Early years business sustainability
Many of you will have been feeling the effects of the economy and may have concerns regarding the sustainability of your business.
What does unsustainable mean?
Unsustainable means that your business cannot go on at this rate. There will be financial implications most likely linked to either your income or expenditure.
The biggest problems facing providers is their understanding of the future impact on the day-to-day operation, impact on quality and the impact on finances. Business planning and cash flow forecasting helps support your understanding of where the business is going. The cash flow should be updated monthly to see if there are sufficient funds coming in to cover your outgoings. A business plan is normally revised once a year but is a working document like an action plan to guide you through and inform change.
Why do you need a business plan and cash flow?
Below are some of the important reasons for creating a business plan and cash flow forecast:
- To focus your efforts, set objectives and the future direction of the business
- To enable you to spot potential pitfalls before they happen
- To set realistic targets that allow some flexibility - without steering away from core objectives - for some 'fine tuning' along the way
- To enable you to track your growth
- To structure the financial side of your business and better plan for the 'what it's', by understand future risks and managing them
- To raise income and manage finances through specific policies and procedures.
Problems faced by an unsustainable setting
Staffing - are your staffing ratios too high? Listed below are the standard ratios on non-domestic premises. However, if you are a school-led provision, childminder or out of school provider, please check your setting's requirements.
- 0 to 2 years = 1:3
- 2 years = 1:4
- 3 to 7 years = 1:8.
Occupancy - with a cash flow forecast you will be able to look at how many places you need to fill to break even and at what price you need to set your fees to gain the desired income. You will be able to identify where your numbers drop and then proactively manage how to fill the gaps in each session through increased marketing and advertising.
Fees - are you charging too little or too much?
- Investigate to see what other providers are offering in the area and link to your breakeven price
- Late pick up fees - you may have to pay staff to stay late when parents pick up their children late - you can adopt a parent contract with a specific clause for late fees
- Late charges - if your parents are paying their fees late you are entitled to charge a late payment fee or refuse access (although this has to be in your contract)
- Registration fees - when a new child registers who is not receiving the Free Entitlement Funding you can consider charging for the administration that is involved in registering a new child as well as offering 'marketing material' such as t-shirts / book bags with the provisions name, logo and phone number.
Rent - if you feel your rent is too high, consider speaking to the landlord about negotiating a decrease or a longer term contract. This may add stability to the setting and may yield a discounted rate, with additional security.
Need more support?
If you feel any of the issues above affect your business, contact our Business Management Consultants in confidence at firstname.lastname@example.org. We are here to work in partnership, to help and support you run your business, your way!