Why bother bootstrapping your business?
Bootstrapping your child care business takes hard work and has many challenges. But it also has many rewards. By using your own money and resources to start your child care business, you have more freedom and control. You also have less debt and more profit. With smart thinking, creativity, and hard work, you can own and run a successful child care business.
Bootstrapping has challenges, but it can be a great and rewarding experience for many business owners. It helps you feel more in control, encourages you to be resourceful, and can lead to a business that lasts longer and is stronger. Here are some of the benefits that come with bootstrapping:
- Financial independence: By not getting money from outside sources, you do not 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: When you bootstrap your child care business, you keep full ownership and control. You can decide where the business goes and how it is run. This lets you make choices that fit your vision and values. You do not have to answer to outside investors.
- Lean and efficient operations: Bootstrapping makes you think harder and be more creative. With only a small amount of money, you learn to focus on the most important costs. You learn to make things run smoothly and find new ways to grow without spending too much.
- Focus on your families: Bootstrapping encourages you to focus on building a business that puts customers first. When your money comes directly from happy customers, which are the families you care for, you have a strong reason to give great service. You want to meet their needs and do even better than they expect.
Bootstrapping sounds great, right? For some child care business owners, it is. However, it's essential to carefully 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 of the downsides to bootstrapping include:
- Risk of burnout: As the owner and manager of your child care business, you probably do many different jobs. You handle tasks from managing the business to taking care of the children. This can lead to burnout, which can affect the quality of care you give and how well your business does overall.
- Slower growth trajectory: Without money from outside sources, your child care business might grow more slowly 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: Marketing is important for bringing new families to your child care business. Bootstrapping may limit how much you can spend on advertising. This could make it harder to reach people and be known in your community.
Despite the shortcomings, many child care business owners find bootstrapping an effective, efficient way to start their business.
Sounds good! How do I bootstrap my child care business?
If you want to bootstrap your child care business, there are key activities you should undertake before and after you launch your business.
Before you launch your child care business, there are three 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. It will help you understand the market and costs.
- 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 opt to open all five on day one. However, that means they are likely paying for empty or low-enrollment classrooms. Alternatively, if the same center could start with two classrooms, they could opt to just open the two while the 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.
- Tap into free or very low-cost resources: When you start out, don’t hesitate to ask for help from friends and family. The first thing you may think of is asking for low or no interest loans, but more easily you could ask for their time or skills. For example, you could ask your cousin who is a bookkeeper to help you set up your accounts. One child care business owner offered friends pizza to help her set up the playground equipment. Also, don’t hesitate to ask them for donations of toys and books – they are likely going to be glad to get them out of their house and it will reduce your start-up costs. Finally, consider exploring 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.
Once you open, you can continue to grow through bootstrapping using four more strategies.
First, utilize 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. This helps you make the most money. It is important to base your budget on the number of children you can 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, to avoid losing money.
Collecting full fees means getting payments from families on time and in the full amount. Late or incomplete payments hurt your income. You should make your expectations clear to families. Child care software with online payment options can make this easier.
The third thing to consider is whether your business's income can cover the cost for each child. 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.
The Iron Triangle is important for financial success at any point in your child care business. It is especially important when you are bootstrapping a new business. It will help you make the most of the money coming in and quickly fix any problems in your budget.
Next, 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. Here are some cost-effective marketing strategies for promoting your business:
- Word-of-mouth referrals: Encourage happy families and your staff to tell their friends, family, and neighbors about your business. Word-of-mouth can be a great way to attract new families. If you want to offer rewards, think about a discount on child care (which will cost you less than giving cash) or cash only if the new child stays enrolled for 90 or 100 days. This gives you time to earn money from the new family to cover the cost of the reward.
- Partnerships with local businesses: Team up with local businesses. This could include doctor's offices, hair salons, schools, and community centers. Share information about your child care business with them. Offer to put brochures or flyers in their buildings. Or, give their employees discounts or priority on your waiting list to attract more families.
- Social media presence: Create and keep up a strong presence on social media sites like Facebook, Instagram, and Twitter. Share photos, videos, and updates about activities, your building, and your staff. Talk with families and the community by responding to comments and messages quickly.
- Community events and fairs: Take part in local community events and fairs to make people aware of your child care business. Set up a booth with fun activities for children and helpful information for families. For example, one center printed flyers and went to local garage sales to hand them out to families who were shopping.
- Host open houses: Hold regular open houses where families who might be interested can tour your building, meet your staff, and ask questions. You can even use Facebook Live and other ways to stream video to do virtual open houses and tours.
- Testimonials and reviews: Ask happy families to write reviews and give testimonials. Share these on your website or social media. Good feedback from families who use or have used your services can build trust and make your business seem reliable in your community.
- Local media coverage: Write and submit press releases to local newspapers or community newsletters about significant events or achievements at your child care business.
Third, you can use just-in-time hiring and ordering. These 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 a lot of 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. Always having a waiting list can be very helpful. It shows that families are committed to using your services before you hire and expand.
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. They also want to lower the risk of supplies going bad or becoming too old to use.
Both of these strategies can help you make the most of the money you have. However, they also require careful planning, good predictions, and clear communication with suppliers and employees to make them work well.
Fourth, watch your cash flow. Simply put, cash flow is the money coming into your business (through sales) and the money going out (through expenses). Watching cash flow is always important. It helps you make sure you have enough money to pay bills, employees, and other costs.
Disclaimer
The information contained here is for educational purposes only and is not intended to constitute legal, tax, or financial advice.