Starting A Childcare Business as a Solution to the Childcare Crisis in Your Home and City

This is a series where I (Sarah) use our business plan tools to create plans for imagined businesses using our “good business” strategy. Stay in the loop by subscribing here.

I was lucky (?) to be raised as an 80’s latchkey kid. This came with the benefit of being deemed at the ripe age of 11 as a respectable babysitter to a 9-month-old and 3-year-old late into the evening.

This first job became a regular gig and soon filled every weekend and summer with endless toddler dance parties, raiding kitchens for junk food, and singing along with Beauty and the Beast until even the 5-year-olds couldn’t stand it.

By the end of the summer after 8th grade, I was headed to high school and had enough cash from my 3 years of babysitting to purchase a horse. It was a cheap horse, which by definition is not cheap at all.

When I turned 16 I got a “real job” and wanted to focus on riding, so I stopped babysitting. I remember calling more than a dozen families to let them know I would no longer be available.

Childcare was still part of my life thought. In high school, I organized summer sleepover riding camps for kids. By the time I reached University, I could reliably get a job teaching children’s riding lessons and I did that steadily until I graduated - 5 years and 4 transfers later.

Despite all this, I never considered working long-term in childcare. I never considered a job in anything except horse training until I entered the workforce amid an economic crisis. The opportunities were slim and the rent was due.

Fast forward almost a decade and I'm living in a rural village on the border of Uganda in the not-yet-a-new country of South Sudan. I'm the Interim Co-director of a children’s home for 60 kids.

My job description as Co-Director was to run the economic development programs, manage the finances, oversee project management of a new building, and lead day-to-day operations. All of which I felt qualified to do. Within a week of arrival, it became clear that that role would instead be given to the other Co-Director (aka my husband). Instead, I would be given the title of “Mama Sarah, Head of Child Welfare”, even though my husband had the actual credentials for Child Welfare and I had the credentials for management - sometimes you can’t overcome the reigning cultural code…or the patriarchy.

Two years later, with the imminent arrival of our first biological child, we were in the unfortunate position of choosing between our health and our roles as parents to the 60 kids in Nimule, South Sudan. The decision was made for us when I had to be evacuated for medical care.

As a new mom back in the US, I was shocked by how one baby felt like as much work as 60 kids. The jump from having no babies to one may be the biggest shock of your life.

via GIPHY

With my husband working out of the home, like many primary parents, I was confused as to how I was supposed to manage the household & childcare, and also get back to an out-of-house career; ideally starting another business or NGO.

I didn’t know it then, but I was experiencing a systematic problem as an individual one. My confusion was not unique to me. The systems in American society are stacked against families and especially mothers. 

But, here's what I did know:

1. I liked being a full-time parent at home with my kid.
2. Community solutions, even at the smallest of scales, give me purpose and drive me to action.

So for the next few years, I returned to my first career. We became a dual-income household with me offering childcare to other families, with my own children in tow. You can read more about that here.

Let's explore the multiverse as an exercise in how to create businesses that solve big problems at a small scale. What if I had launched a childcare business rather than seeing it as a temporary solution? What would that Business Plan look like? How would I make sure it was financially sustainable and that I loved it? 

My hope is someone steals this plan and makes it their own; and that this little exercise sparks some solutions to our big collective societal challenges.

[Side Note: Have you heard about Private Equity buying up daycare centers? Check it out if anger motivates you...]

Let’s start solving the childcare crisis together. No pressure.

Imagine I'm at home with my first baby. I am trying to decide whether or not I should stay home with the kids, or if I should go back to work out of the house.

For this exercise, let's assume a few things:

• I want to be with my kids in these early years.
• I want to grow professionally and continue building a career.
• I plan to continue building roots in my Denver community.
• I am dedicating my career to excellent childcare solutions for ALL children in the long term; not just my own in the short term. 

I don’t have to imagine too hard, because this was me a little over a decade ago. While we ended up leaving Denver, this scenario is based on a business I could have built while I combined paid childcare work with caring for my first child. You can read more about that here.

I'm going through the steps of our Business Plan Challenge to demonstrate how to start a business plan.

Step 1: The Ideal Scene. What do I want my life and business to look like in 10 years?

(You can access all the tools I use to create this business plan here)

The first half of this step asks me to imagine what my ideal life will look like in 10 years. I imagined a life surrounded by colleagues and clients working together daily. I am working toward a shared vision for our community, where I also have plenty of time for life outside of work. I know how much I need to make yearly to support my family’s future.

You can see exactly what I wrote for part one here.

The next step asks me start envisioning my ideal organization that will support the ideal life I outlined in step one. The vision for this business started to flow when I thought about who this business would serve - our families or ‘ideal clients’. 

I came up with this:

This answer, which I didn’t even know I was going to write, starts pointing to the type of legal structure, management priorities, and marketing I will need to achieve this vision. In the next steps I will look at how this vision can be financially viable and fit within the vision I had for my ideal life.

(Ready to do your ideal scene? Get free access to the course now.) 

Step 2: Define the Purpose, Vision, and Mission of the business. 

This step asked me to create the scaffolding needed for the business. Defining the Purpose, Vision and Mission enables you to make strategic decisions and help ensure that you don't build the wrong building (ie. a business you hate).

Step 3: Financials 

After the big vision and long-term thinking we did in steps 1 & 2, we bring it back to today and start playing with numbers to understand if this idea has any chance of being financially sustainable.

Step Three uses a ‘Back of the Napkin’ mindset. We don’t need to go crazy and figure out every little expense. But we do need to do some rough estimates and do a little research. 

Most of us can’t be like Amazon and lose money for 10 years; nor do we have any interest in building a monopoly using unfair labor and pricing practices. So we need to see how we can make our model work.

I tested two “Back of the Napkin” financial models. Model One is an unlicensed home childcare and Model Two is Childcare Home Coop for 20 children.

What I’m trying to learn with the ‘Back of the Napkin’ financial exercise for each model:

1. What’s the most revenue I can make for childcare? What’s my maximum capacity? How many hours of childcare can I provide in a month?
2. What expenses will I incur to reach that maximum capacity?
3. How much gain/loss is there depending on the different financial assumptions I make?
4. Is this worth exploring and getting real market data on expenses & prices to create a more detailed financial plan?

Model 1: Unlicensed home childcare 

For the first model, I wanted to test the financials of a business that would require very little startup expenses, time, or licensing but where I could start earning an income from the business quickly. When my first child was 6 months old I started caring for 2 kids in my home and at their home 2-3 days a week. We're going to build off of that idea.

In the state of Colorado, you can be an unlicensed caregiver for up to 4 children (including your own) and no more than 2 children under 2 years old. 

I’m going to imagine that I am starting this business in Denver in today’s market. I have a 6-month-old and want to start a childcare business from home. I'm going to have 4 kids in my house, 4 days a week at $20 an hour.

I was pleasantly surprised to see that while caring for my child, using average childcare costs in Denver, I could pay myself a salary of $4000 monthly (pre-tax). In my expenses, I included a weekly cleaning service and a babysitter for my kid one day a week. Read that again! That one day I'm not working, I'm going to have childcare. Most primary parents never get a day fully off, I'm going to get a weekday off and a weekly cleaner. After paying myself and predicted expenses, the business still had a monthly profit of $960.  

Since I wouldn’t be paying for full-time childcare for my child, I would also be saving around $2000/month. This seems pretty great, as long as I want to be home and not pursue another type of career. This is a lifestyle choice business in many ways. I’m assuming a partner with a second income or someone to share household expenses. It would be difficult to get by as a single parent on $4000/month in Denver’s current housing market - though I'm sure people do.

If I wanted to increase my revenue, I would find some ways to increase the value for my clients with add-on products. I could offer laundry drop-offs that I do in the evenings or warm meals to go home with them when they pick up their child. This could increase my monthly profit by $800/month with these kinds of up-sells.

Here are the final back of the napkin results, with add-on services:

 

What do we know after doing the back of the napkin on an unlicensed home care model?

This business could work. Even if I can’t get to max capacity in the first few months or my expenses end up being higher than my estimated guess, there is enough profit to make sure I don’t lose money and likely take a salary home pretty quickly.

I could stop here and move forward with this model. I would then move on to filling part 2 of the financial model (P&L) and do more research to validate my assumptions of expenses might be.

I'd then move on to Step 4 of the business plan: The Marketing Strategy where I map out what it would take to get a few clients. 

For this exercise though, before I move onto the next steps, I'm going to start mapping out my other model.

Model 2: Childcare Co-op for up to 20 children

For the second model, I go BIG. What would it look like to start a childcare co-op with other families, where we have licensed professional early childhood educators and a dedicated space. In this model, I'm going to go all-in on my big vision to create long-term care solutions for parents in my city. The results of the Back-of-the-Napkin modeling and Step 4 will be in Part Two...

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