Expanding Your Childcare Business: Important Factors to Consider When Deciding to Scale Your Business

You have built a childcare business you are proud of and you are ready to take your business to the next level. What factors will you need to consider as you prepare to scale your business to accommodate the growth of your program and ensure profitability for years to come? The following article will help you evaluate whether you are indeed ready to consider expanding your childcare business, what different options you have for your expansion model, and what key components of your business should be well established before you move forward with your expansion.

Evaluate Your Business: Signs You Are Ready to Expand

Generally speaking, you will have a pretty good idea about whether it is time to consider scaling your childcare business, but it is worth taking note of your current circumstances before you pursue any kind of major expansion. Here are some questions to help you evaluate whether you should pursue growth at this time:

  • Assess your current profits. How profitable is your daycare business right now? Are your profits well ahead of the overall cost of running your business? If you are barely scraping together revenue, now is not the time to expand. You want to be in the best fiscal shape possible for starting your new venture—you have no other option if you want a successful expansion.
  • Assess your current enrollment capacity. Have you reached your maximum enrollment numbers? Do you have a growing wait list of families trying to get in your program? Are your classrooms and play areas growing more crowded with all the children you are enrolling? An affirmative answer to these questions will help you see your possible need to scale up your business so you can accommodate more families.
  • Assess the needs of your community. You may need to do a little market analysis to determine whether there is a need for more childcare in your community, especially if you envision expanding to another location or a bigger building. Do new subdivisions in your area or additional business parks indicate an increase in families with young children—and potential new clients? It will benefit you to find out. Your local chamber of commerce or social services may be good resources to seek out.
  • Assess your staff. You will need a strong, caring, competent staff to meet the challenges of expanding your daycare business. Do you have staff members you can count on? Is there a lot of turn over among your teachers? Can you think of one or more individuals who could be mentored to grow into a director role at a second location, or at least be a great assistant director to you if you wish to continue as the director? Remember, if you are considering growing your childcare business, you don’t want to be the only person capable of running the show.  Your growing business will only operate like a well-oiled machine if each person is willing and able to do their part.
  • Assess your vision. What do you hope to achieve with your expansion? Get specific. The more concrete your vision in terms of desired profit, enrollment, and other measures of a successful childcare business, the more easily you will be able to ascertain whether growth is the right thing for you at this time.

Once you have evaluated the current state of your business, you can move forward with planning your expansion. As we will explore, you have several different options to consider.

Decide How You Will Expand: Several Expansion Options

You have determined that expansion is the right step forward for your childcare business, and now you need to decide how to take your business to the next level. Will you increase enrollment by adding programming for additional age groups? Will you buy a bigger building? What about opening a second location? There are important items to consider with each option.

Expand Your Programming – If space is not an issue at your facility right now and you haven’t outgrown your current center, maybe you want to think about expanding your programming to include additional age groups. You could add an infant program if you don’t already have one or a pre-kindergarten class if you only have preschool children currently. Expanding your programming is certainly your most straightforward option since you won’t need to shop around for another location or put together a detailed business proposal to obtain the financing for a new facility.

What you will need is an effective marketing campaign that will help you reach your ideal enrollment numbers for your new programs. Word-of-mouth recommendations from your current clients is a great resource, and a referral program may be an effective way to attract new families as well. Beyond the help of your current clients, you will need to get strategic. What features will set apart your new programs from your competitors? Maybe you would like to look into an accreditation program to show how your programming meets the high level of standards set out by the National Association for the Education of Young Children, for example. Whichever way you choose to set apart your new program from the rest, you will want to have a quality website and active social media presence (hopefully you do already!) to make it easy for potential clients to find out more about what your childcare program has to offer.

Buy a Bigger Building – If your daycare facility no longer has the ability to support your growing business, it could be time to move. One option is to buy a bigger building. You will need to do a lot of research to make a smart move, so plan carefully. Consider location options, including any zoning laws, safety codes, health regulations, and other rules put in place by state and local governments. In order to secure financing from lenders and investors you will need to develop a detailed business plan. Your business plan is a comprehensive report of your expansion plans, including your reasoning for the expansion, market research and strategies, and financial documents that show current and projected profits for your business. Undoubtedly, you will want to create both a start-up budget and an operating budget, as well as a variation of your budget that accounts for both full-capacity and about fifty-percent capacity. This will help you (and your lenders) get a realistic picture of how much money your new daycare center will make.

Open a Second Location – All of the factors you must take into consideration for buying a bigger building will apply to opening a second location as well. In addition, you will also need to plan for additional staff members to support an entirely new location. You may not just be hiring new teachers, but additional support staff and leadership roles as well. An excellent marketing plan is crucial to the success of your expansion. You should consider implementing your marketing campaign at least three to four months before your second location opens to give yourself plenty of time to generate interest and new clients.

Practical Steps to Prepare for Expansion

Once you have settled on the best expansion for your daycare business, it’s time to move forward. Here are several essential steps you will want to take as you get started with your expansion:

  • Research. Do this first and do it thoroughly! You will save yourself from immense hardship if you conduct the necessary research needed to support your expansion. Research your local market, your current and projected budget, state and local regulations, location options, marketing approaches, your desired niche, and your selling point.  
  • Create your business plan. You will need to carefully put together your business plan in order to obtain the financing necessary to expand your daycare center. Your business plan consists of an executive summary, or your reasoning for an expansion, description of your business, market analysis, a marketing plan, and your company finances.
  • Obtain financing. Secure the necessary financing, whether by obtaining business loans, government grants, or a combination thereof. You may want to see if you are eligible for a grant through your local Child Care Resource and Referral Agencies.
  • Build a great team. Make sure you have a strong staff in place to help you ease the transition to your new center or second location. Train additional leadership if necessary.
  • Launch a strong marketing campaign. Ensure the success of your expansion with an excellent marketing strategy. Utilize word-of-mouth and referrals from your current clients, build your online presence, and advertise. Give yourself enough time to generate interest before you official expand.

Taking the leap and expanding your childcare business is no small feat, but if you plan your expansion strategically, you may open the door for an incredible growth opportunity.

The Honest Buck Accounting team would love to help you assess whether expanding your childcare business is the right decision for you. Our expansion feasibility studies help you take the guesswork out of your expansion. Schedule a call to learn more today.

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