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Developing a Business Start-up Plan |
If you're setting up a new family child care business, you need to develop a start-up plan that will help you anticipate and address any issue that could derail your new enterprise. Planning ahead can save you time and money later on.
Here's a checklist of issues you should address before beginning your business.
Regulatory
Contact your local child care licensor to find out if there are any serious barriers to you meeting the licensing requirements. These could include:
Safety standards: requirements that you make safety modifications to your home, such as installing an egress window or outdoor fence. Your home may also have to pass inspections by the building and fire departments.
Space standards: requirements that you have enough indoor and outdoor square footage available to children
Disqualification factors: requirements that you have a criminal background check that may include looking at any history of mental illness or chemical dependency in you or a family member
Legal
Check with the appropriate agency to insure that none of the following legal barriers apply to your business:
Zoning laws: City or county zoning ordinances may limit your ability to run a business out of your home.
Deed restrictions: Private landowners, such as homeowners associations, home developers, and landlords may have restrictions in your deed that limit you ability to operate your business. Read all deeds and covenants for your property before opening your business.
Business name: Although you are not required to adopt a separate name for your business, if you do, some states require that your register your business name with the secretary of state's office.
Business structure: The vast majority of providers should operate their business as a sole proprietorship. There is no paperwork to file to do so. If you considering operating as a partnership, corporation, or limited liability company (LLC), I strongly recommend that you consult with an attorney and tax professional for advice.
Business location: If you are considering running your business out of a building that you do not live in, consult with your child care licensor, Food Program, and zoning office to learn about the impact of this decision.
Start-up Costs
As a new provider, you'll have to spend some money to get your business off the ground. Start-up costs can vary a lot, depending on your personal circumstances, business goals, and the community you live in. In most cases, the cost of starting a family child care business is pretty low (unless you are required to make home improvements).
Some states require providers purchase certain items before they can start caring for children. These can include:
Licensing fees
Smoke detectors or fire extinguishers
Criminal background check
Fire and building inspection fees
Well water test
Medical exam or tuberculosis test
Safety items (outlet covers, child safety locks, a first aid kit, a security gate)
Toys (indoor and outdoor)
Training classes
Vehicle expenses (mileage for trips involved in meeting licensing rules)
Children's activity expenses (books, music, child care curriculum)
Cribs and playground equipment
Home remodeling (egress window, fence)
There may be other start-up expenses that are necessary, even if they are not required by licensing rules. These could include:
Homeowners insurance
Business property insurance
Business liability insurance
Vehicle insurance
Play equipment for children
Advertising expenses
Office expenses
Security system
Family child care association dues
Here are some strategies for keeping your initial expenses low:
Check out books, videos, and music CDs from the library.
Buy used toys and equipment at yard sales or on www.craigslist.org.
Organize a book and toy exchange with other providers.
Use the neighborhood playgroup rather than buying your own equipment.
Shop wisely for food: use coupons, buy in bulk, etc.
For more information, see the Family Child Care Business Planning Guide.
What is a Business Plan?
A business plan is a written tool that spells out how you will operate your business and includes the following components:
A start-up plan (for new businesses only)
A statement of your hopes and goals for the business
A marketing plan
An insurance plan
A program plan
A professional development plan
A record-keeping plan
A financial plan (budget)
Creating a business plan is probably pretty low on your list of favorite activities. It isn't an exciting task, and may even seem quite intimidating, especially if you've never done anything like it before.
However, playing closer attention to your business will have a significant payoff, and the hours you spend on planning may end up being the most important time you spend on your business, other than actually caring for the children.
Preparing a business plan is essential if you are starting a new business, but it is also very useful for an ongoing business, particularly if you want to apply for a business or personal loan. The business planning process offers several advantages:
A chance to reevaluate and rethink your program. (Should I try some new marketing approaches?)
A financial spring-cleaning. (Is it time to create a budget to help manage my spending?)
A review of your practices to clean out anything that's outdated and fill in any gaps. (Should I overhaul my contract? Should I add more paid vacation time?)
A review of your insurance policies to ensure you're adequately covered. (Is it time to increase the coverage limits on my business liability policy?)
Help in meeting your short-term financial goals. (What changes would allow me to put more money into an emergency fund? Should I cut back on buying toys? Should I start charging for another federal holiday?)
Help in meeting your long-term financial goals. (What changes would let me save more money for retirement? Should I raise my rates? Add another child to my program?)
There are no rules about how to write a business plan or what to include. It can be as short as 4-5 pages or longer, if you want. The goal is to set down some basics about your business that will help you focus on what is important. Here's a simple outline of a business plan:
Hopes and Goals
A short summary of what you want to accomplish in the coming year (having fun caring for children, meeting a budget goal, getting high marks from parent evaluations, etc.)
Marketing Plan
A list of 2-3 benefits of your program.
A schedule to contact your local Child Care Resource and Referral (CCR&R) agency to update information about your program. Ask the CCR&R about rates charged by other caregivers (homes and centers) in your area.
An annual calendar of planned marketing activities
Insurance Plan
An annual checkup with your insurance agent to make sure your home, contents of your home, and your car are fully covered for any business use
An annual checkup to ensure that your business is protected through business liability insurance
Program Plan
A written description of your goals for the number and ages of children you want to care for
A description of your curriculum (formal or informal)
Professional Development Plan
Your goal for attending training workshops or classes for the upcoming year.
Your plan to achieve a post-secondary degree (if needed).
Membership in local, state, and national family child care associations.
Record-Keeping Plan
A written description of how you will keep records such as: children's attendance, parent payments, Food Program payments, business expenses, hours worked in your home, child care contracts, federal and state tax returns, and monthly bank statements.
Financial Plan
An annual budget and cash flow projection.
Getting Help
If you need help with developing your own business plan, don't hesitate to ask for assistance. You may want to talk to other providers who have already written such a plan. Or talk to your local CCR&R agency or Food Program sponsor for advice or referral to someone who can provide more help. Your tax preparer or financial planner may also be able to help you with certain areas of your business plan.
If it seems too daunting to write an entire business plan all at once, start by focusing on completing one section at a time. It may be easiest to start with a topic that you've already given some thought to or have some experience with. For example, if you already have some ideas about your professional development goals, then start there. Once that section is done, move on to another area. There's no rush; try to make steady progress and you'll be done before you know it.
To be most helpful, your business plan should be a living document that evolves as your business changes and you gain experience. I suggest that you review and update your plan periodically — perhaps every year, or whenever there's a change in your personal business circumstances, such as an addition to your family or a move or expansion of your business.
This handout was produced by Think Small (www.thinksmall.org).
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