The ABCs of owning a child care business
When schoolteacher Heather Newton and accountant Ginger Aragones opened Bullfrogs & Butterflies in 2006, their backgrounds in education and finance gave the Virginia Beach preschool an edge.
But they overlooked a crucial business component: marketing.
Initially, word-of-mouth advertising worked fine - until the economy threw a 2007 tantrum that bullied its way into the next decade. Parents, coping with layoffs, foreclosures and high gas prices, struggled to pay tuition. In 2010, enrollment dropped by half, to 23 kids.
Meanwhile, the school had a stagnant, bare-bones website. An exterior sign boasted "Bullfrogs & Butterflies" - but no mention of "preschool" - in big, colorful letters. The business wasn't even in the Yellow Pages.
"I really thought people would drive by, see the sign and stop in," Newton said. "But they couldn't figure out what kind of business we were. One person thought we sold children's clothes."
Child-care providers get so busy with kids, parents and governing agencies, they often neglect their business operations. Most lack experience in marketing, accounting and human resources, says Lauren Small, child-care specialist at the Hampton Roads Small Business Development Center in Norfolk.
"They don't have a business background," said Small, who oversees the Early Education Small Business Program, a partnership between the SBDC and Smart Beginnings South Hampton Roads, the local arm of a statewide early-learning network. "They started out as teachers or child-care providers, or maybe they babysat out of their home or worked in a child-care center and decided to open their own."
Traditional training programs, rightfully so, have focused on education, safety and other care-related issues. Increasingly, however, they help child-care providers with running a business.
A is for accounting
"Child & Day Care Provider Tax Compliance Assistance," a June 5 webinar from the Internal Revenue Service, can be viewed on the IRS Video Portal. The webinar offers industry-specific record-keeping tips:
- Remember to save receipts for business-related deductions, including food, laundry detergent and diapers.
- Develop a contract that clearly describes any extra charges, such as transportation expenses and fees for late pickup or early drop-off.
- For home-based providers, keep detailed logs of the time spent using the home as a business. The same goes for vehicles driven for child-care transportation.
Sing a song of sixpence...
Virginia's Child Care Financing Program provides low-interest loans - $150,000 for freestanding child-care centers, $10,000 for in-home providers - to eligible businesses. Recipients must spend the money in the following areas:
- Fixed-asset purchases related to children's health, safety and welfare, such as playground equipment, cots, books, educational materials and lockable cabinets for cleaning supplies.
- Minor building maintenance, renovations or repairs to fulfill government health and safety requirements.
- Buying buses for transportation.
- Other learning aids, tools or programs.
Offered by the Virginia Small Business Financing Authority, the program has an application fee of $100 - or $15 for home providers.
Oh, the places you'll go!
Small's program, a business boot camp or "mini-MBA" for child-care providers, is extending its reach. Launched in Virginia Beach in 2010, it expanded to Suffolk this year. In 2013, it will also be available in Norfolk and Chesapeake.
The year-long program includes business development classes, one-on-one counseling and other resources for child-care providers.
"It's a collaborative process," Small said. "I work with the businesses individually and meet with them at least once a month. It's a big time commitment for them."
The payoff is big, too. Last year, Virginia Beach graduates, including Bullfrogs & Butterflies, achieved a 36 percent increase in enrollment and a 29 percent increase in revenues, Small said.
Newton credits the program with saving her preschool from a post-recession sulk.
"The marketing was a huge piece for us," she said. "You really need to brand yourself."
She and Aragones learned to create - and update - a WordPress website.
BullfrogsandButterfliesSchool.com brims with fresh content like photos, class schedules, curricula and testimonials. They also joined Facebook, revamped their sign, designed a new logo and brainstormed a slogan: "Where young minds take flight."
"Each one of them," Small said, "leaves this program with a brand identity. So, a logo, a website, a functioning accounting system, training on QuickBooks and, if we can, some signage help - all things that create a sustainable, long-term business."
The program addresses a common challenge for child-care providers: retaining good employees in an industry that paid a median wage of $9.28 an hour in 2010.
"The human resource piece is so important," Small said. "If you're not strong in HR, you could have a lot of turnover. So, do you hire well? Do you interview well? Do you have good job descriptions and orientation procedures? Do you understand leadership?"
The five-year, $2.5 million program is funded by the Batten Educational Achievement Fund of the Hampton Roads Community Foundation. The foundation awarded its Early Learning Challenge Grants to Smart Beginnings to work with five cities in South Hampton Roads. Eligible cities receive matching grants of $500,000 over five years. Currently, Portsmouth is the only one not participating.
For more information, visit "Early Learning Initiatives" at www.smartbeginningsshr.org. Licensed child-care providers or religious-exempt programs can apply through the coordinators in each city:
- Chesapeake: Kathryn Jessee, 382-6796, firstname.lastname@example.org
- Norfolk: Sarah Sterzing, 664-6071, email@example.com
- Suffolk: Brenda O'Donnell, 514-7457, firstname.lastname@example.org
- Virginia Beach: Karen Kehoe, 385-0144, email@example.com
Kehoe is coordinator of GrowSmart, an early-learning initiative previously under the city of Virginia Beach's library system. Last July, the city moved GrowSmart to the department of economic development, marking a shift in thinking about child care.
Studies show that early childhood development programs have long-term benefits for business communities, Kehoe said. Children who participate in them are more likely to graduate from high school and college, according to a 2010 report from the Society for Human Resource Management. They typically earn higher salaries, pay more taxes, own homes, have savings and are less likely to rely on public assistance.
"Investing in kids," Kehoe said, "is very good for the economics of a community."