Headstart Daycare & Learning Centre
Prepared for Marv Painter
MPAcc 809 (04)
Prepared by:
Sibil Chan
Lindsay Chiang
Anne Lee
July 12, 2010
Headstart Daycare & Learning Centre
T ABLE OF C ONTENTS
1.0
Executive Summary .......................................................................................................................... 4
1.1
Value Proposition .......................................................................................................................... 4
1.2
Sustainable Advantage ................................................................................................................. 4
1.3
Summary of Operations Plan ........................................................................................................ 4
1.4
Summary of Marketing Plan .......................................................................................................... 4
1.5
Summary of Human Resource Plan ............................................................................................. 5
1.6
Summary of Financial Plan ........................................................................................................... 5
2.0
Introduction........................................................................................................................................ 5
2.1
Mission .......................................................................................................................................... 5
2.2
Goals and Objectives .................................................................................................................... 6
3.0
Industry Overview ............................................................................................................................. 6
3.1
Location Overview ......................................................................................................................... 6
3.2
Child care Industry Overview ........................................................................................................ 6
3.3
PESTE Analysis ............................................................................................................................ 7
4.0
Operations Plan ................................................................................................................................ 9
4.1
Organizational Structure ............................................................................................................... 9
4.2
Composition of the Board of Directors .......................................................................................... 9
4.3
Services Offered ......................................................................................................................... 10
4.4
Hours of Operation and Daily Activities ...................................................................................... 11
4.5
Supplier Analysis ......................................................................................................................... 13
4.6
Site Layout .................................................................................................................................. 14
4.7
Service Providers ........................................................................................................................ 15
4.8
Capital Budget ............................................................................................................................. 15
4.9
Working Capital Management ..................................................................................................... 16
4.10
Operating Capacity ..................................................................................................................... 16
4.11
10-Year Projection ...................................................................................................................... 17
5.0
Human Resource Plan .................................................................................................................... 17
5.1
Roles and Responsibilities .......................................................................................................... 18
5.2
Training Program ........................................................................................................................ 20
5.3
Labour and Management Costs .................................................................................................. 20
6.0
6.1
Marketing Plan ................................................................................................................................ 22
Marketing Mix (4 P’s) .................................................................................................................. 22
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Headstart Daycare & Learning Centre
6.2
Segmentation .............................................................................................................................. 24
6.3
Target Market .............................................................................................................................. 25
6.4
Positioning ................................................................................................................................... 25
6.5
Competitor Analysis .................................................................................................................... 25
6.6 Market Research ............................................................................................................................... 29
6.6
Marketing Strategy ...................................................................................................................... 29
6.7
Marketing Expenses .................................................................................................................... 30
6.8
SWOT Analysis ........................................................................................................................... 31
7.0
Financial Plan .................................................................................................................................. 33
7.1
Introduction.................................................................................................................................. 33
7.2
Start up Costs.............................................................................................................................. 34
7.3
Capital Structure ......................................................................................................................... 34
7.4
Working Capital ........................................................................................................................... 34
7.5
Projected Financial Results ......................................................................................................... 34
7.6
Investment Analysis .................................................................................................................... 37
8.0
Appendices...................................................................................................................................... 39
9.0
References ...................................................................................................................................... 46
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Headstart Daycare & Learning Centre
1.0 E XECUTIVE S UMMARY
A British Columbia certified teacher and two business associates have decided to establish a child care
facility to not only invest in a thrilling business endeavour, but to also assist in the increasing of the
opportunities of children’s futures. The three business entrepreneurs will be providing $112,500 in equity
financing, but wish to seek another $37,500 of equity from another potential investor. An additional loan
of $50,000 from the bank will total the $200,000 required for initial start-up costs and resources.
1.1
V ALUE P ROPOSITION
Headstart Daycare and Learning Centre (the “Centre”) will offer full-day child care services to young
families in the Clayton Heights area of Surrey, British Columbia. Clayton Heights is a growing young
community that is surrounded by multiple elementary schools of the Surrey School District. There is an
increase demand for a reliable infant and toddler group daycare as young urban parents commute to
downtown Vancouver for work. The Centre will be the first group daycare facility in the area, providing
age-appropriate learning opportunities to children in order for them to start to reach their full social,
physical, and intellectual potential.
1.2
S USTAINABLE A DVANTAGE
The sustainable advantage of Headstart Daycare & Learning Centre will be achieved by providing a
successful future for the children through our engaging and highly educational program planned and
implemented by a certified British Columbia teacher. This is currently an area that is not served by other
caretakers.
1.3
S UMMARY
OF
O PERATIONS P LAN
Headstart Daycare & Learning Centre will obtain a group child care provider license for children from
infant to school age. Maximum capacity of the Centre will be set at 74 children, based on the projected
floor plan of having four main child care rooms at the Centre. Attending children will be placed into one of
the four rooms with children of similar age in order to establish suitable activities for their benefit. The
Centre will be staffed with employees who have their Early Childhood Educator certification to provide the
children with a highly interactive educational environment. A manager will also be on-site to ensure that
day-to-day operations are run smoothly. Minimal working capital will be required, as revenues are
primarily rendered from services provided by the staff. The company will receive funds from the
prepayments of monthly daycare fees before salary payments are to be made to employees. Therefore,
the company will operate with a negative cash flow conversion cycle.
1.4
S UMMARY
OF
M ARKETING P LAN
Our child care facility will be targeting parents who require full-day child care for their young children.
These parents would also like to enrol their children in a centre that has an educational and stimulating
environment such that their child can grow and have the best opportunities. Headstart Daycare &
Learning Centre will become the first licensed group daycare facility in the Clayton Heights area.
Promotion of the new child care centre will primarily come in the form of flyer distributions to new
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Headstart Daycare & Learning Centre
residential developments, community outreach programs, and hosting of open houses for interested
families.
1.5
S UMMARY
OF
H UMAN R ESOURCE P LAN
Headstart Daycare & Learning Centre will require a director and a manager. The director will manage the
business formalities and administration required for the Centre. The manager will oversee the day-to-day
operations of the Centre and provide assistance to the director. The number of educator and assistant
educator employees required at the Centre is dependent on the quantity and ages of children that are
present at the child care facility. Headstart Daycare & Learning Centre will ensure that they are staffed
appropriately in compliance with the standards set-out under the British Columbia Child Care Licensing
Regulation. Additional employees would also include a full-time chef to create wholesome nourishing
meals and a part-time maintenance worker to handle any repairs required
The director is to receive a salary of $50,000 while the other employees will be paid a starting hourly
wage of $10 - $18 per hour, depending on their position and qualifications. All employees will receive
benefits in addition to their salary and wages. Total salary and wage expenses will be approximately
$126,038 in the first year and are expected to increase at an annual rate of 2%.
Training will be provided to the manager, educators, and assistants and will be led by the director.
Training will focus on the Centre’s teaching and child care philosophy and will include a briefing of the
Centre’s policies and procedures, the code of conduct, training on the sign-in system, and job
expectations for each of the roles. The director, manager, and certified educators are also expected to
attend various professional development workshops throughout the year, compensated for by the
enterprise.
1.6
S UMMARY
OF
F INAN CIAL P LAN
Based on our preliminary forecasts, the Headstart Daycare & Learning Centre will sustain a positive cash
flow within two years of operations. Over a 10-year period, the net present value provided by the Centre
will be $26,094 based on a 20% rate of return. The internal rate of return is 22% over 10 years.
2.0 I NTRODUCTION
Headstart Daycare & Learning Centre will be known as the group child care facility in the Clayton Heights
community that provides an enriching educational and interactive atmosphere for young children to
develop into their full capabilities.
2.1
M ISSION
Our mission is to provide a safe, educational and nurturing environment for children from infant to prekindergarten age during a parent’s work day in the Clayton Heights neighbourhood in Surrey, British
Columbia. Our company will ensure a child’s well-being, by providing attentive care in daily activities
through a highly educational program that will increase the child’s learning potential.
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Headstart Daycare & Learning Centre
2.2
G OALS
AND
O BJECTIVES
Short-Term Goals
The goals to be met within the first two years of operations include:


Obtain a 60% operating capacity
Gain name recognition in the Clayton Heights community as a daycare that provides an
educational and stimulating daycare environment
Long Term Goals


Reach an operating capacity of 65%-100%
Obtain an annual return on investment of 20%
3.0 I NDUSTRY O VERVIEW
3.1
L OCATION O VERVIEW
Surrey, British Columbia
Surrey is the fastest growing suburb in Metro Vancouver, with a growth rate of 4% per year (Selected
Trend Data for Surrey, 1996, 2001, 2006 – Statistics Canada, 2010). The median age of an individual in
the city is 37 years old, signalling the presence of a young population. The city is populated by couples
and families, as 35% of the population contain a couple with children and over 60% of the population are
married or in a common-law relationship. Surrey is a city where working professionals reside as housing
prices are lower than the metropolitan city of Vancouver. The booming demand for real estate is
evidenced by the 23.6% increase in new active listings in Surrey from 2009 to 2010 (Fraser Valley Real
Estate Board Statistics Package – Fraser Valley Real Estate Board, 2010). Although working
professionals reside in Surrey, according to the 2006 Census, 76.1% of residents commute to work.
There is an increase in the number of children in the area, as the Surrey School District is the largest
school district in British Columbia and is one of the only few districts that is growing in the province
(School District No. 36 (Surrey); 2010) The presence of a young and booming population where young
professionals reside to raise their families presents a large market for a daycare.
Clayton Heights is one of the growing communities in Surrey where there is a multitude of new residential
townhouse developments housed by young families and working professionals. The nearby elementary
schools are of the largest in population of the Surrey School District, and a new school, Adam’s Road
Elementary, is ready to open in September 2010. As there is no group daycare facility in the area of an
emerging neighbourhood, Headstart Daycare & Learning Centre will capitalize upon the opportunity to
set-up in this location.
3.2
C HILD
CARE I NDUSTRY
O VERVIEW
Licensed child care providers in British Columbia are either designated as a family child care facility, a
group child care facility, or a preschool. Daycares that fall under the family category are typically in the
child care provider’s home, and can accommodate no more than seven (7) children. Children attending
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Headstart Daycare & Learning Centre
family daycare centres are usually from the residential neighbourhood and of varying ages, thereby
having one group of children with differing skills and capabilities to cater to. Licensed group child care
centres are not organized in someone’s residential home, but are usually in a community centre, church,
school, or commercial building. Group child care centres typically have a license to accommodate an
increased number of children based on their floor space available to the children and the number of
common rooms. As group centres are able to service more children, children of similar ages can be
assembled together for increased social interaction with peers of comparable developmental levels.
Certified early childhood educators customarily facilitate the classroom of a group daycare. Some have
an educational element to their daycare. Group daycares are also organized as either a private
enterprise or a non-profit organization. Child care centres with a designation as a preschool are mainly
different in two factors: educational module and hours of operation. Licensed preschools are only able to
provide care for children for no more than four hours in a day. Majority of pre-schools, thus, open for
sessions of two and a half to three hours. Preschools also typically focus on providing educational value
to their students. Some preschools instruct even based on an educational methodology such as
Montessori education or Waldorf education. Montessori education philosophy is based on the fact that a
child’s own interests will allow for self-directed learning, and the educator is only present to support and
remove barriers obstructing the child’s natural learning progressions (Montessori method – Wikipedia,
2010). A school with a Waldorf philosophy will teach children through the use of practical experiential
activities (Waldorf education – Wikipedia, 2010).
Children from infant to four-years of age in Surrey comprise of approximately 6.2% of the population,
24,555 children (2006 Community Profiles – Census Subdivision, 2010). All these children require fullday child care from a responsible adult, whether it is from a parent, babysitter, nanny, or daycare centre.
In the 21st century, there are an increased number of families that are stepping away from the traditional
roles and having both parents work in order to earn income for the family. New Surrey elementary
schools currently being constructed shows that there are an increasing number of children to the Clayton
Heights area and that there is demand for child care facilities. Child care centres are also becoming early
education classrooms, allowing children to partake in interactive activities to teach them early educational
skills that are traditionally taught later in elementary school (McClure, 2010). This trend has come from
the pressure that parents want their children to have early educational experiences in order to have a
head start to their intellectual and social well-being.
3.3
PESTE A NALYSIS
3.3.1 Political Factors
The British Columbia child care industry is directly affected by the Child Care Licensing Regulations as
set out in the Community Care and Assisted Living Act by the Province of British Columbia. These
regulations outline the licensing and functioning conditions, health and safety requirements, prerequisites
to staffing the facility, as well as other program standards for any BC licensed child care settings.
Headstart Daycare & Learning Centre is restricted by these regulations in running their facility, especially
in the maximum number of children that the Centre is able to accommodate and the number of certified
early childhood educators needed to meet the ratio requirements of educators to children. It is essential
that Headstart Daycare & Learning Centre specifically monitor for any changes to these regulations, and
continue to abide with the British Columbia child care standards in order to keep their license to practice.
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Headstart Daycare & Learning Centre
Currently, the Ministry of Children and Family Development in British Columbia provides child care
subsidy to parents. The subsidized child care amount provided by the provincial government is
dependent upon factors such as the parents’ income, the number of dependent children who requires
child care in a family, and spousal information. A major part of Headstart Daycare & Learning Centre’s
revenue stream comes in these child care subsidies received directly from the provincial government on
behalf of the parent. A decrease in the amount of funding for child care would affect the Centre as
parents may not be able to fund the governmental shortfall and they would begin to seek less expensive
alternatives of child care.
The provincial government also provides a daily operating fund to child care providers to assist in the
funding of the care of British Columbia children in a registered facility. This government subsidy provides
$12 per day for children up to 35 months of age and $5.48 for 3 year-olds to kindergarten age (British
Columbia: Ministry of Children and Family Development; 2010). This additional revenue stream greatly
assists child care centres in covering the daily costs of child minding. Loss of this government funding
may cause some facilities to operate in a net loss position, resulting in the risk of business failure.
3.3.2 Economic Factors
As Canada continues to rebound from the worldwide economic downturn, there has been a reduction in
spending of supplementary items that are believed to be excessive. Even though child care is considered
a primary necessity for families, parents may be in search for daycare facilities that are more economical
in order to make their dollar stretch further. This would affect the enrolment of children at higher-priced
learning centres as parents may explore other family daycare settings that would not have such an
educational component or choose a daycare that has decreased fees from meals and diapers being
supplied by the parent each day.
3.3.3 Socio-Demographic Factors
The British Columbia government has been putting a greater emphasis on education recently. This is
shown by the Ministry of Education announcing in 2009 that full-day kindergarten will be available to all
BC eligible five-year olds by September 2011 (British Columbia: Ministry of Education, 2009). This will
affect child care facilities as those kindergarten children will only require care on a reduced time-frame of
before and after-school care hours.
Another socio-demographic factor affecting the child care industry is that there is a declining birthrate
(British Columbia Stats: Local Health Area Total Fertility Rates, 2009). Families are not having as many
children, which, thus, affect the need for child care facilities for them. Some cultures also do not believe
in sending their children into group daycare facilities, which would also decrease the need for child care
from external groups.
3.3.4 Technological Factors
The increased technological shift does not have a significant impact on the child care industry at the early
childhood age levels. School-age children, though, are being exposed to technology at an earlier age.
Many before and after-school child care programs in British Columbia do not have the capital funds to
have increased technology resources for their programs. Child care has still been based on the social
and development play through health and wellness, and physical activity.
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Headstart Daycare & Learning Centre
Technology is, however, permitting parents to verify the well-being of their children through installed video
cameras (McClure, 2010). The use of ‘nanny cams’ allows parents to surveillance their child’s activities
with their child care provider, giving the parent comfort that their child is being taken care of appropriately.
This technology has not yet progressed to the British Columbia child care industry, even though some
daycares may desire to use in-house video cameras to prevent possible liability accusations.
3.3.5 Environmental Factors
Cold and rainy weather conditions and climate changes would move outdoor child care attendees to an
indoor safe play area. It is a current requirement of all licensed British Columbia child care facilities to
have both an outdoor and indoor suitable play area for children. Thus, these environmental factors would
not affect the child care industry.
4.0 O PERATIONS P LAN
4.1
O RGANIZATION AL S TRUCTURE
Headstart Daycare & Learning Centre will be incorporated under the British Columbia Corporations Act.
The corporation will be owned and operated by Anne Lee, a Canadian resident. Incorporation will provide
the owner with limited liability, and will provide a reduction in the amount of taxes payable through
incentives such as the small business deduction.
4.2
C OMPOSITION
OF THE
B OARD
OF
D IRECTORS
The appointment of the following experienced and competent individuals will provide appropriate
oversight for Headstart Daycare & Learning Centre.
Director – Anne Lee is the owner and director of Headstart Daycare & Learning Centre. She is an
internal board member who oversees the operations at Headstart Daycare & Learning Centre.
Early Childhood Educator – Jane Jones is a certified Early Childhood Educator who has her own daycare,
Little Galileos, in Port Moody, British Columbia. She has extensive experience in providing an educational
environment for infants and toddlers. Jane will be a key individual in evaluating the integral parts of
educational programs and other endeavours at the daycare.
Chartered Accountant – Loacker Chong is a Chartered Accountant who has extensive experience in the
audit of small businesses. His experience and advice in the accounting and tax implications of certain
transactions will be highly-valued.
Parent – Kim Sloan is a working professional with a 13-month-old son and a 3-year-old daughter. She
has numerous connections with parents in the Clayton Heights area due to her daughter’s involvement in
extracurricular activities. Her knowledge in the needs of a working professional with children will be
essential in the development of services offered by Headstart Daycare & Learning Centre.
Lawyer – Jim Claw is a lawyer with Jim Claw Law. He has extensive experience in children and family
law. His expertise will help Headstart Daycare & Learning Centre avoid potential lawsuits.
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Headstart Daycare & Learning Centre
Investor – A position on the Board of Directors is reserved for the investor. The investor will be able to
provide oversight on the overall strategic goals of the company.
4.3
S ERVICES O FFERED
Headstart Daycare & Learning Centre will provide the following services:

Educational Program: Headstart Daycare & Learning Centre is committed to the growing the
minds of children, providing them with the skills and tools necessary for future success. Our
tailored educational plan is designed by a certified Early Childhood Educator (“ECE”) and sample
learning themes and expected prescribed learning outcomes are shown in Figure 1.
Figure 1 – Sample Learning Themes and Prescribed Learning Outcomes
Sample Learning Themes
Dinosaurs
Nature
Communities
Space
Sports
Circus
Transportation
Farms
Animals
Health & Nutrition
Fairy Tales
Seasons
Sample Prescribed Learning Outcomes – Late Tykes Age
Social Responsibility
 Willing to participate in circle activities
 Begins thinking of alternatives to solve problems in peaceful ways
 With support, follows basic rules for working with others (eg. taking turns, sharing)
 Recognizes importance of good daily hygiene (eg. washing hands, brushing teeth)
English Language Arts
 Use speaking and listening when engaging in exploratory and imaginative play to express
themselves, ask for assistance, exchange ideas, sharing ideas, and experiment with new ideas
 Engages in reading-like behaviour
 Create simple messages through combination of pictures and symbols to convey meaning
Numeracy
 Identification of repeating patterns with two elements
 Begin to sort 3-D objects using single attribute
 Begin to recognize number sequence by 1s, starting anywhere from 1 to 10
Physical Development
 Perform movements in personal space while maintaining control
 Use their body to create shapes (eg. bending, pulling, twisting, stretching)
 Following rules and directions when participating in physical activity
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Headstart Daycare & Learning Centre

Safe Environment: All employees are provided with quality training to ensure that the safe
environment is provided to all children in our care. A criminal check is required for all employees
before employment commences. Periodic training ensures that our employees provide children
with the protective and secure environment.

Physical Comfort: As children at the infant and toddler age may not have the capabilities to
‘know when to go’, our child care providers will assist these children in toilet training events and
supply the diaper equipment required for each child to carry on with their daily activities.

Food and Beverages: Headstart Daycare & Learning Centre provides a nutritional breakfast,
lunch and a snack for all children each day. The food is prepared by an on-site chef and is in
accordance with the Canadian Food Guide, ensuring that essential nutrients are provided to the
strengthening of children’s growing bodies. Figure 2 shows a sample food plan for a typical
week.
Figure 2 – Weekly Sample Food Schedule
Food
Monday
Tuesday
Wednesday
Thursday
Friday
Breakfast
Oatmeal
Bananas
Milk
Rice Krispies
Strawberries
Apple Juice
Banana Bread
Orange
Milk
Pancakes
Pears
Milk
Morning Snack
Rice Cake
Apple Juice
English Muffin
Grape Juice
Cheerios
Treat
Apple Juice
English
Muffins
Strawberries
Milk
Carrot Sticks
Water
Lunch
Hot Dog
Yogurt
Milk
Turkey
Sandwich
Fruit
Milk
Chicken
Fingers
Carrots
Peaches
Milk
Afternoon
Snack
Cheese and
Crackers
Milk
Oatmeal
Cookies
Milk
Crackers
Peaches
4.4
H OURS
OF
O PERATION
AND
Scrambled
Eggs
Hash Brown
Potatoes
Cherries
Bread
Milk
Fruit
Juice
Celery
Peanut
Butter/Cheese
Wiz
Peanut Butter &
Jelly Sandwich
Milk
Bagels
Mixed Fruit
D AILY A CTIVITIES
The daycare will operate from 7:00am to 6:00pm daily. The hours are scheduled to accommodate the
working hours of a working professional. Please refer to Figure 3 for a sample daily activities schedule
for toddlers and pre-school age kid children.
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Headstart Daycare & Learning Centre
Figure 3 – Daily Activity Schedule
Schedule
Toddlers
7:00am – 8:15am
Individual Quiet Exploration
8:15am – 8:30am
Arrival of Majority of Children to the Centre
 Cleaning of station area for breakfast
 Washing hands
Breakfast
8:30am – 9:00am
9:00am – 9:15am
9:45am – 10:15am
Clean-up after Breakfast
 Toilet training (diaper changing)
 Washing hands
Circle Time
 Monthly theme, interactive song
Arts & Crafts
10:15am – 10:30am
Morning Snack
10:30am – 11:15am
Numeracy
 Teacher-led interactive activity
Outdoor Physical Activity (weather permitting)
 Individual & group movements
9:15am – 9:45am
11:15am – 12:00pm
12:15pm – 12:45am
Indoor Teacher-Led Safe Movement / Table Activities
Preparation for Lunch
 Toilet training (diaper changing)
 Washing hands
Lunch
12:45pm – 1:00pm
Read Aloud Theme Story
1:00pm – 2:30pm
Quiet Rest
2:30pm – 3:00pm
Individual Quiet Exploration
3:00pm – 3:15pm
Afternoon Snack
3:15pm – 3:30pm
Social Responsibility
 Toilet training (diaper changing)
 Washing hands
Carpet time theme activity
 Language arts
Outdoor Physical Activity (weather permitting)
 Individual & group movements
12:00pm – 12:15pm
3:30pm – 4:15pm
4:15pm – 5:00pm
Indoor Teacher-Led Safe Movement / Table Activities
5:00pm – 6:00pm
Station Exploration
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Headstart Daycare & Learning Centre
Schedule
Preschool Age
7:00am – 8:15am
Individual Quiet Exploration
8:15am – 8:30am
Arrival of Majority of Children to the Centre
 Cleaning of station area for breakfast
 Washing hands
Circle Time
 Monthly theme, interactive song
Breakfast
8:30am – 9:00am
9:00am – 9:30am
9:30am – 9:45am
10:30am – 10:45am
Clean-up after Breakfast
 Use of washroom / washing hands
Carpet Time
 Language arts
Morning Snack
10:45am – 11:30am
Numeracy
11:30am – 12:15pm
Outdoor Physical Activity (weather permitting)
 Individual & group movements
9:45am – 10:30am
12:15pm – 12:30pm
Indoor Teacher-Led Safe Movement / Table Activities
Preparation for Lunch
12:30pm – 1:00pm
 Use of washroom / washing hands
Lunch
1:00pm – 1:15pm
Read Aloud Theme Story
1:15pm – 2:45pm
Quiet Rest
2:45pm – 3:15pm
Individual Quiet Exploration
3:15pm – 3:30pm
Afternoon Snack
3:30pm – 4:15pm
Arts & Crafts
4:15pm – 5:00pm
Outdoor Physical Activity (weather permitting)
 Individual & group movements
5:00pm – 6:00pm
4.5
Indoor Teacher-Led Safe Movement / Table Activities
Station exploration
S UPPLIER A NALYSIS
Due to the nature of the services provided by Headstart Daycare & Learning Centre, the determination of
suppliers is not an integral part of the business. However, it is important to identify suppliers that will
provide the business with its daily operational needs.
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Headstart Daycare & Learning Centre
Food: Food will be purchased by the cook at a local grocery supermarket. The cook will have discretion
over the items to be purchased; however, the items purchase must be in line with the Canadian Food
Guide.
Daycare Location: Headstart Daycare & Learning Centre will be renting a location in the Clayton Heights
area for the daycare. We will need to work with the landlord to ensure that noise is tolerated at the
location and extensive leasehold improvements can be accomodated.
Rental costs have been incorporated into the income statement in Appendix III.
4.6
S ITE L AYOUT
We have designed an indoor and outdoor layout that is in accordance with the standards set out by the
Ministry of Children and Family. The floor plan for the Centre takes into consideration the educational
and physical needs of the children. Toddlers, infants, early tykes and late tykes will have their own play
area, allowing children to socialize with peers in their own age group. An outdoor area, equipped with a
sandbox and play structures, for toddlers and preschool aged children has also been set up. A toilet
training area is set up for toddlers and infants, while toilets are set up for preschool aged children. A
detailed floor plan is shown in Figure 4.
Figure 4 – Floor Plan
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Headstart Daycare & Learning Centre
4.7
S ERVICE P ROVIDERS
4.7.1 Janitorial Services
Janitopia Utmost Janitorial Service will be providing janitorial services for Headstart Daycare & Learning
Centre. We will be employing the services of the janitorial company everyday to ensure that a safe,
sanitary environment is provided for the children.
4.7.2 Legal
Jim Claw Law will be providing legal services and advice for Headstart Daycare & Learning Centre.
However, we do not anticipate that there to be any litigation associated with the business.
4.7.3 Technology Support
Tyco Consulting will provide the Centre with computer technology support and with ongoing website
maintenance. The fees associated with technology support are under website costs of Advertising and
promotion in Appendix III: Projected Income Statement.
4.7.4 Surrey College and Langley College
Headstart Daycare & Learning Centre will be recruiting for assistants and employees from nearby private
institutions approved to train early childhood educators (British Columbia: Ministry of Children and Family
Development; 2010). As such, Surrey College and Langley College will be focal points for recruiting
qualified employees.
4.8
C APITAL B UDGET
To commence the business, Headstart Daycare & Learning Centre will need to purchase numerous
capital assets. A list of costs associated with each item is listed in Appendix I: Start-Up Costs at the end
of our business plan.
4.8.1 Leasehold Improvements
Leasehold improvements will include the construction of dividers needed for the separation of
classrooms, toilets, outdoor playing areas for toddlers, infants, early and late tykes. Other costs include
costs for preparing the site in order to satisfy the building requirements stated by the Ministry of Children
and Family Development. Leasehold improvement costs are estimated to be $100,000 and are estimated
to have a useful life of 10 years based on the lease term.
4.8.2 Playground Materials
Headstart Daycare & Learning Centre will purchase outdoor playground slides and obstacle courses from
International Play in Langley, BC. The cost listed includes an outdoor playground structure that has a
slide and miscellaneous obstacle equipment suitable for children aged three to five. The playground
material is expected to have a useful life of 5 years.
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Headstart Daycare & Learning Centre
4.8.3 Furniture and fixtures
The Centre will purchase furniture, fridge, stove, tables, lighting, and shelving. All furniture and fixtures
will be purchased from IKEA and is expected to have an estimated useful life of 5 years, except for the
stove and fridge, which has a useful life of 10 years.
4.8.4 Educational Material
To support the educational progress of the children, we will need to invest in books and stationery. Books
and charts will be purchased from Collins Education. Stationery is purchased from Staples. Due to the
Centre’s focus on education, the estimated useful life of the books, charts and stationery is 2 years. The
costs associated with educational material vary with the number of children that are enrolled at the
Centre. We have taken into consideration these as variable costs per child. Amounts of educational
materials per child is shown in Appendix I:Start-Up Costs.
4.9
W ORKING C APITAL M ANAGEMENT
4.9.1 Liquidity Management
The Centre will receive monthly daycare fees from parents on the first date of every month, which is the
industry norm. Expenses will be paid as incurred. Employees will be paid on a biweekly basis and
purchases for food will be made two times a week. Due to the nature of the business, the Centre is
expected to have cash on hand at all times.
4.9.2 Inventory Management
The only main inventory the Centre will have is food. Food will be purchased twice a week and prepared
on the premises. Expired food will be discarded at the end of the week by the in-house chef.
4.9.3 Accounts Receivable
Due to the prepayment of monthly daycare fees at the start of the month, Headstart Daycare & Learning
Centre will not have an accounts receivable balance.
4.9.4 Accounts Payable
Headstart Daycare & Learning Centre will have an accounts payable to employee as hours are worked
during the month. There will be minimal balances in accounts payable as the Centre will mainly pay for
expenses on a cash basis (ie. purchase of educational materials, food).
4.10 O PERATING C APACITY
The Ministry of Children and Family Development imposes strict regulations with regards to the maximum
number of infants, toddlers and children that are permitted in a group daycare. Based on the regulations,
Headstart Daycare & Learning Centre will have a maximum capacity of 74 children at any given time. A
breakdown of the age groups is shown in Figure 5.
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Headstart Daycare & Learning Centre
Figure 5 – Total Licensed Capacity
Age
Number
Infant (9 months -18 months)
12
Toddler (18 months -35 months)
12
Early Tykes (3 years)
25
Late Tykes (4 Years)
25
Total Capacity
74
It is projected that Headstart Daycare & Learning Centre will reach an operating capacity of 22 children in
the first year, 44 children in the second year, and minimum 48 children in Year 7.
The Ministry of Children and Family Development also stipulates the number of staff that must be on site
for each group of children in the daycare. The staff ratio analysis, which is discussed in further details in
Labour and Management Costs in the Human Resource Plan, has been taken into consideration the
expenses that will be incurred at each operating capacity reached.
4.11 10-Y EAR P ROJECTION
We have assumed that the Centre will only open for 6 months in Year 1. This results in a net loss of
$59,550 in Year 1. However, we have projected to have a net income of $155,634 in Year 10 of
operations. This can be seen in Appendix III: Projected Income Statement. Dividends of $75,000 are
projected to be paid out to investors beginning in Year 3, representing a 26% external rate of return on
investment. The initial operating capacity is projected to be 30% in Year 1, but averaging 60 - 65% of
maximum capacity over the projected 10-year period.
5.0 H UMAN R ESOURCE P LAN
The organizational structure of Headstart Daycare and Learning Centre is shown in Figure 6.
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Headstart Daycare & Learning Centre
Figure 6 – Organizational Chart
5.1
R OLES
AND
R ESPON SIBILITIES
5.1.1 Director
The director has five years of management experience in the child care industry as well as experience in
accounting and finance. She has been certified by the British Columbia College of Teachers and has had
four years of teaching experience. As such, she has an understanding of the BC education system
requirements and has the aptitude to design and implement a curriculum based on the provincial
government’s prescribed learning outcomes which will help give the children a head start for the future.
The director also has her early childhood educator certification and her first aid and CPR certification and
is knowledgeable in child medical care. The director is responsible for overseeing the child care
programs for each age group and services and for ensuring they are in compliance with the BC Child,
Family, and Community Services Act (BC Child Care Licensing Regulation, 2010). She also can issue
early childhood educator certification to those who meet the required criteria set out by the BC Child Care
Licensing Regulation.
The director is responsible for addressing any issues and concerns that the parents may have as well. In
addition, she performs the accounting and business administration for the Company, as well as
increasing sales through marketing initiatives.
5.1.2 Manager
The manager has two years of experience in the child care management industry and extensive
experience in working with infants and toddlers. She is not allowed to be managing another child care
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Headstart Daycare & Learning Centre
facility during her employment (Province of British Columbia: Community Care Licensing Branch –
Ministry of Healthy Living and Sport; 2007). The manager also has her early childhood educator
certification, a valid first aid and CPR certification and her undergraduate degrees in family studies. A
criminal record check is required from the manager, since she will be providing oversight to the day to day
operations of the business and will be working closely with children, relieving the educators while they go
on their lunch breaks.
The manager assists the director in hiring the educators, chef, maintenance staff, and the assistants. The
manager reports directly to the director. The manager has to handle supplies management, which entails
ordering the supplies the educators will need for their daily activities. Her daily role is primarily to ensure
that the Centre is implementing the services and educational program that has been designed for the
children. The manager is also responsible for answering parents’ inquiries in the absence of the director.
5.1.3 Educator
The educators all have at least one year of prior experience in working with infants and toddlers and have
completed a basic early childhood education program at an accredited education institution. They are not
required to hold an early childhood education certificate, but are all at least in the process of qualifying for
such certification.
The educators have a valid first aid and CPR certification and have had a criminal record check
conducted prior to the start of employment, as they will be working closely with the children. They are
responsible for planning and executing the child care programs that the director has pre-approved. The
educators also have to help with any minor clean-up and sanitization of various areas once the children
are done with an activity.
The educators report directly to the manager and oversee any assistants and volunteers.
5.1.4 Infant-Toddler Educators
The infant-toddlers educators have the same qualifications and meet the same requirements as the other
educators. However, the infant-toddler educators also have an infant/toddler educator certification. As
such, they will be responsible for the children under 36 months.
Like the educators, the infant-toddler educators report directly to the manager and oversee any assistants
and volunteers.
5.1.5 Assistants
The assistants help the educators execute the child care programs and help provide supervision to the
children. They all have had experience in working with children and have the capability of taking care of
young children. BC Child Care Regulation further stipulates that the assistants must have completed at
least 20 hours of coursework in child development, guidance, health and safety, or nutrition. The
assistants are not required to hold an early childhood education certificate per BC Child Care Regulation.
However, they are required to hold a valid first aid and CPR certification and they must complete a
criminal record check prior to the start of employment.
The assistants directly report to the educators and are selected by the managers through an interview
process.
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Headstart Daycare & Learning Centre
5.1.6 Volunteers
Our daycare centre will accept volunteers from time to time seeking early child care experience. These
volunteers are required to have a criminal record check performed prior to any volunteer work. They will
be assigned one of the age groups and will be supervised by the educator in that room.
5.1.7 Chef
The chef is responsible for preparing the nutritious meals and snacks for the children and for cleaning up
the kitchen and child table areas after the meals. The chef has three years of experience in food
preparation and has his Food Safe certification to ensure basic safe food handling procedures are known.
He is required to ensure that the meals and snacks meet the recommended daily food intake guidelines
stated in Canada’s Food Guide (BC Child Care Licensing Regulation, 2010). He is also responsible for
handling the food inventory and supplies and for maintaining the general cleanliness of the kitchen and
designated eating areas. A criminal record check has been done for the chef, as he will be in close
contact with children.
The chef works closely with the managers and the director to develop the daily menus and reports directly
to them.
5.1.7 Maintenance Staff
The maintenance staff will work part-time at the Centre and has two years of carpentry experience. He is
mainly responsible for the maintenance and repairs at the facility. The maintenance person is also
expected to help with any rearrangement of furniture and any heavy lifting that may be required. The
maintenance staff reports directly to the manager.
5.2
T RAINING P ROGRAM
An in-house two day training program has been developed by the director for the managers, educators,
infant-toddler educators, and assistants. The training is led by the director and focuses on Headstart
Daycare & Learning Centre’s teaching and child care philosophy. It will also include a briefing of
Headstart Daycare & Learning Centre’s policies and procedures, the code of conduct, training on the
sign-in system, and job expectations for each of the roles. Also, the managers, the educators, and the
assistants are required to attend professional development workshops once every three months and the
director, the managers, the infant-toddler educator, and the educators must renew their early childhood
educator certification every five years.
5.3
L ABOUR
AND
M ANAGEMENT C OSTS
The number of educators and assistants that Headstart Daycare & Learning Centre will require depends
on the number of infants and toddlers that are enrolled in the program. The required adult-to-children
ratios are as follows:

For children under 36-months, there must be one infant-toddler educator for every four
children, one infant-toddler educator and one educator for every five to eight children, and
two educators and one assistant for every nine to 12 children;
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Headstart Daycare & Learning Centre

For children from 36-months to school age, there must be one educator for every eight
children, one educator and one assistant for every nine to 16 children, and one educator and
two assistants for every 17 to 25 children (Province of British Columbia: Community Care
Licensing Branch – Ministry of Healthy Living and Sport; (2007).
Headstart Daycare & Learning Centre does not expect that many children to be enrolled in early and late
supervision which run from 7:00am to 8:15am and 4:45pm to 6:00pm respectively. As such, the manager
and the director will work staggered shifts, with one person being present for early supervision hours and
the other person being present for late supervision.
Infant-toddler educators, educators, and assistants are expected to arrive at work during their scheduled
full-day shift. Majority of the children are expected to arrive by 8:15am, and will leave by 4:45pm. There
will be 2 educators who work in shifts, with one of the educators starting work earlier in the morning than
another educator. The maintenance staff will begin at 10:00am and will end at 2:00pm. The chef is
expected to begin at 7:00am and will finish at 4:00pm. Depending on the week, the manager will begin
work at 7:00am and will finish at 4:00pm while the director will alternate with the manager with a 9:00am
to 6:00pm shift. All staff will be given an hour break throughout the day. Please refer to Figure 7 and
Figure 8 for the respective hours of operations and staff schedule.
Salary will start at $50,000 for the director. The managers, the infant-toddler educator, and the educators
are offered an hourly wage of $18.00 per hour, $15.50 per hour, and $14.00 per hour respectively. The
assistants, the chef and the maintenance staff are all offered a starting hourly wage of $10.00 per hour.
All employees will receive CPP, EI, and holiday pay as well as basic extended health care. Wages are
expected to increase at an annual rate of 2% each year.
Figure 7 – Hours of Operations
Days of the Week
Monday
Tuesday
Wednesday
Thursday
Friday
Open
Close
Total
Hours
7:00am
7:00am
7:00am
7:00am
7:00am
6:00pm
6:00pm
6:00pm
6:00pm
6:00pm
11.0
11.0
11.0
11.0
11.0
Figure 8 – Staff Schedule
Director
Manager
Infant-Toddler Educator 1
Infant-Toddler Educator 2
Educator 1
Educator 2
Assistants
Cook
Maintenance Staff
Start
End
9:00am
7:00am
7:00am
9:00am
7:30am
8:30am
8:00am
7:00am
10:00am
6:00pm
4:00pm
4:00pm
6:00pm
4:30pm
5:30pm
5:00pm
4:00pm
2:00pm
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Headstart Daycare & Learning Centre
6.0 M ARKETING P LAN
6.1
M ARKETING M IX (4 P’ S )
6.1.1 Product and Services
Headstart Daycare & Learning Centre will offer full-day child care to children from infant to five years of
age. The Centre’s program will include a safe learning environment allowing the child to develop
physically, socially, and emotionally. To create a suitable learning environment, Headstart Daycare &
Learning Centre will combine the child’s experiences with structured age-appropriate activities as well as
individual child exploration. Monthly theme educational topics will be introduced to children in order to
enhance their learning at an early age. Children will be placed among others their own age falling into
one of the following categories: infants, toddler, early tykes, and late tykes.
Other services offered at Headstart Daycare & Learning Centre include a certified Early Childhood
Educator in each classroom in accordance to the ratios set out by the Ministry of Education. The Centre
will provide children with breakfast, lunch, and two snacks per day for full-day participants from our inhouse cook. Also, diaper necessities for changing infants and toddlers will be provided by the Centre
throughout the day. Parents are expected to supply their child with appropriate footwear, sunscreen, and
a hat for safety precautions.
6.1.2 Price
Headstart Daycare & Learning Centre will price their services on a competitive basis to similar offerings in
the Surrey and Langley region area of the Fraser Valley. As Headstart Daycare & Learning Centre
provides things such as healthy meals and snacks, structured educational development activities, and
diapers, prices for this full-time daycare will be on the high-end based on these inclusiveness valueadded services. Part-time set-day services will also be offered to children of the toddler, early tykes, and
late tykes age groupings. Monthly child care rates beginning in Year 1 of operations are outlined in
Figure 9 below.
Figure 9 – Monthly Fee Schedule – Year 1
Age Group
Infants (9mths-18mths)
Toddlers (18mths-35mths)
Early Tykes (3yrs)
Late Tykes (4yrs)
Full-Time
Part-Time (3 Days)
Part-Time (2 Days)
$1,100
$1,050
$925
$925
Not available
$700
$625
$625
Not available
$475
$425
$425
6.1.3 Promotion
To announce the grand opening of Headstart Daycare & Learning Centre, promotion will be focused on
the community of Clayton Heights and its immediately surrounding areas. The area that we will be
distributing our flyers to has an abundant number of residential developments that are occupied by
families with young children. The flyers will emphasize our focus of providing full-day child care which
includes building a child’s physical, emotional, and social development. Within the first couple of months
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Headstart Daycare & Learning Centre
of opening, Headstart Daycare & Learning Centre will waive the required child registration fee which is
required at many group daycare locations to cover administrative costs. This administrative fee discount
will allow parents to switch child care locations at no extra cost. It is thought that once a child is attached
to a daycare, then they will stay for a long duration and we will be able to generate revenues from one
child for an extended period of time. Promotion of our products and services will be centred upon the
interactive educational environment that we are providing so that a child can have a head start into the
future. A sample flyer is shown in Figure 10.
Figure 10 – Sample Flyer Initial Promotion
Marketing of the Centre will also be done at parenting and pre-natal classes at the local community
centres. This will allow us to concentrate our marketing strategies on our target market of people with
young children in the Clayton Heights area. As we are unable to promote the daycare facility directly at
the school sites in person, Headstart Daycare & Learning facility will also rely on ‘word of mouth’ of initial
participants to their family and friends in the community.
6.1.4 Place
Location of the Headstart Daycare & Learning Centre will be conveniently situated in Clayton Heights at
65A Avenue and 185th Street. This site is walking distance to multiple elementary schools, including a
new school Adam’s Road which is opening in September 2010. The proposed location is also positioned
23
Headstart Daycare & Learning Centre
next to community parks and surrounded by recently developed residential townhouse property. Clayton
Heights is a fast growing community of Surrey, British Columbia which has welcomed many young
families due to all the new residential development in the past few years. Please refer to Figure 11 for a
map of Clayton Heights with schools of the Surrey School District surrounding Headstart Daycare &
Learning Centre.
Figure 11 – Map of Clayton Heights and Surrounding Schools
6.2
S EGMENTATION
Child care facilities tend to be segmented by geographical location, hours of operation, age category of
license permits, educational focus, and price. Family cultural beliefs of specific child care environments
(family babysitter vs. family daycare vs. group daycare facility) would also affect where a child would
24
Headstart Daycare & Learning Centre
obtain the necessary care. Family daycare facilities tend to care for children for long hours of the day
providing a safe babysitting service. Places dedicated as preschools usually have a clear structural
educational focus to their day, but only for a few hours at a time.
6.3
T ARGET M ARKET
6.3.1 General Description
The target market of the Centre comprises of young families with professional working parents that want
to ensure their child’s education is started on the right developmental track. This may entail families who
have two working parents, single parents who require child care as they earn income, or families where
the parent is returning to the workforce from maternity leave. Given the high focus on experiential
learning at Headstart Daycare & Learning Centre, we are targeting parents who place a strong emphasis
on the importance of education. Due to the highly competitive school environment, the parents are
concerned about exposing their children to numerous educational opportunities at an early age.
6.3.2 Demographic
Due to the high cost of fees charged at Headstart Daycare & Learning Centre, we will be targeting
families that have an income above the median household income of $60,000 in Surrey (Selected Trend
Data for Surrey, 1996, 2001, 2006 –Statistics Canada, 2010). Also, we will be focusing on families that
would qualify for sufficient child care subsidy from the government to cover the necessary fees that they
are unable to contribute.
6.4
P OSITIONING
Headstart Daycare & Learning Centre will be a full-day child care facility, supplying an educational focus.
The Centre’s differential factor is our educational focus promoting the child’s whole-self from certified
educators, as well as our services to provide necessities, including healthy snacks and meals and diapers
to toddlers and infants, throughout the day.
6.5
C OMPETITOR A NALYSIS
The child care industry in the Surrey/Langley area comprises of an array of options for parents from small
family in-home daycares to large group-care facilities. Full-day child care centres in the vicinity of Clayton
Heights are compared in the Figure 12 below based on location, hours of operation, fees, maximum
capacity, and teaching philosophies. Programs designated as preschool are not analyzed as they are not
licensed to provide child care for more than 4 hours a day and would not be in direct competition with the
full-day services of Headstart Daycare & Learning Centre.
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Headstart Daycare & Learning Centre
Figure 12 – Competitor Analysis – Full Day Child care Centres
Child care
Centre
Type
Location
Hours
Base Fees Max
Services
(Monthly) Capacity
Jellybean Park
Group
63rd Ave &
196th St.
7:00am –
6:00pm
$858 $1,058
94
Interactive
Play
69th Ave &
202B St.
6:30am –
6:00pm
$975 $1,175
151
Interactive
Play
Montessori
Education
0 yrs - 12
yrs
Kids World
Group
0 yrs - 12
yrs
Loving Family
Montessori
Multi-age
Group
63rd Ave &
175A St.
8:00am –
5:30pm
$900
8
Cloverdale
Discovery
Centre
Group
58th Ave & 176
St.
7:00am –
6:00pm
$850 $1,000
35
The Child
Care Centre in
Cloverdale
Group
59th Ave &
176th St.
7:00am –
6:00pm
$675 - $850
60
Parent
provides daily
meals/diapers
Willowbrook
Montessori
Child Care
Group
67th Ave &
203rd St.
7:00am –
6:00pm
$810 $1,020
82
Montessori
Education
Langley
Montessori
Children’s
Centre
Group
30mths -12
yrs
55A Ave &
197th St.
7:30am –
5:30pm
$820 $1,090
100
Montessori
Education
0yrs - 5yrs
0yrs – 12yrs
0yrs -12 yrs
From the analysis of other competitors, it is evident that child care centres that provide services, such as
meals and an educational teaching component, to the child tend to charge significantly higher fees.
Headstart Daycare & Learning Centre will provide nutritious meals and diaper changing services to
children.
Many of the group daycare centres in the nearby neighbourhoods are licensed to host a high maximum
capacity of children in their facility at one time. This is due to the fact that they have a group child care
license to also care for school-age children from the ages of five (5) to twelve (12). The staff requirement
ratio of educators to school age children is much less restrictive than that for children under five years of
age. One responsible adult is able to care for up to fifteen (15) school-age children (Province of British
Columbia: Community Care Licensing Branch, 2007). Headstart Daycare & Learning Centre will not offer
26
Headstart Daycare & Learning Centre
child care services to school-age children. Some families with older siblings may choose other daycare
options that offer school-age children before and after-school care, so that their whole family is at one
place. This will cause lost revenues for Headstart Daycare & Learning Centre. The amount of facilities
and active free space to care for school-age children is quite large due to the fact that these children are
much more fully developed and functional. The revenue fees paid per school age-child is substantially
less than that of an infant or toddler as they only require before and after-school care for a few hours at a
time. The large gym equipment facilities and common rooms would not be used by school-age
participants during the day as they are attending other classrooms. Operationally, staffing before and
after-school programs also requires educators to work split shifts. Having this type of staffing schedule
makes it difficult to recruit full-time educators for these positions. Headstart Daycare & Learning Centre
has calculated that the revenues generated and benefits of hosting school-age children do not outweigh
the costs to facilitate them from a business perspective. Therefore, our Centre will focus on the care and
educational philosophies for children from infant to pre-kindergarten age.
There are a number of centres that have either a Montessori or Interactive free play teaching philosophy
to their daycare. The Montessori education philosophy is considered to be self-directed learning based
on the child’s inner natural guidance, with the teacher only there as guidance to observe over the
surroundings (Montessori method – Wikipedia, 2010). Interactive free play centres allow the child to
explore on their own with physical materials and at their own pace. Headstart Daycare & Learning Centre
will differ from other daycares in terms of their educational component as educators will be engaging
students in some structured sessions based on prescribed learning outcomes. Prescribed learning
outcomes are set by the Ministry of Education for British Columbia certified teachers to follow for the
Kindergarten to Grade 12 level. The Centre’s learning outcomes and goals for the child are based on the
same subject areas of social responsibility, English language arts, numeracy, and physical education, but
brought down to the specific age group. In turn, this educational standard will assist in giving children a
head start to their education and facilitate a smooth transition towards school when they enter
kindergarten.
Figure 13 below shows all the registered family and group neighbourhood child care facilities that are
close to where Headstart Daycare & Learning Centre will be located. Not shown in the figure are the
registered providers who are registered with a Child Care Resource and Referral Program (CCRC), but
are not required to have a license to practice. These are considered registered providers who may care
for a maximum of two additional children who are not part of the provider’s family. Registered providers
are minor competition to Headstart Daycare & Learning Centre and do not pose a big threat as they can
only care for a small amount of children, and it is not certain that the adult is a certified early childhood
educator with sufficient qualifications and experience.
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Headstart Daycare & Learning Centre
Figure 13 – Locations of Licensed Child Care Facilities in Surrey/Langley area surrounding
Clayton Heights
# on Map
Child care Centre
Type
1.
Loving Family Montessori
Group
2.
Little Learning Steps Family Child Care
Family
3.
Nature’s Playground Daycare
Group
4.
The Child Care Centre in Cloverdale
Group
5.
Cloverdale Discovery Centre
Group
6.
Little Bear Daycare
Family
7.
Willowbrook Montessori Child Care
Group
8.
Magic Patch Daycare
Family
9.
Lisa’s Daycare
Family
10.
Making Memories Family Child care
Family
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Headstart Daycare & Learning Centre
11.
Playful Learning Centre
Family
12.
Pooh Corner Family Daycare
Family
13.
Heartland Daycare
Family
14.
Jellybean Park
Group
15.
T.L.C. Darby Family Daycare
Family
16.
Langley Montessori Children’s Centre
Group
17.
Lilyput Family Daycare
Family
18.
Brenda’s Daycare
Family
19.
Love-It Care
Group
20.
Kids World
Group
From analysis of the locations of licensed child care facilities in the Surrey/Langley area surrounding
Clayton Heights, it is evident that there are no large group daycare centres within the direct Clayton
Heights community of the proposed Headstart Daycare & Learning Centre. Thus, there is demand for
this kind of child care centre in the area for the community. There are a few family type facilities nearby,
but these would only be able to care for no more than seven (7) children at a time.
6.6 M ARKET R ESEARCH
Market research was conducted through a variety of methods to access the demand of a child care facility
in the area of Clayton Heights. Teachers employed by School District No. 36 (Surrey) who are teaching
at the elementary schools in the area were contacted to collect socio-demographic information about the
general make-up of the student population in the area, parental involvement and attitudes, and average
developmental abilities of learners. Registered and licensed child care providers in the area were
compiled through contact with the Child Care Resource and Referral Program Services offices allocated
to serving Surrey and Langley. Licensed child care centres were contacted to inquire about waitlist
situations and educational philosophies if any. Employees of competitor daycare facilities also shared
their experiences working in their group daycare centres on a daily basis.
Through our market research, it is in consideration that there is a need for a group daycare facility in the
community of Clayton Heights. Some of the group daycare facilities have substantial waitlists to get into
their programs, especially at the infant and toddler age groups. Also, there appears to be community
parent buy-in for an early education learning environment where stimulating activities for the child will
develop him in great strides physically, socially, emotionally, and intellectually.
6.6
M ARKETING S TRATEGY
One of the Centre’s short-term goals is to gain recognition in the Clayton Heights community as a
daycare that provides an educational and stimulating environment. Achieving this acknowledgment will
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Headstart Daycare & Learning Centre
allow our full-day child care facility to increase operating capacity through word-of-mouth and testimonials
from current participant parents.
The director will be responsible for the organization and outlay of many of the marketing strategy
programs. Initial promotion will be in the form of flyer distribution and community outreach programs.
Advertisement cards will be circulated to nearby residential developments to target the new residents into
the community. Please refer to Figure 10 for our sample marketing flyer. Clayton Heights is a community
with many of its new residents comprising of young couples and families. Community outreach programs
include the director promoting the Centre through delivery of knowledge and information to pre-natal and
parenting classes in the neighbourhood community centres.
Parents are welcomed to set-up meetings with the director or the manager of the Centre to discuss the
philosophies of the program as well as take a tour of the facilities with their children. Parents can also
inquire about the specific certifications and qualification experiences from our educators. Ensuring that
the parents have comfort in their children’s care is essential to obtain their trust, so that they will choose
our facility for their child.
Registration of our available services will be through the local Child Care Resource and Referral Centre
(CCRC). The CCRC assists parents in finding suitable registered child care in their community. A short
description of our Centre’s child care philosophies including maximum child allotment levels will also be
submitted to the CCRC for Surrey to be posted on their website for access to our target market.
6.7
M ARKETING E XPENS ES
A breakdown of marketing expenses of the first five years of operations is outlined below in Figure 14.
There is an estimated 3% increase in marketing expenses due to inflation. Year 1 has forecasted the
highest amount of marketing expenses due to making our Daycare & Learning Centre known to families
of the Clayton Heights Community.
Figure 14 – Marketing Expense Breakdown
Year 1
Year 2
Year 3
Year 4
Year 5
Flyer Distribution
4,500
1,250
1,288
1,326
1,366
Community Outreach
2,500
2,575
2,652
2,732
2,814
Website
2,100
600
618
637
656
Open Houses
2,000
4,425
4,558
4,694
4,835
Total
11,100
Flyer Distribution – Flyers will be distributed to residential houses and town-homes in the nearby
community of Clayton Heights in Year 1. An increased number of flyers will be distributed in Year 1 in
order to give knowledge of Headstart Daycare & Learning Centre’s daycare services in the community. In
Years 2 – 5, flyers distributed will be estimated at $1,250 per year.
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Headstart Daycare & Learning Centre
Community Outreach Programs – Our facility will attempt to partner our advertising with specific programs
in the community. These estimated costs of $2,000 per year are to appeal to those who are in parenting
courses and pre-natal classes in the neighbourhood.
Website Costs – Costs in Year 1 include the initial generation of the daycare website’s design and
development costing $2,000, and approximately $100 in staff time to register with the local Child Care
Resource & Referral Centre website. Further maintenance costs to keep the website current and
marketing will be approximately $600 per year.
Open House Events – Headstart Daycare & Learning Centre will host a few ‘open house’ events so that
parents and children are able to tour the facilities, meet some of the educators, as well as learn about the
educational methodologies of the Centre. Costs related to open houses will be for early childhood
educators to give speeches promoting the Centre, decorations, and mini snacks. These open house
marketing costs will only be seen in Year 1 when the child care centre is establishing a reputation in the
community.
6.8
SWOT A NALYSIS
6.8.1 Strengths
Educational Component
Headstart Daycare & Learning Centre offers full-day child care with an enhanced educational integrative
program. Studies have shown that early childhood education programs are associated with better
transitions to the regular school environment in kindergarten, improved numeracy and language arts
skills, and benefits on a child’s long-term social and emotional development (British Columbia: Ministry of
Education, 2009; Barnett,2002). Combining an educational element into a child’s day will assist children
in growing to their full physical, social, emotional, and intellectual potential.
Large Group Facility
With a group daycare facility, there is an increased opportunity for children to socialize and interact with
peers their own age as there are usually a greater number of participants in the program. This is in
comparison to a smaller family daycare setting or having an in-house nanny. Having the ability to have
groups within a small age range allows the early childhood educators to implement learning outcomes
that are more age-appropriate, which would increase development for a child.
Certified Early Childhood Educators (ECE)
Each classroom of children under school age will have a certified early childhood educator present to
implement their program within the specified educator to child age ratios as required by the provincial
government. Certification as an early childhood educator demonstrates that each educator has both the
experience and knowledge to care for children, in which the Ministry of Children and Family Development
has acknowledged.
Value-Added Services
Headstart Daycare & Learning Centre will provide nutritious meals and snacks to participants throughout
the day, as well as certain supplies, such as diapers, for the child’s comfort. This will relieve the parents
from some of the daily duties of ensuring the child’s health and well-being.
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Headstart Daycare & Learning Centre
Central Community Location
Headstart Daycare & Learning Centre is conveniently situated and surrounded by many elementary
schools and new residential property. The community is expanding as seen by the new Adam’s Road
Elementary School which is opening in September 2010. New residential developments are being
purchased by young professionals and families with young children.
6.8.2 Weaknesses
Higher Child care Fees
Headstart Daycare & Learning Centre grants children with the necessary tools and skills to develop into
their full potential. Because of these additional quality services, our child care facility fees are considered
to be on the higher-end of child care in the area.
New Name in Community
The Centre is new to the community and parents will need to research about our facilities and teaching
methodologies in order to feel comfortable about leaving their child in our care. Headstart Daycare &
Learning Centre does not have the buy-in of families in the community, as there is no prior knowledge of
our program.
High Turnover of Early Childhood Educators
Early childhood educators obtain their certification through sufficient experience with young children and
acceptable post-secondary education outlined by the Ministry of Children & Family Development. In a
survey of early childhood educators in British Columbia, nearly half (48.9%) of respondents earn $15 an
hour or less (Early Childhood Educators of British Columbia; 2008). This is a difficult wage to support an
entire family with. Thus, many early childhood educators move into other careers, such as teaching, and
results in a high turnover of educators at child care facilities. Having high turnover of staff is not best for
the child’s learning as there can be too many disruptions to a child’s daily schedule for them to
accommodate to at all times.
6.8.3 Opportunities
Clayton Heights Community
There are currently no large group daycare facilities in the Clayton Heights community. Full-day group
child care would be a driving distance (5 – 7 minutes) to Cloverdale in Surrey or Willowbrook area in
Langley. Offering parents a closer alternative in the community is a great opportunity for Headstart
Daycare & Learning Centre. The Clayton Heights community shows a great opportunity for a child care
centre as it holds some of the highest populated elementary schools – Don Christian (497 students),
Hillcrest (572 students), and Hazelgrove (580 students) – in the Surrey School District nearby, showing
that this area has a high number of children (School District No. 36 (Surrey); 2010).
Child Care Demand / Current Waitlists
Market research conducted through employees of competitor group daycare centres and Child Care
Resource & Referral Centres show that there is a demand for child care in the Surrey/Langley area that
Headstart Daycare & Learning Centre will be situated, especially in the infant and toddler ages. Jellybean
Park and Kids World, comparable daycare facilities in Langley, both have waiting lists for these age
groups.
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Headstart Daycare & Learning Centre
Children with Special Needs
There are not that many child care facilities in the area that are equipped to accept children with special
needs. Young children with special needs usually obtain provincial government funding for special
worker aides to assist them in daily duties. There is an opportunity for Headstart Daycare & Learning
Centre to earn higher profits per child with special needs if we can accommodate. Currently, our floor
plan has the Centre situated on one floor in order to possibly host a child with certain special needs.
Competitor daycares, Jellybean Park and Kids World, are both in facilities that encompass two floors.
6.8.4 Threats
New Child care Entrants
Child care can come in many forms, some that may suit an individual better than others. There are not
many capitalized costs for a parent to offer child care in their own home as a registered provider to help
increase their household earnings while caring for their own child. Small child care entrants in the area
can also take away from the market share of children that need care in the Clayton Heights community.
Child care Licensing Regulation Changes
Significant changes to the child care regulations set by the provincial government can impact how child
care is put into practice. Educator to child ratio changes for an age-group and licensed areas by square
footage can influence operations of the learning centre and the capacity limits at Headstart Daycare &
Learning Centre.
Full-Day Kindergarten
The Ministry of Education in British Columbia has announced that by September 2011, British Columbia
schools will offer full-day kindergarten to all five-year olds. Implication on the child care industry is that
these five-year olds will not require full-day child care in the future, decreasing the market size.
Family Structure/Aging of Community
Clayton Heights is a relatively new growing community comprising of a lot of young families. In the future,
the families in the community will age and the family structure can differ significantly in the newer
generation. The market for child care may decrease if there are trends in the community comprised of
smaller families (eg. only one child), increased percentage of stay-at-home parents, or the community is
aging and is not being replaced by young families in the area.
7.0 F INANCIAL P LAN
7.1
I NTRODUCTION
Cash flows and returns are prime variables that investors consider in making an investment decision. As
such, we have prepared 10-year projected financial statements for Headstart Daycare & Learning Centre.
An assessment of the financial health of the Centre has been completed through the analysis of various
ratios to ensure the returns and values created are reasonable.
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Headstart Daycare & Learning Centre
7.2
S TART
UP
C OSTS
A listing of initial start-up costs is shown in Appendix I: Start-Up Costs. Capital investments in leasehold
improvements, furniture improvements and outdoor playground structure are needed in order for the
Centre to commence business. In addition to the capital start up costs, we have budgeted $11.100 for
advertising costs. Promotional items include flyer distribution, community outreach initiatives, start up of
the company’s website and grand opening events.
7.3
C APITAL S TRUCTURE
The capital structure of the business will be 75% equity and 25% debt. The owner and 3 other venturers
will each contribute $37,500 for a total of $150,000. A debt of $50,000, with an interest rate of 8%, will be
taken out. The loan will be repaid over 10 years.
7.4
W ORKING C APITAL
Working capital will only consist of accounts payable due to the nature of operations and the fact that
customers are required to prepay on a monthly basis, eliminating the need for an accounts receivable
balance, as it is the industry norm. There is minimal food inventory on hand as food is purchased twice a
week and any spoiled food is discarded on a weekly basis. As such, the Centre will maintain a negative
working capital operating balance.
Aside from salaries, which will be paid on a semi-monthly basis, suppliers will be paid primarily on a cash
basis when the goods are purchased.
7.5
P ROJECTED F INANCIAL R ESULTS
7.5.1 – General Assumptions and Explanations
Inflation Rate – Revenues and expenses are forecasted to grow at an inflation rate of 3%.
Corporate Income Taxes – Headstart Daycare & Learning Centre is a private, incorporated enterprise in
Canada and majority of its investors are Canadian residents. As such, it is assumed that we will qualify
for the Small Business Deduction for a reduced tax rate. This Small Business Deduction is acceptable for
the first $500,000 of taxable income, in which Headstart does not exceed in the base case scenario.
Combined corporate federal and provincial tax rate in British Columbia for our business has been
assumed to be 15%.
7.5.2 Projected Balance Sheet
A balance sheet forecast for 10 years has been compiled and can be seen in Appendix II: Projected
Balance Sheet. Current assets will only comprise of cash and prepaid expenses. Cash is required to
cover day-to-day operating expenses, such as repairs, as well as keep a positive retained earnings
balance year over year to ensure our bank debt financing. The Company will have no accounts
receivable balance as parents prepay their fees on a monthly basis.
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Headstart Daycare & Learning Centre
Property, Plant, & Equipment – The balance and associated accumulated amortization amounts are
based upon the capital organizational structure. Please refer to the Section 4.8 Capital Budgeting in the
Operations Plan for discussion.
Trade Payable, Income Taxes Payable, Bank Debt Balance – Trades payable are based on certain
monthly operating expenses while income taxes payable is derived from the portion owing to the Canada
Revenue Agency each year. Please refer to Section 4.8 Capital Budgeting under Operations Plan for the
assumptions on the bank debt balance.
Prepaid Expense – Closing balance of prepaid expenses is assumed to be the prepaid rent and
insurance associated for one month. These expenses are prepaid on a monthly basis.
Trades Payable – It is assumed that the majority of Headstart’s creditors billed on a monthly basis will
offer terms of payment on average of 30 days. Amounts are projected to be identical to one’s month
worth of janitorial services, utilities, and repairs & maintenance costs.
Bank Debt – $50,000 bank debt at the beginning of Year 1 requires monthly repayment of $7,191 for ten
years.
7.5.3 Projected Income Statement
The projected income statement from Year 1 to Year 10 is shown in Appendix III: Projected Income
Statement. The appendix demonstrates that there will be a net loss in the first year, and a positive net
income in the subsequent years. The critical assumptions related to the revenues and expenses are
discussed below.
Revenues
Child Care – Parent Fees – Revenues are the prepaid monthly amounts received from parents for our
services. It is projected that we will achieve approximately a 30% occupancy rate in Year 1, and then will
subsequently obtain a 59% - 65% occupancy rate in later years.
Child Care Subsidy – Government – This pertains to the funds that the provincial government provides
to subsidize parents for the cost of child care. These funds are directly rewarded to the registered child
care, once a parent is approved from assessment of their income and family situation. The Centre will
reduce the amount that the parent needs to pay for child care fees from the approved government
subsidy that they are able to claim. As Clayton Heights is a community of young working professionals
with above average household incomes, it is assumed that this stream of revenue will make up only 25%
of total parents’ fees on average.
Operating Fund – Government – This revenue is offered by the government to registered child care
providers in British Columbia, as subsidy for the costs of managing a daycare. Current funding daily rates
are $12 for each child under 36 months of age and $5.48 per child 3 years old to kindergarten age, if the
child is in the care of the registered provider for more than 4 hours each day.
Application Fees – This consists of the fees charged when a child registers at our daycare centre. This
fee covers the administrative paperwork required when a child enrols and begins services. It is set to
begin at $50 per child and is assumed to grow at the inflation rate of 3%, which is comparable to other
group daycare facilities in the area. The Centre will waive this application fee to parents in the first few
months of operations in order to attempt to attract more participants. Thus, no revenues are recognized
35
Headstart Daycare & Learning Centre
in the first year of operations. In the second year and beyond, it is forecasted that there will be on
average at least six (6) of these application fees charged to parents.
Expenses
Salaries & Wages – Costs relate to salary expenses for all employees. Salary and wages expense is
adjusted based on the number of staff needed to provide adequate care at the average daycare capacity
for the year. For more information regarding the composition of the staff and the wages paid, please refer
to the human resources plan.
Professional Development – Expenses relate to the cost of training employees and for the cost of the
professional development courses offered to our employees throughout the year.
Food/Snacks – This balance includes the cost of supplying the food for breakfast, morning snack, lunch
and afternoon snack to the children in the daycare. It is assumed that a cost of $5 per child will be
incurred each day.
Janitorial Services and Supplies – Janitorial services and supplies consists of the service costs paid to
Janitopia Utmost Janitorial Service. The price reflects the annual cost of cleaning services for a location
that is of similar size as our proposed daycare centre.
Office Supplies – Costs include costs for pens, pencils and other miscellaneous costs for the manager
on site.
Accounting and Legal – Accounting and legal costs include costs for an off-the-shelve accounting
program to be utilized by the manager along with minor legal fees amounting to $5,000 each year.
Advertising and Promotion – Costs relate to promotion of Headstart Daycare & Learning Centre in the
community. Examples of promotional activities include flyer distribution, community outreach initiatives,
maintenance of the company’s website and the grand opening open house.
Rent – Headstart Daycare & Learning Center will be operated out of a rented location. It is assumed that
rent will cost $5,000 per month.
Utilities – Utilities include costs for telephone, water, gas and electricity. Based on the space occupied by
the daycare, it is estimated that the utilities will cost approximately $600 per month.
Insurance – Insurance costs include insurance for accidents that occur on our premises and for personal
injury and property damage resulting from the daycare operation. Costs are projected at $400 per month.
Repairs & Maintenance – Expenses include costs such as minor repair and maintenance of leasehold
improvements and other kitchen appliances. Repairs & maintenance are projected at $1,000 per month.
7.5.4 Cash Flow Projections
The projected cash flow statement for each year is shown in Appendix IV: Projected Cash Flow
Statement.
The Centre will try to pay out dividends beginning in the third year of operations, in order for equity
investors to obtain their investment back and commence earning a return. In our base case scenario,
dividends to be paid out will amount to $75,000 in Year 3 and Year 4, sufficiently returning the initial
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Headstart Daycare & Learning Centre
equity investments. Subsequent dividend payout policies will continue to be $75,000 in remaining years.
Dividends will be distributed to investors based on their controlling interest in the enterprise. As well,
dividends can only be paid in years where enough cash exists. Thus, our worst case scenario shows
zero dividend payouts as the business has not recruited enough participants into the Centre to generate
sustained profits, resulting in business failure.
Appendix III shows that we will have negative operating cash flows in Year 1, but we will have positive
operating cash flows for each of the subsequent years. Overall, we will have sufficient cash flow to
sustain our operations.
7.5.5 Ratio Analysis
Key financial ratios related to liquidity, investment utilization, solvency, and profitability are shown in
Appendix V: Ratio Analysis. Although most ratios show a poor financial position in Year 1, it should be
noted that the financial position improves from Year 2 onwards. The poor financial position in Year 1 is
due to the initial capital investment outlays that are required and the fact that Headstart Daycare &
Learning Centre is only opened partway through the year. As such, the cash outflow is greater than the
cash inflow, resulting in a weaker financial position in comparison to the other years.
Salaries and professional development costs as a percentage of total operating expenses is
approximately 70% each projected year. This is in-line with industry standards for childcare facilities in
British Columbia. The percentage cost of food and snack to total operating expenses is calculated at
approximately 11% - 12% for the projected years.
7.6
I NVESTMENT A NALYSIS
We have performed an analysis on the viability of the investment for an investor using net present value,
internal rate of return and external rate of return. We have analyzed the indicators using 3 scenarios, our
base scenario and the best and worst case scenario.
7.6.1 Net Present Value (NPV)
Net present value measures the business’ ability to generate a return for investors on a given rate of
return. For our analysis, we have used a required rate of return of 20%, as the business is a relatively
safe investment and small private enterprise. As shown in Appendix VI: Net Present Value, IRR, & ERR,
the NPV of the Centre is calculated to be $26,049. We have also performed a scenario risk analysis.
NPV under the best case scenario of an average occupancy rate of 76% is calculated to be $234,698,
while under the worst-case scenario of an occupancy rate of 43% - 49%, the NPV is $(468,370).
7.6.2 Internal Rate of Return (IRR)
IRR measures the return on investment from the business’ perspective. The IRR under the base case
scenario is 22%, as shown in Appendix VI. Since the IRR is above the rate used in the NPV, this means
that the business is an investment which will provide the investor with a favourable rate of return. Under
the best case scenario, the IRR is 43%. Under the worst case scenario, there is no IRR, as the business
is unable to generate a positive free cash flow.
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Headstart Daycare & Learning Centre
7.6.3 External Rate of Return (ERR)
The external rate of return measures the rate of return for investors based on the amount of dividends
that are subsequently paid out. Under the base case scenario, the ERR is 26%. The ERR is 44% under
the best case scenario. Lastly, there is no ERR under the worst case scenario, as the business is unable
to generate a profit to pay dividends to investors.
7.6.4 Payback Period
The payback period measures the time, in years, it takes a business to pay back the invested capital to its
investors. Under the dividend payment schedule in the base case scenario, the payback period is 4
years, while under the best-case scenario; the payback period is 2 years. Under the worst case scenario,
the business is unable to distribute dividends to its investors.
7.6.5 Step Costs –Break-Even
Due to the nature of the regulations of the daycare industry, the profitability of the business highly
depends on the number of children that are enrolled in each age group at the Centre. This is due to the
restriction on the number of children that each educator is able to take care of. As shown in Appendix VII:
Step Cost Analysis, one educator is only able to take care of 8 early tykes, 8 late tykes, 4 toddler or 4
infants. An analysis has been performed to show the total contribution margin of the number of children
in each group. It is important to note that the Centre will only earn a positive contribution margin with a
minimum of 3 children in a specific age group. Given that our competitors have waitlists filled with our
potential customers, we are confident that we will be able to fully utilize each educator that will be hired,
mitigating the risk of a negative contribution margin from the hiring an additional educator to take care of
only 1 or 2 children.
7.6.6 Risk Analysis
The critical variable in assessing the risk of the business is the number of children that the business is
able to obtain. Sensitivity analyses of the financial impact of the number of children that enrol at the
Centre were analyzed. In the best-case scenario, it is estimated at the operating capacity will reach 76%
after the first year. This results in a ERR of 44%. This is contrasted with the worst-case scenario, in
which there will be no return on the investment made by shareholders. This is based on a 43% operating
capacity after the first year. However, the worst-case scenario will most likely not occur, given that our
competitors have full waitlists, signifying that there is a shortage of daycare facilities in the Clayton
Heights neighbourhood.
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Headstart Daycare & Learning Centre
8.0 A PPENDICES
Appendix I: Start-Up Costs
Description
Outdoor Playground Structure
Chairs
Tables
Rugs
Lighting Fixtures
Shelving
Stove
Cookware
Fridge
Office Supplies
Office Computer
Leasehold Improvements
Cost
$5,000
$300
$300
$100
$400
$400
$1,500
$800
$1,600
$400
$800
$100,000
Books/Charts
$50 per child
Stationary
Toys
$25 per child
$50 per child
39
Appendix II: Projected Balance Sheet
Year 1
Current Assets
Cash
Prepaid expenses
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
20,200
5,400
25,600
117,473
5,562
123,035
113,081
5,729
118,810
121,646
5,901
127,546
120,298
6,078
126,376
137,170
6,260
143,430
198,015
6,448
204,463
270,914
6,641
277,555
335,353
6,841
342,194
420,516
7,046
427,562
Non-Current Assets
Property, plant, & equipment
Accumulated Depreciation
114,350
(11,200)
114,350
(23,280)
123,350
(34,944)
123,350
(46,275)
137,350
(57,340)
137,350
(68,192)
151,350
(78,874)
151,350
(89,419)
165,850
(99,855)
165,850
(110,204)
Total Assets
128,750
214,105
207,216
204,621
206,386
212,588
276,939
339,486
408,189
483,208
2,260
(10,509)
3,728
(4,521)
2,328
11,776
4,026
18,130
2,398
12,576
4,348
19,322
2,470
13,389
4,696
20,554
2,544
14,216
5,071
21,831
2,620
15,062
5,477
23,159
2,699
23,972
5,915
32,586
2,780
25,103
6,388
34,271
2,863
26,267
6,900
36,029
2,949
27,465
30,414
42,821
38,300
38,795
56,925
34,447
53,769
29,752
50,305
24,680
46,511
19,203
42,362
13,288
45,874
6,900
41,170
0
36,029
0
30,414
Equity
Share Capital
Retained Earnings
Total Equity
150,000
(59,550)
90,450
150,000
7,181
157,181
150,000
3,447
153,447
150,000
4,316
154,316
150,000
9,874
159,874
150,000
20,226
170,226
150,000
81,066
231,066
150,000
148,316
298,316
150,000
222,160
372,160
150,000
302,794
452,794
Total Liabilities & Equity
128,750
214,105
207,216
204,621
206,386
212,588
276,939
339,486
408,189
483,208
Current Liabilities
Trades payable
Income taxes payable
Current portion of long-term debt
Non-Current Liabilities
Long-term debt
Total Liabilities
Headstart Daycare & Learning Centre
Appendix III: Projected Income Statement
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Revenues
Child Care - Parent Fees
Child Care Subsidy - Government
Operating Funding - Government
Application Fees
Total Revenues
96,975
32,325
22,799
152,099
399,537
133,179
93,932
309
626,957
411,523
137,174
96,750
318
645,766
423,869
141,290
99,653
328
665,139
436,585
145,528
102,642
338
685,093
449,682
149,894
105,721
348
705,646
502,935
167,645
115,803
358
786,741
518,023
172,674
119,277
369
810,343
533,564
177,855
122,855
380
834,653
549,570
183,190
126,541
391
859,693
Salaries & Wages
Professional Development
Food / Snacks
Janitorial Services & Supplies
Office Supplies
Accounting & Legal
Advertising & promotion
Rent
Utilities
Insurance
Repairs & maintenance
Total Operating Expenses
126,038
600
14,520
3,960
4,000
5,000
11,100
30,000
3,600
2,400
6,000
207,218
364,657
1,854
59,822
8,158
4,120
5,150
4,425
60,000
7,416
4,944
12,360
532,906
375,597
1,910
61,617
8,402
4,244
5,305
4,558
60,000
7,638
5,092
12,731
547,094
386,865
1,967
63,466
8,654
4,371
5,464
4,694
60,000
7,868
5,245
13,113
561,706
398,471
2,026
65,370
8,914
4,502
5,628
4,835
60,000
8,104
5,402
13,506
576,758
410,425
2,087
67,331
9,181
4,637
5,796
4,980
60,000
8,347
5,565
13,911
592,260
422,738
2,149
75,655
9,457
4,776
5,970
5,130
60,000
8,597
5,731
14,329
614,533
435,420
2,214
77,925
9,741
4,919
6,149
5,284
60,000
8,855
5,903
14,758
631,169
448,483
2,280
80,263
10,033
5,067
6,334
5,442
60,000
9,121
6,080
15,201
648,304
461,937
2,349
82,670
10,334
5,219
6,524
5,605
60,000
9,394
6,263
15,657
665,953
EBITDA
Amortization
EBIT
Interest
Net Income before Taxes
Income Taxes
Net Income (Loss)
(55,119)
11,200
(66,319)
3,740
(70,059)
(10,509)
(59,550)
94,051
12,080
81,971
3,464
78,507
11,776
66,731
98,672
11,664
87,008
3,166
83,843
12,576
71,266
103,432
11,331
92,101
2,844
89,258
13,389
75,869
108,335
11,065
97,270
2,496
94,775
14,216
80,558
113,385
10,852
102,533
2,120
100,413
15,062
85,351
172,208
10,682
161,527
1,714
159,812
23,972
135,840
179,174
10,545
168,629
1,276
167,353
25,103
142,250
186,350
10,436
175,913
803
175,110
26,267
148,844
193,740
10,349
183,391
292
183,099
27,465
155,634
Opening Retained Earnings
Add: Net Income
Deduct: Dividends
Ending Retained Earnings
(59,550)
(59,550)
(59,550)
66,731
7,181
7,181
71,266
75,000
3,447
3,447
75,869
75,000
4,316
4,316
80,558
75,000
9,874
9,874
85,351
75,000
20,226
20,226
135,840
75,000
81,066
81,066
142,250
75,000
148,316
148,316
148,844
75,000
222,160
222,160
155,634
75,000
302,794
Operating Expenses
41
Headstart Daycare & Learning Centre
Appendix IV: Projected Cash Flow Statement
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Cash Flow from Operations:
Net Income:
Add:
Amortization expense
Change in Working Capital Accounts:
Prepaid expenses
Trades payable
Taxes payable
Cash provided (used) in operations:
Cash Flow from Investing:
Capital Acquisitions
Cash provided (used) in investing:
Cash Flow from Financing:
Equity Investment
Bank debt
Repayment of Principle
Dividends paid
Cash provided (used) in financing:
Cash provided (used)
Cash, beginning of period
Cash, end of period
(59,550)
66,731
71,266
75,869
80,558
85,351
135,840
142,250
148,844
155,634
11,200
12,080
11,664
11,331
11,065
10,852
10,682
10,545
10,436
10,349
(5,400)
2,260
(10,509)
(61,999)
(162)
68
22,285
101,001
(167)
70
800
83,634
(172)
72
812
87,912
(177)
74
828
92,348
(182)
76
846
96,943
(188)
79
8,910
155,323
(193)
81
1,131
153,814
(199)
83
1,164
160,328
(205)
86
1,198
167,062
(9,000)
(9,000)
-
(14,000)
(14,000)
-
(14,000)
(14,000)
-
(14,500)
(14,500)
-
(4,026)
(75,000)
(79,026)
(4,348)
(75,000)
(79,348)
(4,696)
(75,000)
(79,696)
(5,071)
(75,000)
(80,071)
(5,477)
(75,000)
(80,477)
(5,915)
(75,000)
(80,915)
(6,388)
(75,000)
(81,388)
(6,900)
(75,000)
(81,900)
(4,392)
117,473
113,081
8,565
113,081
121,646
(1,348)
121,646
120,298
16,872
120,298
137,170
60,845
137,170
198,015
72,899
198,015
270,914
64,439
270,914
335,353
85,163
335,353
420,516
(114,350)
(114,350)
-
150,000
50,000
(3,451)
(3,728)
196,549
(3,728)
20,200
20,200
97,274
20,200
117,473
42
Headstart Daycare & Learning Centre
Appendix V: Ratio Analysis
Liquidity Ratio
Current ratio
Investment Utilization Ratios
Asset turnover
Fixed asset turnover
Solvency Ratios
Debt ratio
Debt to equity
EBITDA to liabilities
Interest coverage
Profitability Ratios
Net profit margin
Return on assets
Return on equity
Expense Ratios
Salaries & Pro-D to Expenses
Food & Snacks to Expenses
Year 10
Year 9
Year 8
Year 7
Year 6
Year 5
Year 4
Year 3
Year 2
Year 1
(5.66)
6.79
6.15
6.21
5.79
6.19
6.27
8.10
9.50
14.06
1.18
1.47
2.93
6.88
3.12
7.30
3.25
8.63
3.32
8.56
3.32
10.20
2.84
10.86
2.39
13.08
2.04
12.65
1.78
15.45
0.36
0.51
(1.44)
(17.73)
0.20
0.27
1.65
23.66
0.19
0.25
1.84
27.49
0.17
0.22
2.06
32.39
0.14
0.19
2.33
38.97
0.12
0.14
2.68
48.36
0.07
0.08
3.75
94.22
0.04
0.04
4.35
132.13
0.02
0.02
5.17
219.07
0.00
0.00
6.37
628.18
(0.39)
(0.46)
(0.66)
0.11
0.31
0.42
0.11
0.34
0.46
0.11
0.37
0.49
0.12
0.39
0.50
0.12
0.40
0.50
0.17
0.49
0.59
0.18
0.42
0.48
0.18
0.36
0.40
0.18
0.32
0.34
61.11%
7.01%
68.78%
11.23%
69.00%
11.26%
69.22%
11.30%
69.44%
11.33%
69.65%
11.37%
69.14%
12.31%
69.34%
12.35%
69.53%
12.38%
69.72%
12.41%
43
Headstart Daycare & Learning Centre
Appendix VI: Net Present Value, IRR, & ERR
Equity Investment
Bank Debt
Required Return on Equity
(150,000)
(50,000)
20%
Year 1
Net Income Before Taxes
Add: Amortization
Less: Capital Acquisitions
Less: Debt Repayment
Less: Taxes
Free Cash Flow
(150,000)
Net Present Value on Equity
IRR on Equity
External Equity Cash Flows
ERR
External Payback Period
Year 2
(70,059)
11,200
(114,350)
(3,451)
10,509
(166,152)
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
78,507
12,080
(3,728)
(11,776)
75,083
83,843
11,664
(9,000)
(4,026)
(12,576)
69,904
89,258
11,331
(4,348)
(13,389)
82,852
94,775
11,065
(14,000)
(4,696)
(14,216)
72,928
100,413
10,852
(5,071)
(15,062)
91,132
159,812
10,682
(14,000)
(5,477)
(23,972)
127,045
167,353
10,545
(5,915)
(25,103)
146,880
175,110
10,436
(14,500)
(6,388)
(26,267)
138,392
183,099
10,349
(6,900)
(27,465)
159,084
-
75,000
75,000
75,000
75,000
75,000
75,000
75,000
75,000
26,049
22%
(150,000)
26%
4 years
44
Headstart Daycare & Learning Centre
Appendix VII: Step Cost Analysis
Revenues
Infant (9mths - 18mths)
Toddler (18mths - 35mths)
Early Tykes (3yrs)
Late Tykes (4yrs)
1
16,368
15,768
12,547
12,547
2
32,736
31,536
25,093
25,093
3
49,104
47,304
37,640
37,640
Number of Children**
4
5
6
7
8
65,472 n/a
n/a
n/a
n/a
63,072 n/a
n/a
n/a
n/a
50,187
62,734
75,280
87,827
100,374
50,187
62,734
75,280
87,827
100,374
Variable Costs
Educator
Infant/Toddler
Tykes
Food
Educational Material
34,195
30,901
1,320
63
34,195
30,901
2,640
125
34,195
30,901
3,960
188
34,195 n/a
n/a
n/a
n/a
30,901
30,901
30,901
30,901
30,901
5,280
6,600
7,920
9,240
10,560
250
313
375
438
500
(19,210)
(19,810)
(19,737)
(19,737)
(4,224)
(5,424)
(8,572)
(8,572)
10,761
8,961
2,592
2,592
25,747 n/a
n/a
n/a
n/a
23,347 n/a
n/a
n/a
n/a
13,756
24,920
36,085
47,249
58,413
13,756
24,920
36,085
47,249
58,413
Contribution Margin
Infant (9mths - 18mths)
Toddler (18mths - 35mths)
Early Tykes (3yrs)
Late Tykes (4yrs)
** Note that the maximum number of children in a group with 1 educator is as follows:
Infant: 4
Toddler :4
Early Tykes:8
Late Tykes:8
45
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