Middlehurst House Case
Bill Compton
Proposed Middlehurst House Budget Adjustments
Our catchment area continues to show high interest in the childcare services that Middlehurst House offers. We consistently have a waiting list of children and receive enthusiastic inquiries from parents each month. Casual discussions with realtors in our area and exploration of the county's residential property values database indicate that the surrounding neighborhoods are experiencing more gentrification. Indeed, there are indications -- including our parent satisfaction survey results -- that our client families would support higher tuition. I have provided some information below that I believe we should consider as we move into the new fiscal year.
Opportunities to Increase Quality of Care
Although our class sizes are well within the state and city regulations, and compare favorably with recommendations from the National Association for Education of Young Children (NAEYC), for early childhood education and daycare programs ("NAEYC," 2012). Still, I believe we have the capacity to decrease the number of children in our classes, a change that would improve program quality and position us more competitively. Smaller class sizes would also enable us to implement some changes that we have often talked about, such as embedded foreign language and music instruction (Lomba, 2011; Richardson, 2010; Schiller, 2007).
I describe several scenarios for us to consider. All calculations reflect monthly figures, and may be found on the attached spreadsheets.
With our current model, our earnings are $2,200. This number does not reflect net operating margin or EBITDA.
Raising tuition 25% and 50% increases earnings to $5,900 and $9,600 respectively. Note that tuition has not been raised for the 5 to 6 years classes, as these parents are fundamentally opposed.
Moving to smaller class sizes (1:6 for the 2 to 3-year-olds; 1:8 for the 3 to 4-year-olds and 4 to 5-year-olds), but keeping the number of children at a total count of 80 and charging tuition at 50% over the present tuition, produces earnings of $2,044.
Adding a 5 to 6-year class from the 11 children on the waiting list, again at the higher tuition rate, would generate monthly earnings at $5,446.
If more classes are added across all age levels to accommodate children on the waiting list, while maintaining the smaller class size ratios (1:6 for the 2 to 3-year-olds; 1:8 for the 3 to 4-year-olds and 4 to 5-year-olds) and charging 50% higher tuition rate than current rates, would generate earnings of $7,009.
Were we to add one infant class, without any other changes to the configuration described immediately above, with tuition for the infant class and the 2 to 3-year-old class the same, the earnings would be $7,307.
Recommendations
We have a prime opportunity to grow Middlehurst House, add attractive services, improve the class child to teacher ration, and increase earnings. Since we have the facility capacity to increase the number of classes -- and still accommodate gatherings and celebrations -- no capital expenditures result from these suggested changes to our configuration. I strongly recommend that we meet before the next quarter with our accountant and our parent advisory board to discuss these ideas.
Attachments: References, Proposed Budget Calculations, Parent Satisfaction Survey Results (not reproduced here)
References
National Association for the Education of Young Children. NAEYC Teacher / Child Ratios. Retrieved from www.naeyc.org http://preschool.unlv.eu/documents/NAEYC%20RATIOS.pdf
Richardson, P. (2010, August 10). Beyond fun and games: Evaluating the...
Journal of New Music Research. NAMM Foundation.
Schiller, P. (2007, November / December). More purposeful and intentional infant and toddler childcare. Child Care Exchange. Retrieved from https://ccie-catalog.s3.amazonaws.com/library/5017810.pdf
Lomba, A. (2011, March 9). Multilingual ECE programs: How preschool children learn languages and how administrators can help. Early Childhood Investigations. Retreived from http://www.earlychildhoodwebinars.com/presentations/how-toddlers-and-preschoolers-learn-languages-tips-and-activities-for-todays-multilingual-classrooms-and-homes/
Attachment -- Middlehurst House Budget Calculations
Base
Current Model
Age Groups
# Classes
Child: Teacher Ratio
Total Children
Monthly Tuition / Child
Revenue
2 to 3
2
10 to 1
20
$320
$6,400
3 to 4
1
15 to 1
15
$280
$4,200
4 to 5
1
15 to 1
15
$280
$4,200
5 to 6
2
15 to 1
30
$280
$8,400
6
80
$23,200
Expenses
Salaries - Teachers
$9,600
$1,600
per teacher
Salary - Director
$2,000
Salary - Cook
$900
Food
$2,200
$27.50
per student
Benefits
$2,450
Supplies
$600
$520
Admin supplies
Facility + Admin
$3,250
TOTAL
$21,000
Earnings (Not EBITDA)
$2,200
1.a.
Tuition Raised
Age Groups
# Classes
Child: Teacher Ratio
Total Children
Monthly Tuition / Child
Revenue
0.25
2 to 3
2
10 to 1
20
$400
$8,000
0.25
3 to 4
1
15 to 1
15
$350
$5,250
0.25
4 to 5
1
15 to 1
15
$350
$5,250
5 to 6
2
15 to 1
30
$280
$8,400
6
80
$26,900
Expenses
Salaries - Teachers
$9,600
$1,600
per teacher
Salary - Director
$2,000
Salary - Cook
$900
Food
$2,200
$27.50
per student
Benefits
$2,450
Supplies
$600
$520
Admin supplies
Facility + Admin
$3,250
TOTAL
$21,000
Earnings (Not EBITDA)
$5,900
1.a.
Tuition Raised
Age Groups
# Classes
Child: Teacher Ratio
Total Children
Monthly Tuition / Child
Revenue
0.5
2 to 3
2
10 to 1
20
$480
$9,600
0.5
3 to 4
1
15 to 1
15
$420
$6,300
0.5
4 to 5
1
15…
