Financial Management 101

Let’s face it, the only way that we can hope to keep our child care business up and running is through savvy financial management. Basic operating cost for child care programs, including overhead, are very high contrasted to the fees that we may be able to charge parents, depending on our location and mix of services.

Child Care is a business that is labor intensive and highly regulated. What I mean by that is that the ratio of children to adults is very high with the minimum standards prescribed by government regulations. Often quality programs seek to exceed the child to adult ratio in regulations.

Facility and space requirements are also dictated by regulations from both the NYC Department of Health and the NYC Department of Buildings. Once we get past providing home based care, very few facilities in New York City lend themselves for use as child care programs. For basic facility and space requirements for child care programs in NYC go to: childcarebusinessconnections.com and look under “Resources.”

Of course Family Child Care and Group Family Child Care programs have the least amount of overhead since most are operating from their homes, but of course their income is limited by the number of children that they are permitted to care for. In addition, Group Family Child Care providers are required to have an additional person working with them, which is potentially an additional cost that should be factored into their budget. The other person might be a partner, a family member or an employee but it’s important that the person is appropriate to be around children.

Making sure that you have created a realistic budget is the first and most important step in making the decision to open or expand a child care program. Next you should explore how much you will be able to earn in child care fees. What are parents paying other programs in your neighborhood? The reason that you want to check in your own neighborhood is because you need to know the going rate in your locale. Even if you have a friend in another part of the city that’s providing child care, he or she may charge a higher or lower fee depending on the economic conditions and the need for care in their neighborhood.

If you are starting a Family or Group Family Child Care program you will still want to know how much you are likely to be able to charge in fees to earn a decent income but keep your program competitive with others in your neighborhood. You should also try to get information about the need or demand for child care in your neighborhood. To get information about how to do a child care marketing survey for your neighborhood, go to the childcarebusinessconnections.com website and look under “Resources”.

If you are starting a center based program, you should make two budgets. One will be for one time start up cost and the other should be a twelve month budget for ongoing operating cost. In the one time start up budget include cost for consultants to help you price out your start-up cost and develop your budgets based on child care program requirements and regulations. However I suggest that before hiring any consultants that you go to childcarebusinessconnections.com website and download the free booklet: “Twelve Mistakes to Avoid When Hiring Consultants.”
Not only will your budgets guide you in projecting your cost, it will also become a part of the business plan that you may want to present to potential funders, lenders or investors to help you to get your business up and operating.