Business Plan - Daycare

Daycare Business Plan NJ Daycare Inc. is a small provider of daycare services, organized as a sole proprietorship. The industry is large, but highly fragmented, and most businesses have only 1 or 2 employees, and revenues of around $54,000 annually. This daycare will be similar to the ones already existing in the industry, but catering to evenings and extended hours, a subset of the overall daycare market. The state has many different licensing requirements, and it is believed that our daycare will meet all of these requirements for obtaining a license.

Mission Statement NJ Daycare Inc. aims to provide the highest quality daycare service, combining a stimulation, education-forward environment with convenience and low cost for parents, in its mission to be the best daycare in northern New Jersey. Industry The daycare industry is large but highly fragmented. The market research company IBIS World (2014) estimates the size of the market at $46 billion, but without any dominant market player. Indeed, not one company has market share of note, making daycare one of the most heavily-fragmented industries in the country.

The daycare industry is believed to be positively correlated with a healthy economy, which means that it should be growing at present. This is because parents who were not working re-enter the workforce during economic boom times, and working parents have more discretionary income, both factors that contribute to demand growth in the industry (IBIS World, 2013). There are 887,745 daycare businesses, meaning that the average daycare in the U.S. earns annual revenue of $54,114.

The industry is indeed heavily fragmented, as this tiny revenue per business indicates that most are likely part-time businesses or run by just one or two people. There are around 1.7 million people employed in the industry, again around 2 per business. Thus, daycares are small, and usually not very profitable (IBIS World, 2013). Another factor that drives demand for daycare businesses is demographic. Daycare is dependent on the number of young children in an area.

There is preschool age daycare, and then there is school-age daycare, but in either case these are dependent on the number of working families in the region to drive demand. Northern New Jersey is either within or adjacent to the New York metropolitan area, and housing prices are lower than in the city, making the area a draw for working families. The percentage of population under the age of 18 is slightly lower than the U.S.

average for most northern New Jersey counties (22% in Bergen County, for example, versus 27% nationwide), and the general trend is that the teenaged cohorts are larger than the ones under the age of 10, indicating that the birth rate is slowing (U.S. Census Bureau, 2010). However, the shrinking market is not necessarily a problem. First, the industry has few barriers to entry and exit, which means that it tends to contract and expand based on demand -- there is constant turnover of providers.

Second, it is highly localized, so demographic considerations at the local level are more important. Third, the businesses are small, so capturing just a small percentage of the market is enough to success as a new daycare business. Thus, while demographics are not in favor, this does not necessarily pose a problem for a new entrant into the industry. Form of Business There are many different forms of business organization.

A sole proprietorship is a simple form of business organization that has the benefits of being easy, low cost, and allows for taxation flow-through from the business to the proprietor. The disadvantage of this form is that there is downside risk to the proprietor. Typically, insurance is required to mitigate the downside risk. A partnership requires multiple people in the ownership group, and profit-taking has to be built into the partnership agreement, but otherwise is similar in pros and cons to a sole proprietorship. A corporation can take multiple forms.

It is more complex, and more expensive to set up, but it also limits the downside risk to the owner of the business, who would only be liable for the money put into the business, as opposed to all personal wealth (Investopedia, 2014). This business will be formed as a sole proprietorship. The risks are generally low and covered by insurance.

Beyond that, the low cost and simplicity of this structure, along with the income flow through, make the sole proprietorship the most logical form of business organization for a startup daycare business. Operating Considerations The daycare is going to focus on providing service for extended hours and weekends, meaning that the target market will be for parents who either work odd hours, and for children who otherwise have school or preschool during the regular daytime business hours.

This niche is one of the more popular services for daycares, and especially in an area of the state where many people have odd jobs or long commutes. This also allows the proprietor to run the daycare part-time while earning money through other work during regular daytime business hours. Regulatory Considerations With a sole proprietorship form, it is necessary to protect the proprietor from financially damaging legal actions.

Thus, the daycare will be fully insured, and many operating steps will be undertaken in line with the insurance in order to make sure that nothing bad happens within the business. This includes having close supervision of the children, and taking training in first aid to minimize the effects of any accidents that might happen. As well, the State of New Jersey requires that day care operations need to be licensed, and that they adhere to safety codes.

We agree with the state that the safety of children is the number one priority when it comes to daycares -- that is why the daycare business exists in the first place! Chapter 122 of the state Manual of Licensing Requirements is written by the Department of Children and Families, and governs the licensing of day care facilities. These regulations are in force until August 6, 2016 at which time they will be replaced with a new set of regulations. A license is required if.