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Stop Coping, Start Thriving – Moving Your Nursery From ‘Staying Afloat’ To ‘Full Steam Ahead’

"If a business isn’t sustainable, it cannot provide high-quality, reliable childcare and early years education, or support hardworking staff with their career development – and that’s no good to anyone"

  • Stop Coping, Start Thriving – Moving Your Nursery From ‘Staying Afloat’ To ‘Full Steam Ahead’

The vast majority of childcare and early learning providers in the UK are private nurseries that must be able to balance the books to serve their communities. Furthermore, to stay sustainable and continue improving, settings must not only cover costs but make a surplus, or profit.

Nobody opens a nursery to get rich quick, but profit should not be seen as a dirty word. If a business isn’t sustainable, it cannot provide high-quality, reliable childcare and early years education, or support hardworking staff with their career development – and that’s no good to anyone.

So what should new or fledgling businesses be thinking about to ensure those books do balance, staff training can be paid for and contingency funds are healthy for unexpected expenses?

The following pointers – split into three categories – are intended as simple and straightforward food for thought rather than a comprehensive guide. Principles are taken from four free or low-cost Department for Education-backed online courses currently being offered by NDNA, and you can find more details about these at the end of the article.

“Keep good financial records”

Effective book-keeping and accounts are vital to the business health of any nursery, and the Employment Agency Standards Inspectorate may ask to see records dating back as far as six years. You must also keep receipts, invoices and bank statements.

Owners and managers must think about all their fixed and variable costs – everything the business spends money on. That is likely to include heating, staff wages, insurance, mortgage, rent, loan payments, food and other supplies.

These amounts must be set against income. Profit and loss accounts can then show financial performance over a set period of time, for example a year. In contrast, a balance sheet can show the situation at that moment in time, where finance has come from and how it has been used.

A robust financial management system is vital and it must be updated at least monthly. A simple system would split information into a business forecast, financial management information and financial records – the future, present and past. A monthly business report should show income and expenditure, variance from forecast, information on performance so far and profit and loss.

If a setting has poor cash flow and there is not enough money to pay bills and salaries, problems can develop quickly. Action such as increasing occupancy, putting up fees, reviewing debtors, controlling costs or devising a full fundraising plan could be necessary.

“Plan ahead and branch out”

The introduction of the government’s 30 funded hours scheme has had significant implications for the early years sector. If you are encountering a steady stream of potential new customers looking to take up their entitlement, you may wish to think about how you can meet the increased demand in a manner that makes sense for your business.

If you decide to expand your existing site or develop a new one, there are four fundamental criteria for success – a sound business plan, careful planning, market research and a high-quality, committed staff team, effectively managed.

Achieving the balance of good management and early years practice is not easy, but providing a great experience for children and employees, while operating sustainably, is an extremely worthwhile goal.

Before branching out it’s vital to think about your customers, your competition and how your plans will work in practice, including raising finance and gaining planning permission.

“Make the most of marketing”

Good marketing is another cornerstone of sustainability. It’s important to tell potential customers about your services, particularly during difficult economic times when competition is fierce.

Not all nurseries understand the full range of marketing tactics available to them. Good promotion should explain what you have to offer, show people why they should choose you, explain how you can fill a need, and be enthusiastic.

Is your branding as good as it could be? Are you being 100% honest in your communications? Are you thinking about the long term, even if your occupancy levels are buoyant right now? All these things count.

One way to analyse your marketing is to think of everyone who could use your business and split them into smaller, segmented groups. What do you think each group needs? Do you need to do some market research to establish this? Now think about how your setting meets those needs. You might prioritise one group over another. What do you want to say to these potential customers and how are you going to say it? Do you need to create a flyer in a particular language, or could you showcase your setting on social media? Should you take out some advertising?

Make sure any advert has a call to action, such as an open day to attend, so people can see for themselves what you do – and spread your messages further, by word of mouth.

In drawing up a marketing strategy with tactics and an action plan, don’t forget to factor in monitoring and evaluation. How will you tell if you have been successful?

Business support

NDNA provides factsheets, business support and templates to assist with business planning. Member benefit partner KPMG Small Business Accounting offers a fixed-fee accounting system with a free trial available to NDNA members.

The charity also offers four Department for Education backed business courses – A Beginner’s Guide to…

Business Planning & Expansion,
Managing Effectively, and
Marketing & Sales.

These courses are free to members or £10 each to non-members. Visit ndna.org.uk/shop or call 01484 407 070.

Purnima Tanuku OBE is chief executive of the National Day Nurseries Association.

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