CHILD CARE – THE
BUSINESS MODEL
Mythbusters
VARIABLES TO ACCOUNT FOR
 Tuition
 Competitive
 Affordability
 Wage Rates
 Recruitment and Retention
 Operational cost
 Facility Cost
 Ownership/Debt load
 Rental rates
 Vacancy Rates
 Workforce and capacity
THE VARIABLES
Govt.
Assistance
Fund
Raising
Tuition
Cash Flow
Regulations,
Vacancies,
Quality
Revenues
Reserves
Labor, Food,
Supplies,
Facility,
Debt
Service
Cost
BUY LOW, SELL HIGH!
NOT SO EASY
Wages
Tuition
FAILURE TO CASH FLOW MEANS TROUBLE
Tuition
All
Costs
Cashflow
THIS LOOKS EASY! CASH FLOW DONE!
INCOME
VARIABLES
$$$$$$$
$
Tuition
Competition vs. Cash Flow
$848,850
Fundraising
Private vs. Public
$ 12,000
Govt. Assistance
Means Testing
Gross
Revenues
EXPENSES
Salaries
Wage Rates
Food and Milk
Facility
$626,938
$ 79,300
Rent/Debt, Maintenance, General $ 36,000
Supplies & Other
$ 40,300
Total Expenses
$782,538
Net Income
Salaries $16/$12; Occ. 95%; rate $185
$ 78,312
WHAT ABOUT VACANCY LEVELS?
INCOME
VARIABLES
$$$$$$$
$
Tuition
Competition vs. Cash Flow
$726,210
Fundraising
Private vs. Public
$ 12,000
Govt. Assistance
Means Testing
Gross
Revenues
EXPENSES
Salaries
Wage Rates
Food and Milk
Facility
$626,938
$ 79,300
Rent/Debt, Maintenance, General $ 36,000
Supplies & Other
$ 40,300
Total Expenses
$782,538
Net Income
Salaries $16/$12; Occ. 80%; rate $185
$(44,328)
WHAT ABOUT WAGES?
INCOME
VARIABLES
$$$$$$$
$
Tuition
Competition vs. Cash Flow
$726,210
Fundraising
Private vs. Public
$ 12,000
Govt. Assistance
Means Testing
Gross
Revenues
EXPENSES
Salaries
Wage Rates
Food and Milk
Facility
$736,204
$ 79,300
Rent/Debt, Maintenance, General $ 36,000
Supplies & Other
$ 40,300
Total Expenses
$891,804
Net Income
Salaries $18/$15; Occ. 80%; rate $185
$(153,594)
WHAT ABOUT TUITION RATES?
INCOME
VARIABLES
$$$$$$$
$
Tuition
Competition vs. Cash Flow
$788,940
Fundraising
Private vs. Public
$ 12,000
Govt. Assistance
Means Testing
Gross
Revenues
EXPENSES
Salaries
Wage Rates
Food and Milk
Facility
$736,204
$ 79,300
Rent/Debt, Maintenance, General $ 36,000
Supplies & Other
$ 40,300
Total Expenses
$891,804
Net Income
Salaries $18/$15; Occ. 80%; rate $200
$ (90,864)
REAL LIFE EXAMPLE
INCOME
VARIABLES
$$$$$$$
$
Tuition
Competition vs. Cash Flow
$159,000
Fundraising
Private vs. Public
Govt. Assistance
Means Testing
Gross
Revenues
EXPENSES
Salaries
Food and Milk
Facility
Wage Rates
$128,000
$ 14,750
Rent/Debt, Maintenance, General $ 10,260
Supplies & Other
$
7,985
Total Expenses
$160,995
Net Income
$ (1,995)
DRIVING THE BUSINESS MODEL
 What should drive the business plan?
 Market tuition
 Cost
 What about facility costs?
 Rent
 Debt service
 What about workforce?
 Primary cost
 Recruitment
 Retention