Growing your business

One of the most important factors for growth is having customers. It is critical that you make sure that you have the level of enrollment that you need to provide the revenue to sustain your growth before you begin the expansion process. That's why we recommend that you first make sure that the demand by parents and families exists to support the growth that you want to undertake. 

First, do you have a waitlist? 

The first sign that it might be a good idea to expand your program is if you have more people wanting to enroll than you have spaces available. If all your current spaces are filled and you keep getting requests from families who want to enroll, this means there is enough demand to support your expansion. However, if you do not have enough children enrolled to support your business as it is now, expanding will add more stress as you try to cover the extra costs of expanding without having enough money coming in to support it.

Next, is there demand for the type of care that you plan to offer? 

While a waitlist will give you a good idea of how much demand there is, it may not tell you everything about the types of services people want. Be sure to talk to your current families to better understand if they would be willing to join your expanded child care program. For example, maybe you are adding spaces at your current location and could easily fill them using your waitlist. However, if you are opening a new location in another part of town or are moving from a family care setting to a center-based program, these could be reasons for your families to leave if the location is not good for them or if they prefer family care over a center. For this reason, it is important not to assume that a waitlist means you will automatically get more money. Talking with families on your waitlist ahead of time can give you the information you need to decide how many are likely to enroll in your expanded program. This will help your business have the money it needs to cover the extra costs of growth.

Finally, does your growth plan align with the needs of your community? 

The last way we recommend checking demand before you start planning to grow is to find out what your community needs by talking to current families, those on your waitlist, and others in the community. You can contact families yourself or ask your staff to help. This will help you understand exactly who needs child care in the area you are thinking about growing in. It is also helpful to learn about the area and what other types of child care programs are available. For example, are there special services or features about the location and families that you need to consider? What hours and other services, such as before and after school care, are families looking for? What about the ages of kids that you plan to serve? Making sure your growth plan fits the needs of the community you want to grow in will help give your expanded business the best chance to succeed.

Because it will affect your expected income right away, understanding the level and type of demand in your area is a very important step that should be done before you start any other growth planning. This understanding can help you see your potential financial situation and give you an idea of whether or not you are ready to grow. If you do this step and find that you do not have enough families ready to enroll to justify an expansion, then you will want to take the time to find them and work on getting full enrollment at your current child care business before you start thinking about growing in the near future.

Like with families who might enroll, you want to hire at least some of the staff you will need to support your expansion before you start putting your growth plan into action. It is important to think about getting your staff lined up ahead of time because not having enough staff can be just as harmful to your child care business as not having enough families who want to enroll when you are trying to expand. To start, talk with your current employees about whether they are interested in working at a new location (if you are adding one) or if they know anyone who might want to work in the program. If you are expanding into a new area, it is also helpful to ask people who know the area about ways to find employees, such as a local workforce board. You do not need to have every position filled before you start to grow, but you should have a good idea of what your staffing needs will be and a plan for how you will find those people. You might want to think about ways to recruit and attract good staff to make sure you have a group of qualified people to choose from. Sometimes business owners assume they will be able to easily find the staff they need when it is time to grow. This is especially true right now when there is a shortage of workers. So, make sure you are realistic about your staffing needs and your ability to attract and keep employees.

Some child care providers see a chance to expand their business but do not realize that their current business is not financially stable enough to handle the extra costs of growth. If a provider tries to grow their business when they are not in a good financial position, it can put so much pressure on the business to make money that it can harm the business or even cause it to close. So, if you do not already have one, make sure you have a budget for the current year to guide your growth and planning. Then, use this information to create a cash flow forecast for the next 6 to 12 months so you have a clear picture of your financial health. It can be helpful to have a clear record-keeping system in place as you work to understand your finances. You can contact a business coach for free one-on-one help with these processes at any time.

The difference between your cash flow and budget is important. A budget will tell you how much you think you will spend and how much you are spending over a year. Cash flow tells you how much money you have coming in and how much you have going out each month. Having enough cash flow is very important for new businesses. Many new expansions require a lot of money upfront, including costs for staff, supplies, marketing, furniture, and renovations. This happens before you start to enroll children and definitely before you reach full enrollment in the program. You must have enough cash to keep your business going until you can at least break even. Money is essential for any business, so making sure you are financially sound is very important before you start any growth. This will let you know how much you plan to spend and how much you are making, so you have an idea of how much money you have to invest in potential growth.

A deeper look at the importance of knowing your cash flow: Assume that you have $5,000 in expenses over the year, and you have $6,000 in revenue against it, that may look good to you. You see that and know that you're going to make a profit of $1,000 for the year. Now, assume that you will have the $5,000 in expenses in January, but you do not get paid the $6,000 until March. Using cash flow, you can see that you have a potential problem because you must pay the expenses before the cash comes in. Can your business withstand floating expenses like these before your revenue comes in? 

No matter how much help you get in expanding your business, it will cost extra money in some way, either through loan payments or by using your own money to invest in the business. You should know how much you are spending compared to how much you are making each month. This will help you understand if you can handle the extra cost or if it might be too much for you.

In many cases, when you plan to grow, you're going to need additional funds to make it a reality. Whether you're just adding a classroom to your current facility or building a whole new center or a family care business, you will incur additional costs. In these cases, accessing capital can be helpful because it provides money to help you grow to then make more money. However, you should make sure that you are able to handle any associated costs with accessing capital. 

Disclaimer

The information contained here is for educational purposes only and is not intended to constitute legal, tax, or financial advice.