A business plan provides a snapshot of your child care business as it stands today and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your projects.
Why You Need a Business Plan
If you’re looking to start a childcare business or grow your existing one, you need a business plan. A business plan will help you raise funding, if required, and plan out the growth of your child care to improve your chances of success. Your child care business plan is a living document that should be updated annually as your company grows and changes.
Source of Funding for Child Care Businesses
Regarding funding, the main sources of financing for a childcare business are bank loans and angel investors. Regarding bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.
The second most common form of funding for child care is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their budget or, like a bank, give you a loan. Venture capitalists will not fund a childcare business.
Child Care Business Plan Template
Your business plan should include ten sections as follows:
Your executive summary provides an introduction to your business plan. Still, it is normally the last section you write because it summarizes each key area of your project.
The goal of your Executive Summary is to engage the reader quickly. Explain to them the type of child care business you are operating and the status; for example, are you a startup, do you have child care that you would like to grow, or are you using a chain of child care businesses?
In your company analysis, you will detail the type of childcare business you are operating.
For example, you might operate one of the following types:
- Home-Based Child Care: this type of child care business operates out of your home and typically has one or two caregivers on staff.
- Child Care Center: a child care center operates out of a commercial building. It typically has multiple staff and caregivers and can serve many children.
- Pre-School Child Care: a child care business that primarily serves preschoolers
- School-Age Child Care: a childcare business that primarily serves school-age children.
In addition to explaining the type of child care you operate, the Company Analysis section of your business plan needs to provide background on the business.
Include answers to questions such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include sales goals you’ve reached, new program offerings, etc.
- Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal system here.
In your industry analysis, you need to provide an overview of the childcare business.
While this may seem unnecessary, it serves multiple purposes.
First, researching the child care industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your strategy, particularly if your study identifies market trends. For example, if there were a trend towards child care that includes transportation, it would be helpful to ensure your plan calls for such a service.
The third reason for market research is to prove to readers that you are an expert in your industry. You achieve that by conducting the research and presenting it in your plan.
Your child care business plan’s industry analysis section needs to address the following questions:
- How big is the childcare business (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the local or national market?
- What trends are affecting the childcare industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your child care. You can extrapolate such as figure by assessing the size of the market in the entire country and then applying that figure to your local population.
The customer analysis section of your child care business plan must detail the customers you serve and expect to serve.
The following are examples of customer segments: soccer moms, young families, baby boomers caring for grandchildren, etc.
Try to break out your target customers in terms of their demographic and psychographic profiles. Regarding demographics, include a discussion of the ages, genders, locations, and income levels of the customers you seek to serve. Because most childcare businesses primarily serve customers living in the same city or town, such demographic information is easy to find on government websites.
Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.
Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other child care businesses.
Indirect competitors are other options that customers have that aren’t direct competitors. This includes keeping children at home and after-school programs, among others.
With regards to direct competition, you want to detail the other child care businesses with which you compete. Most likely, your direct competitors will be child care businesses located very close to your location.
For each such competitor, please provide an overview of their businesses and document their strengths and weaknesses. Of course, unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of customers do they serve?
- What child care services do they offer?
- What times are they open?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
About the last two questions, think about your answers from the customers’ perspective.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide superior child care services?
- Will you provide childcare services that your competitors don’t offer?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a child care business plan, your marketing plan should include the following:
Product: in the product section, you should reiterate the type of child care you documented in your Company Analysis. Then, detail the specific services you will be offering. For example, will you over technology or exercise classes to the children?
Price: Document the costs you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the menu items you offer and their prices.
Place: Place refers to the location of your child care. Document your site and mention how the area will impact your success. For example, is your child care located next to a heavily populated office building, gym, etc. Discuss how your location might provide a steady stream of customers.
Promotions: the final part of your child care marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:
- Social media marketing
- Reaching out to local bloggers (particularly “mommy” bloggers) and websites
- Local radio advertising
- Banner ads at local venues
While the earlier sections of your business plan explain your goals, your operations plan describes how you will meet them. Therefore, your operations plan should have two distinct areas as follows.
Everyday short-term processes include all the tasks involved in running your child care, such as discussions with prospective new customers, procuring supplies, keeping the child care center, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to serve your 100th child or when you wish to reach $X in sales. It could also be when you expect to hire your 4th employee or launch a new location.
To demonstrate your child care’s ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally, you and your team members have direct experience in the childcare business. If so, highlight this experience and expertise. But also highlight any occasion that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory committee would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in childcare businesses and successfully running retail and small businesses.
Your financial plan should include your 5-year financial statement broken out monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.
Income Statement: an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to indicate whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you serve ten children per day or 50? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. So, as much as possible, research to root your beliefs in reality.
Balance Sheets: While balance sheets include much information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities. For instance, spending $100,000 on building your child care center will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $100.000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement: Your cash flow statement will help determine how much money you need to start or grow your business and ensure you never run out of money. Most entrepreneurs and business owners don’t realize that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a massive $100,000 childcare contract that would cost you $50,000 to fulfill. Well, in most cases, you would have to pay that $50,000 now for employee salaries, etc. But let’s say the company didn’t pay you for 180 days. During those 180 days, you could run out of money.
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