Elements of an Effective Daycare Business Plan

Creating a comprehensive business plan is a critical first step in launching your childcare business. In this article, we will address the importance of a thorough business plan and examine the components of a well-developed daycare business plan. Read on to learn more.

What is a Business Plan?

A business plan is a formal written document that outlines the objectives of your business and the methods you have determined to meet those objectives. Your business plan will provide details about your business’s marketing strategy, financial projections, and operational structure. An effective business plan provides a complete roadmap to your business. Your business plan will guide you through the launch of your daycare business. It will also be necessary if you plan on obtaining financing from a lender.

Many basic business plan templates exist online, and you may even find a business plan template specific to your childcare business. The U.S. Small Business Administration offers detailed guidance and example business plans on its website. Whether you decide to use a template or write your own, all effective business plans will include the following elements.

Executive Summary

An executive summary provides an overview of your business, including your mission and purpose. It will give a clear description of your product or service, introduce your company leadership and employees, give your business location details, and provide a snapshot of your company’s financial information. Although the executive summary appears first in your business plan document, you may find it easier to write the summary after the other elements of your business plan have been developed.

Company Description

A company description will include important information about your business objectives:

• What problem will your company address?
• What solution will your company offer?
• What are the strengths of your company?
• What will set your company apart from competitors?
• Who are your customers?

Be as specific and thorough as possible. You want to demonstrate a need for your daycare business and an ability of your daycare business to meet that need.

Market Analysis

A comprehensive market analysis will help you determine your target market and assess your competition. You will provide details about your intended customers and your competitors:

• What is the scope of your target customer base in your market?
• Who are your competitors?
• How many competitors do you have?
• What kind of childcare businesses do your competitors operate?
• What are the strengths and weaknesses of your competitors?
• How will your childcare business meet a need of your target customers that is not already being met by your competitors?

Organization and Management

In this section you will describe the structure of your childcare business:

• Describe the legal structure of your business: C corporation, S corporation, sole proprietorship, partnership, limited liability company (LLC)
• Describe the team structure of your business: Who will lead the company? How many employees will you have? What roles will they play in the business? What professional experience, achievements, education, and certifications do your key team members have?
• Describe other important legal information, including safety and emergency plans, federal, state, and local daycare licensing requirements that your daycare will meet, and insurance requirements that your daycare will fulfill.

Service Description

Here’s where you will include all the details about the childcare service your business will provide:

• How many full-time and part-time children will your daycare accommodate?
• What tuition fee will you charge per child?
• Describe the components of your childcare program:

What curriculum will you use? What will your adult-to-child ratio be? What extracurricular activities will you offer? What special programs will you provide? What other conveniences will you provide to parents who enroll their children in your program? How will your childcare program be a cut above the rest?

Marketing Plan

Your marketing plan is an important overview of the ways you intend to promote your childcare business to prospective customers:

• Will you advertise your childcare business in a local business directory, community newsletter, or flyer?
• Will you take advantage of social media to promote your childcare business?
• Will you have a business website? How will customers find your website?

Be sure your marketing plan illustrates how you plan to market your childcare business and obtain/maintain your customers. The more details you provide about your marketing plan, the more you will instill confidence in potential lenders and set yourself up for success.

Funding

What funding requirements do you have for your childcare business? In this section you will clearly state how much money you will need over the next five years to get your daycare business up and running. Here’s what you will need to consider:

• How much money will you need and what will the money be used for? (Will you fund a business location, equipment, or supplies, pay employee salaries, or cover bills?)
• Are you seeking debt or equity? What terms do you require? For how long?
• Include your projected return on investment and your financial strategy over the next few years. How will you use the funds to achieve your business goals and turn a profit? How will you pay down your debt? How will you keep costs as low as possible?

Financial Projections

In this section you will provide detailed financial projections for your childcare business. Your goal is to provide supporting evidence that demonstrates the viability of your childcare business and the likelihood of its success. Here’s what to include if your daycare is already established:

• Income statements
• Cash flow statements
• Balance sheets
• Documentation for collateral you could use against a loan

Provide these documents for the last three to five years of business operations.

Also included detailed financial projections for your childcare business for the next three to five years:

• Forecasted income, cash flow, and balance sheets
• Monthly or quarterly projections for the first year of business
• An outline of financial projections matched to funding requests

You can use graphs or other visual aides to paint a financial picture for your childcare business.

Appendix

You will use the appendix to include supporting documents that make your business plan complete:

• Tax returns
• Credit reports
• Licenses, permits, and other legal documents
• Resumes and letters of reference
• Contracts
• Mortgage statements or lease agreements

Set Your Childcare Business up for Success

When you take the time to develop a thorough business plan, you will set up your childcare business for success and increase your chances of obtaining the financing you need with the terms you want. From your market analysis and your competitor assessment to your marketing plan and your financial projections, every element of your daycare business plan plays an important role in creating a roadmap to success for your childcare company. Take the time to do your research and come up with a plan that you—and others—can believe in. The effort will be worth it.

The professionals at Honest Buck Accounting understand the importance of creating a solid financial foundation for your childcare business. Schedule a call with us today to learn how we can help you develop a comprehensive financial plan for your childcare business. We can help you plan for success!