Business Article - Day Nurseries - A Buying Guide
Nearly 60% of women with small children work outside the home. Unlike with previous generations, most families feel they do not have a choice in this matter; the economic realities make it impossible for families to pay even basic living expenses without two incomes. But when parents have to go to work, the need arises for someone to care for the children. Not just any someone, either…someone caring, qualified, and affordable.
This reality makes the day care business a viable option for those who are looking for a family-friendly business opportunity. The necessity for child care makes this a growing field with no slowing of the growth projected, and for people who love kids, there could hardly be a more ideal career field. However, one word of warning should be given to the potential day nursery buyer. Most day nursery entrepreneurs enter the business far more out of a love of children than out of an expectation of large profits. One can make a living as a child care provider, but one is unlikely to get rich.
There are significant demands placed on those who own and run nurseries. Government regulations place strict limitations on owners and workers, often costing owners and directors in terms of time and money. In addition, long hours are required; on top of the regular hours of the nursery, there are hours dedicated to training and paperwork.
There are three different ways to establish a day nursery. First, one could open a center in one’s home. One could also open a new center in a location outside one’s home. Finally, one could buy an established nursery and take over a business that already has children attending.
In any of the above cases, the buyer’s priority at all times must be to provide an atmosphere of safety and growth for children. Secondarily, all rules and government guidelines must be followed strictly, not only to bring the provider into compliance with the law, but to reassure parents that their children are in good and responsible hands while they are away.
Operating a day nursery from the home provides several advantages. One is that there is no overhead for additional space, so start-up costs are considerably lower than if they were in a separate location. In addition to lower start-up costs, there are also tax deductions available for a home-based business. Working from one’s home allows one to control the days and hours one will work, including time off for holidays and vacations, with a flexibility not allowed in an established business location. Also, for those who prefer to work with children, to hold them and play with them, a home nursery allows for this close contact.
In a larger establishment, however, there is more likely to be a staff, leaving the owner free to deal with paperwork and administrative tasks only she can accomplish, and giving her less time to spend with the children. She has more support, can enroll more children in the nursery, and likely makes more profit. Of course, there are more expenses, such as building overhead and payroll for staff.
For those who are considering buying a day nursery, those consierations must be weighed against several other important questions that must be explored before a final decision is made. First, one must ask why the current proprietors are selling the facility. Are they simply trying to get out from beneath an unprofitable investment? Have the demographics of the area changed since the shop’s original establishment; i.e., have customers declined or crime risen? A buyer must look carefully at this matter, as it is possible that the seller will not volunteer such information. There are, however, good and acceptable reasons, as far as the buyer is concerned, for a current owner to sell a day nursery. Perhaps they are retiring, or perhaps they need to liquidate their assets in order to pay medical or tax bills. Neither of those reasons reflects upon the center itself, and can be considered acceptable reasons to divest oneself of an otherwise profitable nursery.
Next, the buyer should look carefully at the area and do her own demographical research. What is the projected future for this neighborhood or district? Who can be expected to use the services being offered in this center in the next year, five years, or decade? The buyer should consider whether the projected demographics are those which he is capable of serving; for example, if the ethnic makeup of the area is projected to change, will the buyer be able to meet the cultural and language needs of those children and their families?
After discerning that the location of the nursery is acceptable, the buyer should look at the physical plant of the center itself. A buyer should always have his or her own independent inspection done of the property, including inspections for pests and for structural soundness. A leaking roof or inadequate plumbing are enough to destroy equipment and endanger children’s health. One should consider whether there is adequate parking and lighting, easy access from the street and sidewalk, and handicapped accessibility. If not, the buyer must factor in the cost of making these improvements.
Next, the buyer should examine the records of the business itself. Does the nursery business have any outstanding bills that could carry over even if there is a new owner? It is advisable to have an accountant or attorney examine the center’s financial records. Does it have a record of profitability? If so, have the profits been sufficient to cover expenses such as rental or leasing, insurance and marketing that all businesses incur? If not, the buyer must discern why not. Has advertising and marketing simply been insufficient, which can be easily remedied, or has there been a problem with the quality of care? Suppliers can be changed and merchandise replaced, but the center’s reputation in the district takes more time to overcome if it is negative. If it is a positive reputation, and the center is already known for its good customer service and good quality merchandise, the buyer should find that fact an encouraging part of her discernment. It often takes years to build a positive reputation in business, and if the nursery’s current owners have already done that work, the buyer should take that into account in his decision.
Whichever method the buyer chooses, she will have to make some choices regarding her business. If she buys an established business, she can either change the way that center does things, or she can continue in the previous owner’s methods until she is more comfortable making changes. Some things that have to be determined early in the buying and establishing process include what kinds of children in what situations will she care for? Infants, toddlers, preschoolers, grade-schoolers after school? Will she take children only part-time, only full-time, or either? Will she provide breakfast, lunch, dinner or snacks? Will she provide over night care, sick care, or emergency care? Will she have an educational curriculum, or will she simply provide well-supervised play and activities? Will she accept government subsidies or vouchers?
Once she has chosen which children her nursery will serve, she must start thinking as a business person. She must develop and write a business plan, and present it to a bank or lender for funding. She will need more funding if she is outside her home, but less if she buys an established business with equipment and supplies already in place. She must have zoning requirements met and insurance in place before she ever accepts a student. She must research grants and subsidies, research her district, its needs and its income level, project her costs and income, and set her fees accordingly. She must have a marketing plan and an advertising budget.
Even before she opens her doors or takes possession of the business, she has to have policies in place that will enable her to run her business efficiently, safely, and profitably. These policies include a parent handbook describing rules, routines, and procedures for disciplining children. She must develop an employee handbook describing pay, benefits and disciplinary procedures, emergency procedures, and background checks. Background checks and other licensing requirements must be fulfilled in order for the buyer to do a day of business.
She must establish a general routine for the day-to-day running of the nursery and train her staff in following it. She should have a balance of active time, quiet time, free play and learning. She will have to be certified in Infant and Child CPR and make sure her staff is as well, and go over her facility with a fine-toothed comb checking for dangers that adults might not see, but small children would.
Buying or building a day nursery business is not an easy path. Between government regulations and anxious parents, a day nursery owner has a life of challenges. For those who love children, who want to care for them in their formative years, the trade-offs of working with them are more than worth any cost.