236: Childcare Center Finances: Forecasting for Success

In this episode, Kate and Carrie dive into the nitty-gritty of financial forecasting for childcare centers. They chat about the impact of public pre-k funding, stressing how it leaves a gap for infant and toddler care. Carrie shares her insights on flexible staffing and care options, suggesting part-time care to match family needs. They also explore financial incentives for staff, like bonuses for less desirable shifts and referral bonuses. 

The key takeaway? Financial forecasting should be an ongoing process, not just a year-end task. It's all about adapting, staying proactive, and ensuring sustainability in childcare. Listen to the full episode to learn more!

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Transcript

Marie 00:00:01  Welcome to child care conversations with Kate and Carrie.

Carrie 00:00:06  Hey, guys, and welcome back to our child care Conversations. Today it's Kate and I, and we're going to talk to you a little bit about using your crystal ball. Right.

Kate 00:00:16  No no no no no no no. We're talking about financial forecasting. Yeah.

Carrie 00:00:22  That's your crystal ball. You look into it. Or is it the magic eight ball? I think not that what it is isn't the magic.

Kate 00:00:29  I think right now that's what it is. I, I'm I'm thinking definitely some folks that think that their, their crystal ball has definitely turned into the to the magic eight ball. So, but with that Carrie, why is this so important? We're we're talking about this in February. Does it really matter?

Carrie 00:00:47  I mean, yeah, I think it does. So we're going to talk a little bit about doing it for your center specifically. And also like what are some trends that we're seeing and other, you know, Influencers or other experts in the field are seeing.

Carrie 00:01:04  Well, the reason we need to do.

Kate 00:01:06  Can we, can we start with, can we start with industry trends like can we can we start there?

Carrie 00:01:11  I was thinking we would start the other place, but yeah, sure, we can start with the industry trends. Okay. so the one that people are whinging on about a lot in Texas right now is public pre-K that's happening in different states at different rates and in different ways. But there is this push to have state or federal more money going into paying for child care, but they're mostly paying for children 3 to 5. Right. Okay.

Kate 00:01:45  So but what happens to all those kids that are under the age of three?

Carrie 00:01:48  Well, what happened in New York City, which was one of the first places that public pre-K was rolled out, was that a whole lot of child care centers closed and there was no place for infants and toddlers and young threes to get care because so many programs closed down, because they were using the higher profit margin preschool kids to subsidize the infants and toddlers.

Carrie 00:02:15  So you would think that since that was such a colossal catastrophe, that other places would have learned from that, but not all of them have. And this is the same not just here in the US, but in Canada, in New Zealand and Australia. In the UK, where there is a lot more funding for what they consider the more important part of early childhood. Those school readiness years 3 to 5, and there's not as much funding for the creche or the nursery or infants and toddlers.

Kate 00:02:56  Okay, but I have a question. Yeah. As a working parent, I totally understand why parents go, oh, this is free. Yeah, but most parents don't work the same hours that those schools are open. So what does that mean for that family? So all of a sudden they've got to come up with care for for summers. Somebody's got to pick their kid up at 2 or 3:00. like how does all of that work for those families?

Carrie 00:03:25  Sometimes it doesn't. And so we've gotten more people who are, quote, nannies, unquote, who are not actually nannies.

Carrie 00:03:34  They are babysitters. I have read so much gothic fiction in my life. I know what a nanny is supposed to look like. They're supposed to develop curriculum. They're working with 1 to 4 children. They're getting those kids ready for boarding school when they're somewhere between the ages of eight and 12. So we're having a lot more people who are doing informal childcare. Somebody the neighbor is taking their kid to school in the morning, and then that college student, that high school student is picking the kids up at 3:00 or 2:00 and bringing them to their house and plopping them in front of a screen and things like that. So that's part of how that's getting picked up in places where the childcare owners have not been smart, because what a lot of child care owners are doing is they're going, okay, well, we can't have those pre-K kids anymore because the school district's taken them. I guess we're just going to have to repurpose those rooms into, you know, dance studios or something. And they're not remembering that the public pre-K probably goes from like 8:00 in the morning until 2:00 in the afternoon.

Carrie 00:04:49  Okay. How many hours is that? That's six. How many hours is that? That's six hours, right. So your program is probably open 12 or 13 hours. And so some the school district is taking six of it. Why aren't you offering care the other seven hours? Like I don't I don't understand what's going on with people's brains. Just charge part time care rates for those kids and get the school district to drop them off in a bus. Or, you know, if you have to go by a bus. But part time, half time rates should be 70% of your full time rate. So if your full time rate, I've been using $800 recently as my sort of generic price for child care. So if it's 800 bucks a month for full time care for that preschool child, what is 70%, I don't know. Let's look, I'm going to have.

Kate 00:05:47  10%.

Carrie 00:05:48  What.

Kate 00:05:49  $600?

Carrie 00:05:50  Okay. So $600, you charge $600 and you only have to staff for six hours instead of for 12.

Carrie 00:06:00  Can you make money charging $600 for that before and after school care, and only having to staff for that 6 or 7 hours? I think you can probably make money doing that.

Kate 00:06:13  Yeah, I think that we can. Maybe that's what we should do. The next butts in the seats workshop. Well, we'll we'll do it around, wrap around care. Because the other thing to think about is summer care. So what is.

Carrie 00:06:24  An Easter break and spring break and Thanksgiving break and I don't know. Indigenous peoples day. Okay.

Kate 00:06:33  But here's the thing. If you have a rate for summer camp for school agers, that is not the same rate as summer care for a preschooler because the ratios are different, right? Like school age ratios in Texas are significantly different. Different than the ratios for staff to children with your three year olds. So please, please, please do not price your three and four year olds summer care as you would your school age summer camp.

Carrie 00:07:09  Yes, your rising preschoolers are a different rate than your rising first graders.

Carrie 00:07:15  So rising preschoolers and rising kindergartners. So kids who at the end of summer program will be going into first grade and higher R one rate and going into pre-K or kinder are another rate. So in my head, those are the two rates for summer programs. But again, you do you boo. You do you. What else? what are some other industry trends?

Kate 00:07:40  Well, I think one of the other things that we're seeing from an industry standpoint is that we're still recovering. I mean, we're getting into literally, Carrie, what in the next month? We're looking at five years of Covid, and there are still programs who only want to do full time care. And I'm sorry. If you have parents who need part time care, then give them part time care. I think we also, you know, you and I heard, one of the staff with hinge Advisors actually talking about contracting hours, and this is what you did when you were actually starting in the field, wasn't it?

Carrie 00:08:21  It's what I did when I was a home based provider.

Carrie 00:08:23  Yeah I did. What are the hours that you need care. And they could have a half an hour on either side of what they thought they needed. But if they were going to be there earlier than half an hour before their contracted time, or staying half an hour after their contracted time. I charged them, and this is in the early 90s, guys. I was charging $10 an hour for extra hours in the early 90s. So if you're not charging at least $10 an hour for those like inflation has happened, I'm sure that that's like 25. And I think that more centers should go to that. And yes, I will 100% admit it means a lot more back end paperwork for the office, because you've got this person who's scheduled to come in at seven, and this person's scheduled to come in at eight, and this person is scheduled to come in at nine. And these people who are going to come in at ten.

Kate 00:09:21  But but doesn't that mean that your staffing rates should also be flexible and therefore you may not be spending as much money on staff?

Carrie 00:09:29  Exactly like that is the upside is, you know, when you need to bring in the second person in that classroom and you know how long you can have one person in that classroom.

Carrie 00:09:40  So I think it's a great way to reduce your staffing costs.

Kate 00:09:45  Absolutely. The other thing that I have heard recently, that I was just shocked that more, more programs didn't do, is at the beginning of the day, the consolidated rooms, you know, like the the I'm sure has a term drop off rooms. I actually had a conversation with a program just this week where that wasn't something they'd ever even contemplated. So, like, literally, they were starting their day at 6 a.m. with four staff. And so we did the math of taking them to two staff. And, you know, in her mind, it wasn't that big of a deal, but all of a sudden it was two staff for almost two hours every day.

Carrie 00:10:25  Times 22 days, times 12 months. Again, I could get out my calculator, maybe I should. Kate's going to get out hers, but it also helps you with staff wanting to have flexible schedules. If you have somebody who's like, look, I just need to have a reason to get out of the house every day because I'm a retiree and that was great.

Carrie 00:10:49  And then my spouse also became a retiree. And both of us being in the house for 24 hours a day is too many hours. So I need to have three hours a day. I'm leaving.

Kate 00:11:00  Yes. Okay. So the answer is almost $8,000 per staff person. So I don't know about you, but I kind of feel like if I had an extra 16 grand just by implementing one two hour in the morning change, that I could do something with it. I might even be able to pay myself. I might be able to give. You know, maybe those openers, maybe, you know, a shift differential of some sort or a bonus. You know, that's the other thing. That's that. Let's start with that as maybe one of our final trends. Carrie. I mean, one of the things I'm seeing more and more, and it's common in other industries, right? Other industries have bonuses, have scorecards, have true accountability measures for our teacher or for their staff. And it is one of the the many business trends that hasn't transitioned like it should have over into early child care.

Kate 00:11:58  So if we're going to be talking you know staff want pay raises. Talk to me a little bit about how we can make bonuses work or incentives work. Like why why does it always have to be that dollar an hour or that $0.50 an hour or whatever it is everybody thinks it should be?

Carrie 00:12:17  Yeah. I mean, again, this is one of those things that I did decades ago. I have people who are like, oh, I don't want to be the opener. I don't want to be the closer. And I was like, okay, people don't want those shifts. I don't want them every day either. So I just made it so that every shift you work as an opener, you get X amount extra for the number of days that you opened. So if you opened seven days, you got an extra two bucks a day for those seven days. So you got an extra 14 bucks. Okay, cool. Now you can go to McDonald's like and it wasn't tied to their overall paycheck.

Carrie 00:12:56  So that if somebody was like, look, I just can't open the next month, my teenager is not getting out of bed. I need somebody else to take the opening. Somebody else can take that. And they get rewarded for working within the team to do this thing. That, for whatever reason, is not popular on your staff right now. So the openers and closers, having that ba, you do it. It gets checked off. You get a bonus and it can be two bucks for the day. And that makes a huge difference if you're living on a 20 year old salary, you know, 20 year old budget.

Kate 00:13:33  Well, the other thing that's really great about that, Carrie, is that you're not really giving that person a pay raise. so they aren't you're not tied to it, right? So, you know, openers having an opening rate and then all of a sudden, like you said, they switch shifts.

Carrie 00:13:49  Then you'd have to demote them, you know, cut their pay, and then they get all bent out of shape.

Carrie 00:13:53  But they're the one who asked to not open anymore. And it's it's a huge challenge where you can say, hey, right now you're being a mentor teacher to this new person who was hired. Every time I get a mentor sheet from you, you get an extra 50 bucks on your paycheck. So the mentor sheet says, I did the mentoring. This is the feedback from my mentee. This is my feedback. This is the next steps. Every time I get one of those sheets, I give you 50 bucks. Then I'm not chasing people to actually do the mentoring that I want done for my new staff. They're doing it on their own. They have an intrinsic motivation. I mean, it's a little bit extrinsic, but I'm not chasing that monkey anymore. I have given that monkey to the staff person who said they were ready to step into this new role. the same could be true if you have staff who are like, oh, I want to be a trainer. Great. Every time you do a training, you get one of those.

Carrie 00:14:57  Here's a bonus for doing the thing. So I think it's a great idea. And it's one of those things that my car dealership does it they if you only fix what is the standard in their shop of, I don't know, 12. I'm making up numbers 12 cars a day that you do the work on, then you just get paid your base. But if you did 16 cars, you get bonuses for those extra four cars.

Kate 00:15:25  Well, I would like us to kind of wrap up with a couple of thoughts. I don't know about you.

Carrie 00:15:30  We can't wrap up. We haven't talked about the need for them to forecast at their center. Kate.

Kate 00:15:34  Oh, okay. Well, I got one thing to say. And then they can forecast to their centers one of the cores. And then we have to do that pretty fast. One of the things that I really think is important when we're starting to look at incentives, and you and I have talked about this for like seriously, truly decades is those referral bonuses, giving them, you know, a reason to do the tour to follow up with the phone call.

Kate 00:16:00  You know, do you have somebody who really, really is passionate about your program? Give them that opportunity. So, I really think that and it's been great hearing more and more industry leaders give that as an example of a way to fill your program, because if your staff aren't already your raving fans and they're not already telling people about your program, you have to scratch your head a little and go, why? but if you give them that dollar incentive, it's amazing.

Carrie 00:16:32  It's not saying $1. Don't give them a dollar there. She's saying financial incentive. Okay. So let's go back to what I thought we were starting with, which was why is it important to forecast what's going to happen financially at your center? A lot of people think, okay, this is something that we do in October or November before we do our annual budget, and that is a decent time to do it. But here we are in February and you now know how many enrollments you got in the January enrollment bump. Okay, we're at reality here.

Carrie 00:17:08  And, you know, because you're having conversations. And if you're not. Shame on you. Bad dog. No biscuit. you need to be having conversations with all of those parents whose kids are two and a half and older about what they're planning to do for the next school year, and talk to them about all the wonderful things you have planned, like, oh, are you going to be able to be one of the parents on the pumpkin patch field trip? I know you were looking forward to that. And, you know, getting them a little bit of that fear of missing out, talking about how they will be impacted by the fall programs, but asking them are they sticking or are they bouncing? And then you can forecasting okay. Based on Okay, I got these four families that said they were going to be here, but they weren't looking me in the eye, so I think they might be looking. And then I've got these eight other families who are definitely leaving for the new school year.

Carrie 00:18:10  So that means I need to enroll as if I have 12 openings. What am I going to do for my marketing to fill those 12 spots?

Kate 00:18:20  Hey, we're assuming that they're full to begin with, Carey.

Carrie 00:18:24  Of course, I'm assuming that they've been listening to us. We've been talking to them for two years, and if they were doing what we tell them to do, they will be full. But if you haven't hired somebody to handle your marketing, who's actually giving you. I don't know. Results based marketing, direct results marketing. Then maybe they're not full. So what do they do if they're not full?

Kate 00:18:51  Well, first of all, there's a there's two different levels of full, right. There's your licensed capacity.

Carrie 00:18:57  And your functional capacity.

Kate 00:18:59  There's your functional capacity. And you really need to kind of know the difference. There is that functional capacity because your teachers complain. Is that functional capacity because I'm going to use a room like an infant room that might have a ratio of maximum group size of eight, and you're licensed for ten, right? So it doesn't make sense to bring in those other two kids because you can't even do that group size wise.

Kate 00:19:25  Right. So some of that is a little bit, you know, kind of wonky. But either way, let's just say you have 100 kids that you should have in your program right now. And you're like, oh, we're doing really pretty good. We've got like 85.

Carrie 00:19:40  No, that's bad.

Kate 00:19:41  That's really you have you have 15 kids. And if you base that off of carries, $800 a kid.

Carrie 00:19:48  Hang on, I'm doing it.

Kate 00:19:49  You're doing the math. That means that you are leaving a ton of money over.

Carrie 00:19:54  12 grand.

Kate 00:19:55  Every month. you have 12 grand left on the table. What could you do with an extra 12 grand in your program? Yes, it's 15 kids. Yes, it's, you know, 15%. Whatever. That is probably your profit margin. So if you are listening to this, even if you're a director and you're like, oh, that's not my deal, guess what? It is your deal. And if you have an owner who hasn't put you on an incentive program, you need to have a conversation with your owner.

Kate 00:20:21  Okay. If you're an owner listening to this and you have a director who seems to leave money on the table all the time, and they're not really good at following up or following through with tours and phone calls. Give us a call. Let's coach you through how to design a real incentive program for them, because you don't have time for that stuff. Not when you're leaving 12 grand on the table every month. Okay, I'm gonna get off my soapbox. Go ahead.

Carrie 00:20:44  Carry 12 grand times, 12 months. Like, that's real money. Like, that's a gross of thousands of dollars. like that's $144,000 or pounds or yen or lira, depending on where you guys are listening.

Kate 00:21:04  It's probably it's probably at least three staff. Yeah.

Carrie 00:21:09  Two at the minimum, two at the minimum. Like you can hire a whole new administrator. You can hire a person who is just doing enrollments for that $144,000 and have extra money to put in the savings account, your bank account, the emergency fund, whatever.

Carrie 00:21:29  At $144,000, you can hire that position. Or our recommendation hire a company. Who does that? Get the heck off your plate, but make sure that they are good at what they do and they're results based. And you still have more profit and have a better running school because there's one person or one agency taking care of the marketing for your program.

Kate 00:21:59  Customer service is unless you unless that's your thing. I mean, if you came into child care from business and you were all into the customer experience and customer service and you know this and you were in sales and this is what drives you. Awesome. We actually have been talking about it since oh, eight about how every program needed an enrollment specialist. And I will tell you, literally for decades, people look at us like, you know, with their eyes crossed, like we're crazy that child care centers don't need salespeople. And I'm like, yeah, they do too. Anyway. You cannot do.

Carrie 00:22:31  Your job of providing excellent quality care for children if there are no children in the building.

Carrie 00:22:41  That is the basis of the business. Anyway, we there was one other trend we didn't really get a chance to talk about, but you guys already know about it, which is a lot of large centers that are 150 to 300 kids going in across the country. Across the world. Really? some of those are. Venture capital backed. Because here's the thing that I want you to just think about. If venture capital thinks that child care is an industry worth investing in. Guess what? It's an industry worth investing in. And if you're not investing in your staff and your systems, then somebody else is investing in theirs and they're going to eat your lunch.

Kate 00:23:22  Absolutely. All right. So just to kind of wrap up a couple of things that we talked about that were industry trends is public pre-K, American cap, income impact, flexible care, wraparound care, part time care, as well as staff incentives and bonuses, followed by what you need to be doing in your own program. There's the financial forecasting, which really comes into enrollment forecasting, doesn't it, Carrie, when you're trying to figure out, you know, that whole difference between what kids are saying, what kids are going, where am I right now? And if you take away nothing today, hopefully you will sit down and do the math at your program on how much you're losing every month or annually.

Kate 00:24:09  If you really want to be, get yourself a, incentivized to to build those plots. do the math. Right, because 12 grand may not. I mean, to me, it would make me go, oh, let's let's figure that out. But if 12 grand doesn't maybe $144,000. Well, because you only have you only have 15 spots open.

Carrie 00:24:31  And again, if your rates are higher than that or you have more than 15 spots, you might be really, really surprised by how quickly that money becomes an issue. And again, we're talking your functional capacity in another way. Oh, this is a bonus tip. Another way to increase your functional capacity. I'm giving stuff away here. I'm sorry. is to train your staff so that they are better at their job so that you can get closer. To that license number and still provide quality care. Okay, anyway, I think that is more than enough. This has been a little bit longer than a lot of hours, so if you enjoyed the show, share it with someone else who needs to know.

Carrie 00:25:14  Maybe somebody else on your administrative team and go into your podcast player of preference and write a review. We'd love to hear them. We read every one of them, and if we can figure out how to reply back, we do. But we can't always figure that out because we don't have somebody who that's their full time job. and we will talk to you next week.

Marie 00:25:38  Thank you for listening to Child Care Conversations with Kate and Carrie. Want to learn more? Check out our website at Texas Director. And if you've learned anything today. Leave us a comment below and share the show.