How to Build a Childcare Business Plan
A step-by-step guide for childcare with tips and a detailed outline to help entrepreneurs start their childcare business.
Table of contents
- What Is Childcare and Why Should I Start One
- Types of Childcare Providers
- Essential Steps Before Starting Your Childcare Business
- Develop Your Buyer Personas
- Decision Journey Map Definitions
- Determine Your Competitors
- How to Start Your Childcare Business
- Conduct an Opportunity Analysis
- Problem and Solution
- Execution Plan
- Strategic Alliances
- Financial Forecasts
- Consider Various Funding Sources
- Form Your Childcare Business
- How to Gain Enrolment at Your Childcare
- Find the Right Childcare CRM Software to Manage Enrolment with Less Work
Check Out the Tips and Tricks
Changing parent expectations have created an environment where the old way of managing the parent experience from initial enquiry through family retention doesn’t work anymore. It’s inconvenient, time-consuming, and full of obstacles that cause families to choose another childcare centre altogether.
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Childcare organisations that make the parent experience digital and convenient will grow enrolment, increase retention, and remain competitive in the childcare market. In this guide, you'll view the key takeaways from our research and provided recommendations to help you grow your business by optimising the parent experience.
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What is childcare and why should I start one?
According to Forbes, childcare businesses were projected to have some of the fastest employment growth of all industries through 2020. Starting a childcare is a great opportunity for aspiring business owners who have a passion for early childhood education and child development.
‘Childcare’ is an umbrella term for various options (such as Montessori, preschool, and many more) where parents and guardians drop their children off and leave them in your care to...
- Socialise with other children in their age group
- Learn basic fundamentals for future academic success
- Reach important developmental milestones
Is starting a childcare business worth it?
Starting a childcare business or franchise is profitable, emotionally rewarding, and sustainable – the need for committed childcare entrepreneurs has never been greater.
As of 2021, there were 13,370 childcare centres in Australia. The growing popularity of childcare centres comes from the demand. Parents will always need a form of care for their kids. Plus, there’s a necessity, especially beyond COVID-19, to socialise children in an environment that fosters development.
Types of Childcare Providers
- Family Daycare
- Relative care
- Preschool (only)
- Independently-owned daycare
- Childcare Groups
- Before & After School/Vacation Care
The difference between individual centres and childcare groups.
An independently-owned daycare often has an individual owner, a centre director, and possibly a few other administrative staff members – along with teachers, cooks, bus drivers, etc. The owner is typically an individual who puts their own money and savings into opening the centre, so all business rights (name, branding, etc.) belong to them.
Alternatively, a childcare group falls under a corporate brand who has acquired centres in multiple locations and either re-branding or keeping the current brand (to grow their portfolio). This type of business is usually controlled by a group of employees in a head office or headquarters facility.
The centre directors, cooks, educators and teachers are then recruited by the childcare group itself and distributed to different locations to maintain similar or exactly the same policies, values and learning program. Ultimately each location is owned and operated by the larger corporate group.
Essential steps before starting your childcare business
1) Conduct Market Research
When it comes to starting your childcare centre, relying on assumptions about your customers and competitors leads to wasted time, money, and effort. In contrast, businesses that conduct regular market research improve customer retention and are 76% more likely to see an increase in revenue.
Market research is a data collection process that evaluates both consumer behaviour, competitor habits, and industry trends to determine the viability of your centre and build a foundation for future business operations.
Prepare for success upfront by conducting thorough market research to understand your competition, improve communication with your target audience, and identify new market opportunities. This research should result in actual data that you can use to drive your business and marketing strategies as you launch your centre.
There are a variety of tools available to help you conduct market research - all from the comfort of your own office. Gone are the days of hiring team members with clipboards to approach consumers face-to-face. Survey Monkey, Typeform, Google Forms all offer digital market research tools to help guide you through the process of understanding your audience, your competitors, and your industry.
2) Determine Your Target Market
A market segment is a group of consumers that could potentially enrol at your childcare centre. First, identify your market segments and determine how big each segment is.
Be careful not to fall into the trap of defining your market as “everyone in your community.” This often leads to a ‘spray and pray’ approach to your marketing and as we know, a message for everyone really speaks to no one. When you generalise your advertising in favour of not isolating a potential consumer, you aren’t able to effectively communicate with your ideal customers – forgetting to recognise how your family entertainment centre can appeal to them and their needs.
A classic example is a shoe manufacturer. While it would be tempting for a shoe company to say that their target market is anyone who has feet, realistically they need to target a specific segment of the market in order to be successful. If they sell adult athletic shoes, they should be building their message to target athletes or individuals who enjoy staying active and exercising. Likewise, if you offer programs for children aged 6 months to 4 years old, you should prioritise advertising towards young adults in their 20’s and 30’s.
A common strategy when identifying target markets is to use the TAM, SAM, and SOM approach to look at market sizes from a top-down approach as well as a bottom-up approach.
Target Market Terms
- TAM: Your Total Available or Addressable Market
This should include everyone you wish to reach.
Example: Your entire local community.
- SAM: Your Segmented Addressable Market or Served Available Market
This is a portion of the TAM you will specifically target because they align with your offerings.
Example: Families with young children.
- SOM: Your Share of the Market
This is the group of your SAM that you will realistically reach—particularly in the first few years of your centre’s opening, as you may expand and grow your service over time.
Example: Families with young children who make at least $65,000 each year in household income.
For childcare organisations with multiple brands, schools, or programs - increasing revenue and keeping families happy is vital for growth. Your Millennial parents need a uniform, high-quality experience, regardless of location.
Standardising business processes has a significant impact on time savings, costs, and most notably on quality. In fact, standardisation improves quality by 61.9%, on average. Create consistent enrolment processes across all your locations to ensure every family has a great experience and a positive association with your brand – leading to higher conversion success and profitability.
To achieve consistency, your marketing approach and advertising material must follow all your corporate brand guidelines. Your organisation should have a lead management system that supports your childcare staff as they guide families through the decision-making journey while also ensuring each location is delivering a consistent parent experience.
3) Develop Your Buyer Personas
Before you begin writing your marketing plan, make sure you’ve defined your market and buyer personas. Without a deep understanding of who you’re speaking to, a marketing plan will have little value.
Audience personas allow you to dive even deeper into your target market and help you understand more than just who your customer is. These identities inform you how to communicate with your customers in a way that relates to their pain points and needs.
When you understand your customer’s motivations, you can uniquely address their concerns and questions in your marketing materials - leading to increased tours, enrolments, and revenue.
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Start by listing out the various kinds of programs and classes you’d like to offer at your centre.
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Then, determine who the primary decision-maker and who the primary influencers might be in each scenario.
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Primary decision-maker: typically the individual(s) taking financial responsibility and remitting payment at your centre.
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Primary influencer: also crucial in the purchasing process as they often have the ability to sway decision-makers.
For example, imagine you’re promoting availability for Holiday program at your centre. In this instance, the primary decision-maker might be the parent(s) or guardian(s) whereas the primary influencer would likely be the child who’s deciding what kind of activities they want to do this Summer.
Audience Overview
List the audiences, personas, or segments that you want your centre’s marketing and messaging efforts to reach.
Select one audience from above and describe it to the best of your knowledge. Go beyond the traditional persona to consider motivations & behaviour.
Identify the key stages in your audience’s enrolment journey from beginning to end, knowing there may be multi-dimensional steps within a stage. Complete the table for each journey at the individual stages from the specific audience’s point of view.
How to start your childcare business.
Construct a Business Plan
A good business plan will guide you through each stage of starting and managing your childcare organisation- including how to structure, run, and grow your new business.
There’s no correct or incorrect way to write your business plan. What’s most important is that you identify your business objectives and use this document as a roadmap for how to achieve these goals.
A strong business plan can help you recruit business investors, gain funding, or find new partners. Prospective investors want to feel confident they’ll see a return on their investment and your centre’s business plan is the perfect tool to assure potentials that working with you — or investing in your business— is a smart and profitable decision.
Write an Executive Summary
Although this section is the first thing people will read, it’s advised that you write it last, once you know the details of your business inside and out. At this stage, you will be able to articulate your business more clearly and summarise all the information in a succinct, concise manner.
Ideally, your executive summary will be able to act as a stand-alone document that covers the key highlights of your detailed business plan. In fact, it’s common for investors or loan providers to ask for just the executive summary when they start evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation, and more in-depth financials.
As your executive summary is such a critical component of your business plan, you’ll want to make sure that it’s as clear and concise as possible. Cover only the essential components of your daycare, ensuring your executive summary is one to two pages maximum. This section is intended to be a quick read that hooks your potential investors’ interest and excites them to learn more.
The executive summary is a tell-all first paragraph that details...
- The city and state of your centre (you can decide on the exact location later)
- A potential open date
- A projected enrolment count (number of children you can enrol)
- Programs you plan to offer
- Ages you hope to serve
- A quick financial summary (based on grants, funding, and potential revenue from projected enrolments)
This may seem like a lot of information upfront, but it’s simply a high-level overview of your plan.
Execution Plan: Marketing and Sales
The marketing and sales plan section of your business plan details how you propose to reach your target market segments, how you plan on converting those target markets, what your pricing model looks like, and what partnerships you may need to make your centre a success.
Your Positioning Statement
Once you understand your audience, the first part of your marketing and sales plan is your positioning statement. Refer back to your value proposition to create a simple, straightforward sentiment, explaining where your company sits within the competitive landscape and what differentiates your venue from the alternatives that a customer might consider. This statement should be written for an investor or loan provider, rather than for your customer.
For example, a positioning statement for a 24-hour childcare centre in Sydney, New South Wales may look like this:
“For the Sydney-based family who is seeking childcare around the clock, Jenny’s 24-Hour Childcare Centre is a safe option for young children with nutritional meals, best-in-industry sleeping arrangements, a clean outdoor play area, and highly trained care teachers and educators. Jenny’s 24-Hour Childcare Centre is the first centre of its kind within 10 km of the Sydney city centre and offers competitive pricing and competitive daily rates.”
Use this formula to develop a positioning statement for your centre:
Your Mission Statement
Your mission statement is a scaled-down version of your positioning statement. This should be just one-two sentences that are geared toward your target consumer and describe what your business plans to accomplish. This statement usually includes company core values that explain your childcare’s purpose and how you serve your audience.
For example, Busy Bees is a leading early childhood education provider with the mission of “high quality childcare and exciting learning opportunities that give every child the best start in life.”
Pricing
Your positioning strategy will typically determine how you price your memberships and packages. There are some basic rules that you should follow when deciding on your price point:
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Cost-plus pricing: For the most part, you should be charging your customers more than it costs you to host them at your centre to ensure your venue is profitable and is appealing to investors.
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Market-based pricing: Look at what your competitors are charging and then price based on what your audience is expecting.
Financial Forecasts
A typical financial plan will have monthly sales and revenue forecasts for the first 12 months, and then annual projections for the remaining three to five years. Break your sales forecast down into several rows, focusing on just high-level buckets at this point.
Knowing how much your childcare will cost to open ahead of time can save you money, stress, and time. Childcare start-up expenses vary by size, enrolment capacity, and miscellaneous needs.
Keep in mind that you can save on staffing costs and cut down on overhead with technology that helps to streamline your centre’s operations. After all, 40% of Millennials prefer self-service over human contact when interacting with businesses.
It’s essential that you find ways to enable families to book tours and enrol online without ever having to make a phone call to the centre- reducing time spent on necessary-but-manual tasks for both your staff and inquiring families.
Finally, articulate your profits and losses based on the data from your sales forecast and your personnel plan plus a list of all your other ongoing expenses associated with running your childcare centre.
Formula
Step 1: Average daily rate per child x your expected enrolments x 12 (annual revenue – assuming each family is still enrolled during the holiday periods).
Step 2: Childcare businesses make around 16% profit from their overall revenue, after Childcare expenses. Multiply your number from step 1 by .16 to get your predicted profit.
Example: Let’s say you plan to charge families an average of $110 per day for childcare. With that, your goal is to enrol 60 students by the time your childcare centre opens. Multiply ($110 x5) 60 x 12 (annual revenue). This should come out to $396,000. Lastly, multiply your revenue of $396,000 by .16, which equals a net profit of $63,360 per year.
How to gain enrolment at your childcare.
The next step after successfully starting your daycare business is to grow your centre and gain enrolments.
Begin by building a string company culture, actively marketing your childcare centre, and finding the right childcare technology to optimise your enrolment process and save time.
Create a culture where staff want to work.
A childcare centre that stands out from the rest has happy staff members that want to work hard. Create a diverse employee culture that feels comfortable openly talking about situations. Provide support, patience, and room for growth.
Market your centre.
A childcare marketing strategy starts with an achievable goal. Do you want to fill your enrolment spots? Do you want to build a waitlist? Should you focus on scheduling more tours?
Choose an objective and measurable results – so you can track and analyse your marketing performance.
Market, promote, and advertise your childcare centre with...
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Social media (especially Facebook – 83% of Millennials have a Facebook account).
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Landing pages and contact forms on your website
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Listing directories
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Email and text marketing campaigns
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Referrals
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Digital advertisements
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Flyers
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Word of mouth marketing
Tip: Childcare software that automates the reports you need helps you to saves time and improve your return on investment (ROI).
For example, with a Source of Families report, you can see where your leads are coming from. It helps you enhance your marketing efforts and refine your spending. Invest in the channels that are popular and spend less on the ones that aren’t working to generate more high-quality leads.
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