments.
The last option was especially important for Mr. Smith. Having found how valuable and profitable his startup idea was, he managed to find investors, ready to handle the financing of Kids Care Center.
In the model described above, you can use several business scenarios just by changing any of the yellow cells and see, how they perform. It’s especially good for startups with limited original assets. What’s even more, the main privilege of a business plan for child care is that it isn’t set in stone — you can adjust and manage it periodically as your business evolves and plans change.
Drawing Up The Balance Sheet
Today, Kids Care Center operates successfully, increasing the spectrum of services provided. In particular, the center hires bilingual child care professionals to teach kids two languages simultaneously. In addition, they develop a special health and safety plan to teach the kids, how important it is to have a healthy lifestyle.
The example of Kids Care Center exists to prove to those who are in doubt that financial success isn’t all about seed funding but about strategic financial planning, which is possible only if key performance indicators are defined properly.
If you can realize what you can realistically achieve and establish a set of short-term and long-term goals independently, making a business plan singly is next to impossible.
Now when you know what do you need to start a daycare, do three things before you run your own daycare business:
1. Look at the sample business plan attached to see, whether you can work with it independently;
2. Visit our website to find more information about business planning and everything aligned with it;
3. Give us a hand and send round this information if you find our article helpful!
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