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The Critical Numbers in Your Childcare Business

In this blog post, we’ll explore the essential metrics that every childcare business should monitor to thrive in a competitive landscape.

Running a successful childcare business requires more than just a passion for children and nurturing their development. It also involves understanding the key metrics that drive your business forward. By keeping a close eye on the critical numbers, you can make informed decisions, identify areas for improvement, and ensure the long-term success of your childcare setting.

What Numbers Do You Need To Know?

It’s no good just looking at your bank balance to assess the finances of your nursery business. We all know how much it can fluctuate depending on whether you’ve just collected fees, or have paid out for a new piece of equipment. If you look when cash flow is high you might give yourself a false sense of security.

For a full picture of what’s really happening, look at the following…

Check Your Staff Costs Against Your Income

Working out a ratio percentage of your staff costs to your real monthly income shows how profitable your childcare business is for any month. To work this out all you need to know is your monthly staff costs (including national insurance, pension costs and the owners income), and your monthly income amount (fees, funding, etc.).

The formula is…

Your staff costs x 100 = A

Then divide A by your income amount.

For example, if you pay out £5k employee costs per month and take in £12k the sum will be £5000×100=£500,000

£500,000/£12,000=42%

The closer to 50%, or less, you are the better.

Work Out Your Break-Even Figure

When the profits your nursery business generates are equal to your costs, you’re breaking even. This is good to know because if you are breaking even you are not losing money.

Often company owners will work out their break-even figure at the start of their business venture, but then it’s left at that. But costs can change, for example your bills arent going to be the same as they were 2 years ago. If you haven’t increased your income to match your rising costs, you may find your break-even figure is no longer what it used to be.

Ideally, work out your overall, or individual room, break-even figures annually to stay on top of your nursery business numbers.

A quick method to do this is…

Annual costs/Weeks = Costs per week.

Costs per week/Number of sessions being used per week = Costs per session.

Costs per session/Hours per session = Hourly break-even figure.

For example…

Using a 50 place nursery with 70% occupancy = 350 sessions filled

£425,000/51 weeks = £8333

£8333/350 sessions filled = £23.81

£23.81/5 hours per session = £4.76

It is important to look at your monthly occupancy levels alongside your profit-and-loss figures otherwise you could be working for nothing…and no one wants that!

If your childcare business appears to be a sellout success, with all, or most of your sessions filled, but you aren’t making a reasonable profit it’s a pretty clear sign that your prices aren’t high enough, and need to be increased.

For the example above, if you’re charging £6.50 per hour or more, you will be making a reasonable profit.

How Do You Track The Numbers?

A profit-and-loss sheet is something you usually see just once a year, after your accountant has tallied up your year-end figures. But if you really want to make sure things are going well, a monthly profit-and-loss evaluation is a great thing to do.

Getting to know your business takes time so don’t rely on one month’s numbers. Some months you might make a loss, other months you’ll make a profit. Knowing what happens each month will allow you to be more financially prepared throughout the year.

Plan For The Future

If you want to run a successful and profitable childcare business, keep constant track of your enquiries. If you don’t, you won’t be aware when they suddenly drop in number, and you could find yourself with an empty nursery.

To keep ahead of the game, you should know exactly how many enquiries turn into visits, and then become customers, on at least a monthly basis. That way, if things take a dramatic downward turn you can quickly react to rectify things, such as increasing your marketing and social media presence.

Looking at your business numbers can be a daunting thought, but we hope this blog helps make this process a bit easier. If you’re still finding it daunting or would like to talk it over with an expert, who has over 30 years of experience managing over 30-day nurseries, please don’t hesitate to get in touch, we would be happy to help.

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