Business Proposal Report for a Child Day Care

Business Description

This business plan outlines the start-up project for a Child day care. The offering of our business will be unique amalgamation of technology and traditional childcare industry. The main concerns of a parent putting their child in a day care center is about the program, activities for the child, safety, and increasing behavioral problems among children as they grow older (Elias, 2007). Therefore, parents are concerned regarding their children throughout the day and sometimes cannot concentrate at work. Our plan is to set up a center-based day care with video cameras, which will stream out real time videos to the parents who can watch their child at any point of the time online.

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Childhood is the best time to have fun and learn. The main aim of a contemporary day care center is to provide traditional child day care that meets the child’s care and provides activity based learning environment for them. The mission of our business is to provide state of art childcare and social and behavioral development. The organization will be committed to diversity and accessibility so that we can be of service to all who need it. The childcare service will be of purpose for parents, especially mothers who are working. Further, concerned parents will also have no problem at keeping their loved one out of their sight for a greater part of the day. The vision of the company is to attain leadership position in the child day care services in the country.

As a starting up strategy, we intend to expand through self-owned, center based set up. The services will be provided for child day care for toddlers, preschoolers and kindergartners. The centre will be based in domestic areas, which will be easy to access for the parents. Initially the business will be started with one center in Washington DC.

Industry Analysis

Day cares for children have become an exceedingly important due to the increase in the number of both parents employed in a family and rise of employed single parent families. In 2008, 62.1% of the households with children have both the parents employed (BLS, 2008). Therefore, there is an ever-growing consumer base for child day care services. Married women with children are one of the fasted growing employment segments in the labor force since 1972 (SBA, 2009). Over the years, which changes in the demographics of the labor force, the demand for child day care centers has increased.

Among 12 million children in the United States, the number of children growing up in single parent households is constantly increasing. Working single parent comprise of 25% of the households, who are expected to be in need for good day care centers for their children. Therefore, there is an increased need for childcare in order to maintain work-life balance for of parents. Day care services for children has seen increased demand due to changing employment patterns of parents and increasing number of parents joining the workforce.

Total revenue of the industry has increased by 35.8% from 2002 to 2007, while revenue per establishment has increase by 27% (US Census Bureau, 2009). Further, the revenue earned per dollar of payroll in 2007 is $2.13 as compared to $2.07 in 2002 (see table 1). This indicates that even though there are many new entrants in the industry, the industry has seen an increase in revenue earnings.

The main structure of the industry is twofold – home and center based business. Home based day cares are usually operated from privately owned home. Center based operations are larger and they include business models like franchise, corporate sponsored on-site operations, cooperative or individual run ventures (SBA, 2009).

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Currently 42% of the children are taken care of in center-based daycares and 9.6% in nonrelatives’ care. Intuitively child daycare is required for almost 6 million children. Further research has shown that families with higher level of income rely more on center-based day cares (SBA, 2009). In 2009, 15% of the employed mothers used center based day cares for their preschool children as the main source of day care (SBA, 2009). Therefore, the potential market day care is large and constantly expanding.

Competition Analysis

Child day care industry in United States is a highly fragmented industry. In 1986, there were 4800 small day care facilities with less than 20 employees each. The number of day care centers in 2007 has increased by 112% since 1986, but the average number of employees in each center has reduced to 12, indicating a further defragmentation of the industry. In Washington DC, there are 337 centers (as on 2009) among whom only 30% are accredited (NACCRRA , 2009).

Some of the larger players in the child day care business are Kinder-Care, LaPetite Academy, ARA Services, and Gerber Products. Kinder-Care founded in 1969 and is located in 850 cities, have operations in 40 states in the country, and Canada. LaPetite started in 1970, presently has 368 centers in 20 states. ARA, which acquired National Child Care in 1980, has 142 schools in 11 states. Gerber Products have 57 centers in 6 states.

The industry life cycle analysis is done by seeing the growth of the number of day care centers over a period of two decades from 1985 to 2006 (see figure 1). The figure demonstrates an increasing demand for day care centers by mothers for their children. The graph in figure 1 shows that the service industry is in the growth stage of life cycle and is expected to have further growth. Adding a trend line (in red in the figure) for ten years shows that the industry is expected to following a growing stage in the next ten years.

Growth stage of an industry is the best stage for entering the industry to take best advantage of the growth process. The market for the industry is growing and so the success factors for setting up business in a growing market are competitive pricing, convenient servicing and positive promotion. The right targeting and strategy is the key to the success for the business in a growing industry and so it is for child day care industry.

In Washington DC, the childcare service market is booming with a total number of 337 centers in the area. The total number of children below 4 years in the area is 36215 and within the age of 5 to 11 years are 39649. In terms of overall demand for childcare in the area, NACCRRA reports that 62% of the childcare need is for infants and toddlers, 25% is for preschoolers, and 13 % is for school age children (2009). Further, 97% of the childcare demands are for full time demand. Therefore, the above mentioned data suggest that there is a high demand for child day care centers in Washington DC.

Marketing Concept

The main service offerings of the business are to provide childcare for children. The first center will be located in Washington DC. The target customers for our venture would be families with children where all parents are in workforce. In Washington DC, 65.3% of the families who have a child under the age of 6 years have both the parents working (American Community Survey, 2009). Further, the demand for childcare in Washington DC is mostly for infant and toddler care, which comprises of 62% of the total demand and 38% for preschool and kindergarten children (NACCRRA , 2009). Further, our target customers will have an annual family income of $130,000 or higher. Therefore, this is the overall target customer for our business. In Washington DC, almost 36% of the households have an annual income of $75,000 or more. Therefore, the target customers for the business are families with annual income of $75,000 and children less than the age of 6 years.

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Services will be provided for child care of toddlers, preschoolers, and kindergartners. There will be separate activities and arrangements done for the different age group of children. The children will be cared for as well as be given proper activities to develop their intelligence, social, and emotional skills. The main differentiating factor of our service offering will be online availability of the real time video of the children in our center, which the parents can access online if they want to check on their child.

The average annual cost of a child day care center in Washington DC is $13967 (NACCRRA , 2009). Based on this given data and the cost that will be incurred for our set-up, we come up with a competitive pricing. The pricing for the care will be roughly come to $70 per day for infants and toddlers for full time. The price for kindergartners and preschoolers will be $65 per day for full time care.

The main method of promotion will be pamphlets given along with the local newspaper and to working men and women in office areas. The positioning of the company will be based on the differentiating factor of the services provided i.e. real time video streaming of the center through video cameras connected to our website. The parents will be able to watch their child at any moment of the day.

Initially we will set up one center in Washington DC, and then we will gradually expand through a franchisee model. The center will have an initial capacity of accommodating 100 children of carious age groups. We will have facility to care for infants, toddlers, and preschool and kindergarten children. The main differentiating factor for our company will be the availability of real time online video of the children in the center that can be accessed by the parents. The promotion will emphasize on this differentiating positioning of the services.

Human Resources

For a setup which will be center based we intend to employ 20 to 25 employees for each center. Out of these, 15 to 20 will be family childcare providers. These employees will be responsible for complete childcare from feeding, diapering, comfort and play. Each set up will be equipped for 100 children and maintain a child to caregiver ratio of 5:1. When the caregivers cater to older children, they will be responsible for the child’s basic needs and organize activities that will lead to social, intellectual, and behavioral development.

According to Bureau of Labor Statistics, 44% of the industry workers had a high school degree or less, indicating at the low requirement of academic training for most of the jobs (BLS, 2009). The minimum qualification for our family caregivers will be high school degree, for the position of head teacher or caregiver a graduate would be preferred. Apart from care providers, the centers will have one manager or a Head care giver who will preferably be a graduate who will be responsible for supervision of the staff, objective and standard development of the center, responsible for program development, as well as undertaking marketing, staffing, and financial matters. We will have both full-time and part-time employment.

The salary of the employees will be given according to the industry standards. The pay will be depended on the education qualification of the candidate. For child day care providers the salary will be $12 – $13 per hour (NACCRRA , 2009). Childcare employees will be hired on part-time and full-time basis.

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References

American Community Survey. (2009). Washington DC Selected Economic Characteristics: 2006-2008 . Web.

BLS. (2009). Child Day Care Services. Retrieved January 5, 2010, from Bureau of Labor Statistics: Web.

BLS. (2008). Employment Characteristics Of Families. Web.

ChildStats.org. (2009). America’s Children: Key National Indicators of Well-Being. Web.

Elias, M. (2007). Day care concern is not child’s play. Web.

NACCRRA. (2009). Child Care in the State of: District of Columbia. Web.

SBA. (2009). Chind Day Care Service. Web.

US Census Bureau. (2009). Child day care services. Web.

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