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Small Business
Getting started: Child care
June 4, 2001: 7:38 a.m. ET

When it comes to the rewards, do it for love, not for the money
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NEW YORK (CNNfn) - A job well done in many industries is rewarded at the end of the day with a big fat paycheck or a hefty bonus. Not so in the world of giving child care. It's physically demanding, the kids require your undivided attention, and at the end of the year you're lucky if you have enough left over to cut yourself a paycheck.

That is not to say that running a child care center is without rewards. There are rewards and they are great; they're just not monetary. Child care centers are beloved parts of many communities and the people who run them are regarded for the pivotal role they play in the development of the kids in their care.

"People do this because it's something they love or because they recognize this is a service that is badly needed in their community," said Sherry Workman, executive director of the National Association of Child Care Professionals.

Startup costs are high

The first thing most people realize about starting a child care center is that it is an undeniably expensive undertaking. In most cases where an operator is looking to lease space and outfit it for children, the startup costs run upward of $100,000. That, according to Workman, is the reason so many child care centers are affiliated with churches, synagogues and other religious organizations.

In those cases, the churches themselves supply the building, which reduces
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the initial expense of starting the center. Even without leasing or buying a building, the cost of supplies, administering and staffing easily run into the tens of thousands of dollars just to get off the ground.

Even once they are in operation, child care centers are capital-intensive businesses, said Joanne Adan, who owns Bright Beginnings in San Mateo, Calif. Adan, who had been running a child care center out of her home, started shopping for a small space about 18 years ago. Indeed, most child care centers can expect profit margins of between 3 and 6 percent.

Adan got a long-term lease on a home nearby and immediately threw her $60,000 in savings into converting the building into a center. Adan began turning a profit five years after opening Bright Beginnings, but staying profitable is often a challenge, she said.

Kids can create a lot of wear and tear on a building, which needs constant repair and maintenance. Lawns and other outdoor play areas, too, need constant upkeep when children are around. Staffing, however, is the main expense in child care centers.

More offerings; more expenses

In some centers, the ratio of teachers to children is as low as four to one. Historically, child care centers did not pay teachers much money and turnover among staff is often as high as 75 percent.

In response, salaries for teachers have been creeping upward and centers are trying to offer them benefits. Ann Marie Biskar, owner of Barnes-Miller Child Development Center in Portland, Ore., said paying staff well is becoming a matter of survival.

Parents are much more savvy consumers than they were 20 years ago, said Biskar. Likewise, owners of child care centers are more educated about the needs of children. And one of the things that is good for kids is for them to have a stable relationship with their day care provider, said Biskar. Keeping staff on to provide the stable environment most parents and their kids desire means paying people more and providing them with as many benefits as you can afford.

This is one of the main reasons for the skyrocketing costs to consumers of child care. Adan charges $896 a month for five days a week of care for preschoolers and $921 for toddlers, a sum she said is slightly lower than average for the area. Next year, she plans to bump of her monthly rates to $977 for preschoolers and $1002 for toddlers.

Across the country, however, child care rates are high. In Portland, most child care providers charge at least $800 a month for care.

But as parents have become more aware of the benefits and problems involved with child care programs, their expectations have increased about what should be offered. All those offerings, which include highly-trained staff and top notch equipment and educational programs, cost money to offer.

"The industry has changed dramatically in the last 20 years," said Biskar. "It used to be that you needed a place and not very much in the way of education."

With rates increasing and centers trying to offer better programs and staff, the challenge to become and stay profitable has become ever greater. Workman said most people who start child care centers do so because they are great nurturers and educators with tons of energy.

Needed: Managerial skills

Many come from teaching backgrounds or had parents who ran child care centers. Most of them know how to work with kids and are capable of instructing and comforting them. But not all of them are outfitted with heads for numbers and business.

All child care centers have to be licensed, which can be a lengthy and sometimes tedious process. But where most owners run into real trouble is in dealing with the administration of center. They need to learn to evaluate teachers, how to collect fees from parents, how to work with federal dollars that support child care.

Workman's organization has taken on the task of educating center owners on the complex business end of running a center. At its annual conference, the NACCP runs over 60 seminars on subjects like these and other related to the business of child care.

In addition, Workman said many community colleges are now offering course work in the management of child care centers and has encouraged many of her members to get involved with that and take classes.

The demands are heavy on owners and directors. Biskar said she works about eight-to-10 hours a day and often works weekends. And sometimes the administrative work gets put off on those days when she has to jump in and help out in the classrooms.

"A good director does whatever it takes cooking, teaching, changing diapers," she said. "But it's extremely rewarding. There's no place I would rather be." graphic

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The National Association of Child Care Professionals

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.