Is A Childcare Business Profitable?
The answer to that is an emphatic maybe.
It sure can be, but there are all kinds of pitfalls if you get it wrong.
In this article, we’ll tell you exactly what can go wrong and why.
Don’t try to turn it into a franchise
McDonald’s burgers seem to sell well across a zillion locations and countries, not so childcare; ask ABC Learning Centres. It all seemed so lovely, didn’t it?
In 2001, Eddy Groves owned and ran 43 ABC Learning Centres taking in more than $22 million a year. For most of us, that’s the dream right there; or ten times the dream.
But ABC wanted to go to D, and they did. In six short, sharp and spectacular years, ABC Learning went from 43 centres to, no joke, 2238 centres across the globe. That’s almost a centre per day and almost obscene. How is that even possible?
Well, it did somehow happen. Sadly, what also happened was what every childcare centre has to deal with.
Small kids, big costs
It might seem simple enough; get a building with an inside bit and an outside bit. Fill the inside bit with learning stuff and the outside bit with fun stuff. Add a large number of kids and a decent sprinkle of people to chase them around, read stories, teach them stuff and stop them killing themselves on the slides.
Lovely, but it’s not that simple.
Not-for-profits can undermine yours
There you are starting out with your brand new, nicely presented childcare centre on Green Street. And your rates certainly seem reasonable. In fact, if all goes well with your profit margins, you’ll have just enough profit to buy a bigger car or do a small house extension in your first or second year.
Until, that is, you find out about the childcare centre three blocks away on Red Street.
Three words – Not for profit. No new cars, no house extensions; just covering administrative costs and not much more.
Not good for them, but fabulous for their clients who can pay far less for their childcare.
Wages are on the rise
As are overall standards brought on by client expectations and a spectacular amount of competition. As a result, childcare now attracts higher quality teachers and carers demanding higher quality packages.
Is it all doom and gloom?
Absolutely not. The market is there and there will never be a shortage of kids with parents prepared to pay. Childcare is simply more challenging than it looks on the surface.
Should you consult first?
Most definitely. To make a profit, you’ll need to offer something the not-for-profits don’t. If there are enough people in your area looking for some sort of niche childcare, you might be in business.
The big problem is that there are no real economies of scale in childcare operations. You’re totally reliant on the numbers of kids, high occupancy critical to making any money.
Can a childcare business work?
Yes, if you know all the pitfalls, do your homework and present a viable option to your local market, you can certainly succeed.