Running a nursery brings its own unique rewards: watching the children in your care grow and flourish as you offer them the very best early years education.
If you’ve got a passion for teaching and nurturing, along with the right qualifications, spending your days with a group of fun-loving toddlers will sound like a dream come true.
And with childcare costs and availability of suitable places an ongoing issue for working parents, demand will never drop off. So, in theory, it’s the perfect start-up opportunity.
But starting a nursery business isn’t all singing songs and sharing cuddles with small people. Along with the daily – and often dramatic - ups and downs of life as a toddler, you’ll have a complex business model to manage.Rules and regulations, staff training, strategic planning, cashflow monitoring, customer service challenges, reputation management, ongoing marketing: they’ll all require your attention. And don’t forget, you need to do all this with the endless patience and energy every childcare professional must have each day.
Despite the hard work, working with young children as they start their exciting education journey is enormously satisfying. Get your nursery business plan in order from the start and you’ll have taken the first step towards opening the doors to your very first mini-customers.
Why Do I Need to Write A Business Plan?
Having a sound business plan is essential when entering the world of entrepreneurship.
In the private day nursery industry, it will inform your decisions as you progress through the set-up process. Do you need external investment? Do you need professional advice about the legalities? Do you know how to find and attract the parents of future classmates?
Without a business plan, you’ll be stumbling in the dark. And potential investors won’t take you seriously. Nail it now and get organised for the road ahead.
How to Start A Nursery Business
Step one: write your nursery business plan. This should follow a set structure, divided into clear, information-packed sections.
Here we outline a suggested template that will help you get your dreams out of your head and onto paper. Follow these steps and you’ll have a helpful, relevant document to keep you on track.
1. Executive Summary
This is a grand title for your introduction. Within it, you can summarise the top-line detail about your business including its name, your objectives and goals. This gives you, and anybody else who reads your plan, an overview of your intentions.
Make sure it’s clear, concise and gets to the point. Highlight what you can bring to the business to make it a success: think of it as an elevator pitch. Leave the nitty-gritty until later.
2. Company Overview
The company overview builds upon the executive summary to give further insight into your plans. This is your opportunity to tell your story about why you’re starting a nursery business. Include your motivation, experience and qualifications to sell yourself and your vision.
If you’ve never run a business before, imagine you’re already a successful entrepreneur and channel the confidence you know that will give you.
You’re seeking to impress and convince potential investors and partners to help them to understand your journey and to trust you.
Include a vision statement to really hammer home what success looks like for you. What do you envisage achieving in the next five years? How will you reach those goals?
When setting your goals, remember to follow the SMART guidelines and make them:
- Specific: e.g. to have 40 clients within six months
- Measurable: e.g. to make a £25,000 profit in year two
- Achievable: e.g. to break even within 12 months
- Relevant: e.g. to gain an outstanding Ofsted rating
- Timely: e.g. to have a team of 20 staff within 18 months
Outline who will own and operate the business, including its legal structure (for instance, have you set up a limited company?) and how many committed staff members you already have on board.
This might seem obvious, but you need to outline all the services you’ll be covering. Every childcare provider will have a slightly different offering, so think carefully about:
- Opening hours – how flexible can you be?
- Age provision – specify your lower and upper age limit
- Class sizes and ratios – how many children will be in each room? And how many staff?
- Outings – are your premises close to a park, museum or library?
- Activities – will you be offering services by external providers such as swimming lessons or foreign language sessions?
Remember that if you’re not in a position to offer everything on your wish list straight away, you can highlight your future development plans.
Also consider your USP. What will give your nursery that competitive edge you’ll need to thrive? Maybe your premises are located directly opposite a train station, simplifying pick up and drop off for busy parents who commute? Maybe your outdoor space has a wooded area you can market as a forest school?
Whatever makes you stand out from the childcare crowd, shout about it.
4. Market Research
The latest government figures, released in 2016, show that there are around 23,500 day care nurseries in the UK. The industry is worth £4 billion, employs over 188,000 people and provides childcare for 1.2 million children.
Since then, and due mainly to the introduction of the 30 hours free childcare policy, the number of childcare providers registered with Ofsted has fallen. Most of those leaving the market have been childminders facing unsurmountable financial pressures.
Among the private nursery market, 841 providers left the sector in the final quarter of 2017 and 772 joined. And while overall numbers may be falling, the number of spaces is actually rising.
Just as you’re doing now, those 772 people made the entrepreneurial leap: after, of course, writing a comprehensive nursery business plan.
You need to know about this competition: who’s already operating in your area, what services they offer and the demand for them, whether they’re sole traders or part of a larger chain etc. Don’t forget to consider playgroups and home-based childminders in this analysis.
Next, shift your attention to your target market. Naturally, they’re going to be parents, but beyond that they can differ widely. Some of those with two-year-olds will be entitled to more government support than others, others will be relying on childcare vouchers from their employers, some will only need a few mornings a week, others will need a full-time place.Investigate the demographics of your area such as average wage, population levels and fluctuations, and birth rates. Every nugget of information can inform your plans and improve their accuracy.
Crucially, based on your research, you can start to gauge how much you can charge. Prices vary across the country with an average cost of £122.46 for 25 hours of childcare at a private day nursery. You can then factor this figure into your financial planning.
Before you can put a tick next to “write business plan”, there’s some serious number-crunching to do.
A solid business plan should be brimming with informative tables to guide you and reassure your potential investors that you’ve done your sums and are a safe bet. As a bare minimum, you should include a profit and loss forecast and cashflow forecast for the first three years, and a detailed start-up budget.
For a nursery, start-up costs will include equipment ranging from furniture, toys and books, outdoor play equipment, computers and tablets, first aid kits and marketing materials.
Beyond these, some of which will need to be regularly replaced, your highest ongoing cost will be staff wages which averages at 73% of all outgoings for private day nurseries. Add rent or mortgage payments, training and utilities costs, and your profit will quickly be dented.
Then detail your income stream based on estimated numbers and your projected fee structure. To avoid cashflow challenges, consider incorporating a Direct Debit facility for parents to pay their monthly fees. It’ll mean less hassle for them and more certainty for you: you’ll know exactly how much to expect in your business account and when.
Partnering with a Direct Debit bureau such as FastPay will ensure fees are paid upfront, avoiding the administrative headache of gathering payments by cash, cheque or debit card. Your cashflow and your customer satisfaction levels will thrive.
Finally, do you know where your funding is coming from? Be crystal clear in your nursery business plan about cash you’ve already secured (personal savings, soft loans from family and friends etc.) and whether extra capital is required from a business loan, sponsorship or business partner.
Before you start searching for premises, you need to establish how many children you’d ideally like to cater for. This will impact on the size of the property you need, as well as the number of staff and pricing.
Government regulations mean that you must allocate a minimum square footage per child. Calculate your requirements carefully based on these and also consider future expansion plans. The last thing you want is to be a huge hit with local parents and have capacity issues before you’re ready, and financially solvent, to move or extend.
In terms of location, your choice here should be informed by your market research. Will you be filling a gap or saturating an already struggling market?
Key considerations, beyond demand, include:
- transport connections to make pick up and drop off as convenient as possible
- sufficient car parking and outdoor space
- kitchen and bathroom facilities
- with an existing building, its suitability for conversion
Whether you’re renting or buying, adapting a building or moving into purpose-built premises, carefully consider every cost involved in every option.
6. Sales and Marketing
While you’re planning your perfect nursery, you’ll also need to focus on how to fill it with laughing, smiling toddlers. There’s no point starting a nursery business without any little people to enjoy it!
Your marketing plan will form an important section of your business plan. Central to it should be a strategy for advertising your nursery before your planned opening date. From traditional methods such as hanging banners outside the building and leafleting local baby and toddler groups to embracing a full social media campaign, you need to go all out.
Tours of the nursery are also priceless. Parents will want to know exactly where they’re leaving their child and who will be caring for them: viewing your premises and meeting your staff will create trust. Whether you hold an open day or welcome potential clients in on a typical working day, this is your opportunity to showcase your facilities and share your personal approach to childcare.
Impressed parents will then spread the word to friends and family, giving you free exposure that could easily translate into clients.
Once you’re up and running, you’ll need to keep attracting clients as children grow and move on to start primary school. Your reputation will speak volumes here, so use this never-ending marketing job as added motivation to provide exemplary service and standards.
7. Rules and Regulations
While researching how to set up a nursery business, you’ll no doubt get a feel for how much red tape is involved. This is understandable as children are at the heart of your business.
Your business plan must address that you fully understand these legalities and are taking the appropriate steps.
In order to look after children under the age of eight for more than two hours a day in England, you must be registered with Ofsted (the Office for Standards in Education). For a nursery, you’ll be signing up to the Early Years Register.
There are two preliminary steps:
- a DBS check to assess your suitability based on any previous criminal convictions
- completion of a health declaration booklet, in which you must list any health problems and medications you’re taking
Next, you’ll need to demonstrate to Ofsted that you’ll comply with all their strict standards. These cover a wide range of factors including:
- staff training and vetting
- child group size
- staff-per-child ratios
- space-per-child ratios
- fire safety
- bathroom facilities
- health and safety
- quality of education
- welfare needs
This necessarily comprehensive registration process takes time so make sure you factor in at least six months for it to be finalised. You won’t be able to open without it.
Once you’re registered and up and running, Ofsted will assess your nursery at least once every three years to make sure it conforms with the national standards.
With the prospect of an Ofsted inspection on the horizon, you’ll have the added motivation to make your new nursery business a success.
Starting a nursery business is a slow but ultimately highly rewarding process. Prepare for a steady start and enjoy the momentum building as your reputation establishes itself.
A few years down the line, you could be revisiting your business plan with an eye towards the future. Expansion, perhaps with a second or third site, will require another impressive document to wow your investors.