How to Open Your First Nursery Setting

Would you like to set up your own nursery? NDNA chief executive, Purnima Tanuku, looks at how you can begin to turn your dream into a reality by researching the market, preparing a business plan and raising finance…

Starting a nursery may be a life-long ambition, a new interest or the next step in your childcare career. Even if you have worked in childcare for many years it can be a daunting experience with many areas to consider, so you need to make sure you are fully prepared for what it will involve. Whatever the stage of development of your nursery, there are four fundamental criteria for success: a sound business plan, careful planning, market research and high-quality, well-qualified staff. Without all of these ingredients you will struggle to provide the quality of provision that will guarantee success.

Conducting research

The first step to opening a successful nursery business is conducting the right research. Those areas it is essential to cover include customers, competitors and operations. It is important to conduct both primary research (your own research, including talking to potential customers and monitoring competitors) and secondary research (using existing research). The early years department at your local authority is often a good place to find out information about early years provision in your area; local authorities have a legal duty to provide an annual sufficiency report, which is useful for identifying gaps in and identifying a suitable location to open. You must establish the demand for childcare in your area and consider how competitors are catering for this demand; is there a gap in the market which you can fill? Find out what parents want from childcare services and tailor your services to meet their needs; make sure you offer unique selling points so your setting stands out from the crowd. Research the level of fees parents are prepared to pay for childcare, and find out how much nurseries in the area charge parents – this will allow you to set your fees at a sustainable and competitive level.

Good ways to make contact with parents in your area are through antenatal groups or by building relationships with local health visitors. You wish to speak to schools, as they can provide information on local pressures of childcare and could also be great potential partners – for example, you could look at working together to provide wrap-around care. It is also useful to speak to local employers to find out whether they offer parents support with childcare and if they may be interested in sponsoring places at your nursery.

Making a plan

Operationally, you will need to conduct research so you are able to produce a comprehensive business plan. A typical business plan will include:

Executive summary
Summarise key points within the plan, including business objectives, timescales and level of finance required.

Sector analysis
Describe the childcare marketplace in your area.

Market analysis
Detail specific research conducted for your nursery, including market gaps, potential customers, other providers and their strengths and weaknesses, your nursery’s unique selling point, a SWOT analysis (strengths, weaknesses, opportunities, threats) for your nursery business and a pricing policy.

Operational plan:
Describe your objectives for the next three years, covering:

● legal structure of the business – sole trader, partnership or limited company (seek advice from a lawyer or accountant about which route is best for you);

● features and benefits of the childcare service such as opening hours, curriculum or additional services;

● premises – do you plan to buy or rent? Are you taking over an existing nursery? Will you need planning permission to create the setting you want?

● management polices and resources.

Management team
Who is involved in the venture, what are their skills and expertise?

Implementation plan
Describe the process for making the business idea a reality.

Marketing plan
Explain how you will market your business, including associated costs.

Financial information
Describe costs, the level of finance you require, the sources of finance you plan to investigate and a risk and sensitivity analysis. Financial statements such as a cash-flow forecast, profit and loss and a balance sheet should be included to provide an idea of how your nursery business will perform over time.

Appendices
Use the appendices to provide more details where necessary, for example, copies of policies and procedures, management CVs, etc.

Finding funding

Having created your business plan you will now be ready to use it to raise finance for your nursery. Options to finance your nursery include:

● investment in the business from your own finances;

● bank loans;

● business start-up loans;

● equity funding – money from shareholders.

Once you have conducted research, created a business plan and raised finance you will have the foundations in place for setting up your new nursery business. In my second article I will look at how you meet legal and registration requirements for opening a new nursery.

Visit the NDNA website for more support on all aspects of running a successful nursery business.