Why bootstrap your business?
Bootstrapping is using your own money and resources to start your child care business. It provides more freedom and control and less debt. Here are some of the benefits that come with bootstrapping:
- Financial independence: you don't have debt, interest payments, or pressure to give investors quick profits. This financial freedom lets you focus on growing your business for the long term.
- Complete ownership and control: you keep full ownership and control. You can decide where the business goes and how it's run, without having to answer to outside investors.
- Lean and efficient operations: with small amount of money, you learn to focus on the most important costs and find ways to grow without spending too much.
- Focus on your families: when your money comes directly from happy customers, which are the families you care for, you have a strong reason to provide great service.
It's important to weigh the pros and cons based on your business idea, market conditions, and personal preferences before deciding on the best approach for your venture. Some downsides to bootstrapping include:
- Risk of burnout: you handle many tasks from managing the business to caring for children, which can lead to burnout.
- Slower growth trajectory: without money from outside sources, your child care business might grow slower than businesses that get investments. Not having enough money can stop you from expanding, make it harder to market your business, and delay improvements you need to make.
- Limited marketing budget: bootstrapping may limit how much you can spend on advertising, which could make it harder to reach people and be known in your community.
How do I bootstrap my child care business?
Before you launch your child care business, here are ways to start bootstrapping:
- Create a comprehensive business plan: take the time to create a simple, one-page business plan. This plan should outline your vision, who you want to serve, what services you will offer, how you will price your services, your marketing ideas, and your money predictions. This plan will help you set goals and give you a sense of how to start your new child care business. Learn more about creating a business plan on the Operations webpage.
- Have a graduated budget: many start-up businesses assume a “full capacity budget” from day one. For example, let’s say a center has five classrooms. They could open all five on day one. However, that means they are likely paying for empty or low-enrollment classrooms. If the same center starts with two classrooms open, they could work to fill the others. Having a budget that clearly marks the costs as you slowly move to full capacity can guide you to know the resources you really need to start your business. Learn more about creating a budget on the Budget and finances webpage.
- Find free or low-cost resources: When you start out, don’t hesitate to ask for help from friends and family-ask for their time or skills. For example, you could ask your cousin who's a bookkeeper to help you set up your accounts. Don’t hesitate to ask for donations of toys and books. Consider bartering opportunities with other businesses or individuals. For example, a center offered a few months of free care to one parent in exchange for their professional help as a plumber. Learn more about other resources on the Small business resources webpage.
Once you open, you can continue to grow through bootstrapping using other strategies. Use the Iron Triangle, developed by the national organization, the Opportunities Exchange. The Iron Triangle is a financial model consisting of three key components: full enrollment, full fee collection, and the ability to cover per-child costs with revenue. These elements are interconnected and must be equally considered when creating a child care business's budget.
Full enrollment means having as many children as possible in your child care business to make the most money. Base your budget on the number of children you actually care for with your staff, not just the number you are allowed to have by your license. Set enrollment goals that you can reach, such as 85% of your licensed capacity.
Collecting full fees means getting payments from families on time and in the full amount. Late or incomplete payments hurt your income.
Figure out how much it costs to care for each child and compare it to what you charge families. The fees must be equal to or higher than the cost per child to avoid running out of money. To learn more about setting rates, visit the setting rates section on the Operations webpage. To estimate the costs of providing child care, use the Provider Cost of Quality Calculator on the Budget and finances webpage.
Use marketing that costs little or nothing to help your business reach full enrollment. Marketing a child care business with a small or non-existent budget means being creative, resourceful, and focused on connecting with your local community. To learn more about marketing, visit the marketing section on the Operations webpage.
Just-in-time hiring and ordering are business strategies that small businesses often use to make their work better and lower costs. These strategies help make processes and resources flow smoothly to meet needs without wasting anything.
Just-in-time hiring means hiring employees only when you need them to handle current business. Instead of hiring several employees ahead of time, businesses using this method hire employees as more people want their products or services. As mentioned in your plans before you launch, you can create a budget to help you decide when to hire new employees. Maintaining a waiting list can be very helpful because it shows that families are committed to using your services before you hire and expand. To learn more about hiring, visit the hiring section on the Employee management webpage.
Just-in-time ordering means buying supplies or materials only when you need them to produce something or sell something right away. Businesses using this method try to keep inventory costs low and lower the risk of supplies going bad or becoming too old to use.
Make sure to watch your cash flow. Cash flow is the money coming into your business (through services) and the money going out (through expenses). It helps you make sure you have enough money to pay bills, employees, and other costs. To learn more about cashflow, visit the keeping your cashflow positive section on the Budget and finances webpage.
Disclaimer
The information contained here is for educational purposes only and is not intended to constitute legal, tax, or financial advice.