Daycare Budgeting can be a lot to think about. There are so many accounting terms like Profit and Loss, Revenue, accrual basis or cash basis, and the list goes on and on! When I started my Family childcare Home back in 2005, and transitioned into a Licensed Center back in 2007 I had no idea about daycare budgeting or how to budget for a business. I knew a little about budgeting for a home, but a business, and a childcare business at that I was absolutely lost!
Over the ten years that I ran my center, I learned so much about accounting, budgeting all things numbers. And to my surprise, I learned how to look at my budgeting as a whole, through the eyes of numbers. Once I was able to understand the three numbers I needed to know, it really made me look at my daycare budget in a whole new light! And this made it really easy!
So Let's jump into the three numbers you need to know, to understand your daycare's financial status at all times.
1). Break Even and Profit Numbers
A Lot of the times, we focus on how many kids we have enrolled. And yes, this is a great number to know. But the number that you need to be aware of, is how many more children do you need that will ensure two things: Your Break even point, and your profit point. This is what I like to call, your sweet spot enrollment numbers.
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Your break even enrollment number is the number of kids you have to have, to just make ends meet. Your profit number would be any enrollments you bring in, after you have met your break even number. So it may look something like this:
2). Percentages of Revenue
Your Second number to be aware of is your percentages of revenues. If we go back to that pie chart we learned about in elementary math, there are percentages of revenue that each program is contributing to, and each expenses is taking from. Knowing your percentages of revenues will really help you take better control of getting down to ensuring profit. So as an example: Let's say that you offer four different types of programs. Infant, Toddler, Preschool and Afterschool Care. You charge the most for Infants, but that program is only taking up 30% of your revenue. This is not what you want right? Because if you charge the most for infants, you want that program to be the highest percentage of your revenue, because this is where you would make the most money. You could do the same with your expenses and payroll too! Here is an example of a pie chart showing the percentage of revenue of programs. This would be an example of a better scenario.
3). Costs to Run each Classroom
The third number you need to know is how much it actually costs you, to run each classroom. Understanding this number really helps you to see what classroom is doing well, and which classroom is pulling from the other classrooms in your center. (If you are a family childcare home, you can look at this in the same way per program you offer).
See, there is always a classroom that may not being doing well as others. The numbers are too low consistently, or the teacher costs are too high for the amount of children in that classroom. So as an example: Let's say you have a 2 year old classroom with 12 children enrolled. The staff to child ratio is 1:10. So for every 10 children you have to have 1 teacher. So in essence, you have to hire on another teacher, for just two more children to meet the staff to child ratio regulations. To see if this is going to be beneficial to you, you will want to know how much it costs to run that classroom. So you will add up electricity, water, food, activities, teacher costs, etc.. to get the cost of running the classroom. Once you know how much it costs to run that classroom, then you will simply subtract that number from how much revenue that classroom is receiving, and this will give you how much money you are actually making in that classroom, and if it is feasible to hire the extra help to have 12 children. Or just keep that room at 10 children.
In conclusion, knowing these three numbers allows you to look at your childcare business from many different angles. Looking at it from many different financial angles allows you to analyze and strategize your next financial move, to ensure you are running a childcare business, that is healthy financially.
If you are interested in digging deeper into this topic, I teach this to Owners who are enrolled in my "Run it Like a CEO" Group Coaching Program! These Owners get access to my entire online campus where I teach my Childcare Business Budgeting Made Easy Course and other courses, to help you run your childcare business like a True CEO, that not only enriches the lives of children and families, but our own life too!
Check out the other blog posts in this series: