Once you have established the nursery and a reputation in the area, you should find that the places fill up fairly quickly. With more mothers returning to work and the government providing extensive support for nursery places, good quality childcare is in short supply in many areas.
But this is not a business for anyone looking for early retirement. Even when your nursery is full – and remember that this could take some months to achieve – you are likely to find that up to 75% of your fees from the children go on fixed costs. Staff and premises are likely to be the biggest costs but food, nappies and equipment all add up.
If you are looking for a business to make a tidy profit, this probably isn’t the best industry to get into. According to research carried out by the National Day Nursery Association in early 2011. 62% of British nurseries regard making a profit as their biggest challenge.
Despite the fact that demand for childcare is high, full-time day care can constitute a large proportion of a parent’s wage. Your costs will inevitably rise, but when you try to put prices up you are unlikely to get a positive response from parents. You should also remember that many of the costs are fixed, so expansion is the only way to grow the business.
Based on the competitive nature of the business, anything above breaking even could be considered a success. Remember also that because of the relatively high start-up costs and low profit margins involved it could take several years before you are close to making back what you originally invested. Jennie Johnson founded Kids Allowed, a successful chain of children’s centres. Turnover reached £3m in five years, and Johnson has earned a string of accolades, including an Inspiring Women in Business award in May 2011.However the business cost a heavy £5m to set up in the first place.
Freya Derrick set up her Hopscotch Day Nursery for 600,000 and is now turning over £50,000 per month with 82 children currently attending the nursery. “You’ve got to decide right from the beginning if you want to run the business as a lifestyle choice, or as a profit making thing, and that will determine the size of the operation. I wanted to have the freedom to spend time with my children, but I also wanted to run a successful business.”
So if this isn't just about money, why do people do it? Working with children, creating an enjoyable environment, training young people to be nursery nurses and working within a community are just some of the reasons why Blooming Babies founder Ilana King loves her job. But, as she says, "it is not just about working with children. The children are the first priority but you are still running a business."