Talk to nursery owners about their experiences in starting their businesses and they all have their horror stories to tell. Familiar themes emerge - the building work that took far longer than expected, delays with planning permission and budgets that did not stretch where needed. But would-be nursery owners can learn from these problems.
Carrie and Lee Johnson opened their nursery, Kids in Bloom, in West Derby, Liverpool, in June after two-and-a-half years of planning. Lee says their local Early Years Development and Childcare Partnership gave general information, but more specific advice was harder to find. 'We were in a really grey area,' he says. 'It was very difficult to get advice and information from anyone.' However, Liverpool Council's planning department were more helpful in making suggestions about the kind of building and location they should look for, and the local Business Link were 'absolutely brilliant' and helped develop a business plan. Lee says he cannot emphasise enough the importance of building a realistic contingency budget. 'I feel that we tried to underestimate our figures to make us seem more favourable to banks, but that's the wrong way to do it,' he says.
'We looked at a big old detached house and wanted to convert it, but we needed to live in the property as well. Local builders gave us what turned out to be unrealistic quotes. I think we looked a bit green and naive to them. Because we didn't have a contingency fund we found ourselves with no option but to manage the project ourselves.'
This meant they had to source materials themselves. The builders also added an extra couple of months to finish the job, but Lee and Carrie stood their ground and insisted the work be done to the original timescale. Overall, the start-up project did run smoothly. Lee says, 'I'd just emphasise the importance of planning before any conversion work, so that you don't find yourself without a contingency fund.'
Deborah Robinson, owner of Petit L'Enfant Day Nursery in Carterton, Oxfordshire, warns against wasting money on buying a nursery set-up pack, after she spent 24,000 on buying all the equipment and furniture from one company. 'I was under the impression that what you paid for was someone to come and kit out the nursery,' she says. 'Everything that Ofsted would expect you to have - down to noticeboards, the whole lot! What was shocking to us was that 115 boxes turned up, everything was flat-pack and we were left on our own.' It took nursery staff three weeks to put everything together.
Deborah says, 'If you're going for an all-in pack, make sure you know where the company's role finishes. It would have saved us a lot of money to purchase our own equipment and would have given us more control.' .
Deborah has a five-year lease on the nursery property and says, 'If you haven't got a good lease it's hard to get funding. No lender will contemplate lending to you unless you have a minimum of a five-year lease.'
Deborah says she has talked to some nursery owners who would recommend a 20-year lease. 'But our optimistic opinion was, we've been given a great opportunity to come in, take this building on and get on with it. It depends on how much of a risk-taker you are.'
Brenda Burrows, who started running the Willows Day Nursery 13 years ago from her own home in the West Midlands, goes further. 'Buy, not rent,' she warns. 'I wasted thousands and thousands of pounds by renting.'
Brenda says that a key thing to take into consideration when looking for a property is the size of the rooms, because this affects the number of children you can take and how many staff you will need. She stresses finding rooms that will provide the right adult:child ratios required by Ofsted, because it is vital to ensure you do not lose out on placement fees.
As the business expanded, Brenda moved to premises in a building leased in the grounds of West Heath Hospital in Birmingham, but when the five-year lease ran out she decided to buy a building to convert. 'When you've got rented property you can't start knocking walls down. If you buy your own property you can knock through to create bigger rooms for the right staff and child ratios,' she says.
A few hitches during the conversion resulted in a delay in moving into the new nursery. Brenda was hoping to open in July, but the pre-school extension had to be changed and sound-proofing put in downstairs because the nursery was next door to a private residence. She finally opened for business three months later.
Despite the delay, Brenda says, 'It wasn't a chore, because I enjoyed the design and planning the whole thing from start to finish. If you enjoy it, it becomes your baby!'
Rona Broderick, co-owner of the Gold Star Day Nursery in Forest Gate, London, also warns against underestimating start-up costs. Rona, then a childminder, and her friend Nicola Belgrave, a nursery deputy manager, found themselves three times over budget with their plans to convert an East End pub into a nursery.
'The cost was a lot more than we originally expected,' says Rona. They had been quoted 15,000 to cover building work and renovation costs, which they had borrowed from the bank. But the architect turned out to have no nursery experience and did not know what the planning and building department required. Plans had to be redone, the building needed rewiring, the kitchen had to be moved, there were problems with the plumbing and a ceiling needed lowering. Rona and Nicola found themselves 45,000 short.
'If our families hadn't been able to give us that money we wouldn't have been able to open,' says Rona. But the Gold Star Day Nursery opened in August 2001, and just two weeks later all 39 places were taken. Rona's job as a childminder meant many of the places were filled by word of mouth. It had taken nine months to find the property and a year for the planning application to be approved, followed by eight months of building work.
Rona's final words of advice? 'You have to know the industry and the ins and outs. And you just need to be aware that things may not go to plan!'
Di Bangali, owner of ABC Children's Day Nursery in Newsome, Huddersfield, stresses the importance of sound financial advice. 'Don't just think that the first place you should go for funding is a bank. You could find you have assets in other means. Get a good financial adviser and he can direct you to different sources.' Di's previous business experience helped her when it came to planning budgets, and she stresses 'erring on the side of caution'.
She says, 'I was very, very surprised that the banks I approached took different viewpoints. Different financial institutions looked at different areas.' Di advises prospective borrowers to be prepared to provide their business plan in different formats. She says it's also important to make sure you are happy with the service the bank is offering. 'Look at the after-service of that bank, look at the benefits in the short-, the medium- and the long-term as a customer.' A good bank should be able to provide a local business manager and give advice on payment of wages, any other PAYE issues, sickness pay and employees' pension benefits.
Di warns, 'If you are doing a start-up don't underestimate the amount of paperwork!' You will need to include Ofsted's requirements as well as day-to-day administration.
She recommends contacting the local authority business advice department for demographic information. She was able to find out how many children aged under four were in the area and the number of working mothers.
The opening of the nursery was delayed by building work, and with hindsight Di would have included a penalty clause in the building contract for failing to complete in time.
Finally, Di acknowledges, 'Yes, I took on a massive commitment, a big, big step. There have been sleepless nights and worries - but an awful lot of job satisfaction too.'
Tips from the experts
* Be realistic about your budget.
* Include a contingency plan - 10 per cent to 15 per cent for time and money.
* Know your market.
* Location is vital - choose a main commuter route or the centre of town.
* You don't have to spend a fortune on advertising - a large banner on the front of the building can be very effective.
* If renting, get a minimum of a five-year lease.
* Find a good financial adviser.
* Don't be afraid to negotiate terms with your bank.
* Work out staff-to-child ratios based on your room size.
* Prepare for the unexpected.