Looking closely at your marketplace will provide information to enable you to answer the following key questions:
* Are there enough customers for my nursery?
* What service do they want?
* How much can I charge?
Know your markets
Dividing the marketplace into segments is the easiest way to conduct your research. You will want to look separately at the 'residential market' (people living within a 5-mile radius of your proposed nursery location), the 'corporate market' (people working within a 3-mile radius) and the 'commuting market' (people driving by on their route to and from work). If your potential location is densely populated you can halve these distances.
The residential market is easy to assess. Take a look at the houses in the area. Are there many family homes with both parents working? Are house prices such that both parents need to work? Will parents choose a nursery rather than grandma? Do they have the disposable income to afford your fees? Local estate agents are an excellent source of information on the demography of the area and the National Childbirth Trust (NCT) will be able to give you some idea of the size of its membership and tell you where your potential customers are living.
A sign of a healthy corporate market is a number of businesses employing women, especially if they are trying to attract staff. Businesses that care for their staff are likely to have family-friendly policies, which will include assisting employees with childcare arrangements. Examples of employers of this type include hospitals, universities and financial and insurance institutions. Lists of local employers are available through chambers of commerce, or commercial information providers such as Dun & Bradstreet. Contact the human resources manager of each large company and ask if childcare is a requirement for their staff and how many women are currently on maternity leave.
The commuting market will only be of interest if your nursery is accessible from a commuter route and if those commuters are easily able to stop both en route into work and back home. A nursery very nearly opened on a commuter road into a major city, which was highly convenient when travelling into the city but required a 2-mile detour on the return trip. The operator wishes to remain anonymous!
A location on the edge of a residential area but near a centre of business is ideal for combining the benefits of all three segments. Appealing to more than one market can help spread the risk associated with any new venture.
Interviewing anyone pushing a pram or a buggy in the local shopping centre is also an ideal method to establish local childcare habits, including how much people pay and what service they might want to use but can't get.
Having established what the market requires, the successful operator will structure their service accordingly. If the need for childcare is from 8am to 6pm, then that is what you will have to provide.
Is the price right?
While growth in the nursery sector is faster than ever before, demand for childcare still outstrips supply in most locations. It is therefore unlikely that the area that you choose for your nursery would not have a requirement for childcare. However, one of the key factors in determining financial success will be how high a fee you can charge. Full daycare fees in the UK range from approximately 80 to 240 per week, dependent almost entirely upon location. High fees tend to be found in areas of high land value. So, while 240 per week may seem an attractive fee, bear in mind the high cost of entry for a new nursery in an expensive area.
A close look at your competitors will give you a good idea of how much you will be able to charge. A list of all local childcare providers is easily obtainable through your local Children's Information Services at the local authority, and you should visit every potential competitor, checking that they have a waiting list (at least for babies). You will want to establish what is and isn't included in their fee so that you can structure your fees appropriately.
The last piece of the jigsaw will be how big your nursery will be and how quickly you think you can fill it. If there are sufficient potential customers and you can implement a good marketing plan, then from a financial perspective you should look to build the biggest nursery you can afford. Economies of scale will mean that you can provide more facilities for the children and more benefits for the staff in a 100-place than in a 50-place nursery. Unless you simply have a preference for smaller nurseries, the financial returns will also be significantly greater.
Establish your ideal size and your best estimate of the fill rate and you then have all the information required to begin the marketing and financial elements of the business plan.
Business plan format
Executive summary
This should be a two-page summary including:
* key objectives
* three-to five-year profit and loss account
* funding requirements
* benefits to whoever is helping fund your business
* management team
* status of project
The marketplace
Include a brief explanation of the nursery business and trends in the sector, for example, the growing numbers of women returning to work after having children and the National Childcare Strategy (see 'Opportunity knocks' on page 6). Not everyonewill know the nursery business as well as you do.
Market research
Include information about your nursery and where your customers will come from.
Operational plan
State what you expect to achieve by when, and what you will always/never do. Show how you expect to achieve your objectives. Detail the following:
* ethos
* opening hours
* age groups
* premises
* management to ensure the delivery of quality practice * policies and practice such as health and safety, food policy, parental involvement procedures. Keep details for the appendices.
Include some element of risk analysis to show the bank that you have considered what could go wrong. How would you cope with slower rates of occupancy than projected or a staff recruitment crisis?
Management team
Describe your management strengths. Include details of people who are essential to your success and when you anticipate they will join you.
Implementation plan
This should include all the steps you will take during the start-up phase.
Consider the following:
* premises and equipment
* liaison with regulatory authorities
* staffing recruitment and induction
* marketing (you can include your pre-opening plan here or in the marketing plan).
Marketing plan
Include all your marketing plans based on the information you gathered in your market research. Include methods such as advertising, signage and PR. Explain what makes your business different and how you intend to inform potential customers of your existence. Explain how you have arrived at your fee level.
Financial information
Show predicted income and expenditure and the resulting profit/loss using a computer spreadsheet.
Appendices
This section is for more detailed information which would distract from the main points in the rest of the plan, for example, details of your curriculum.
For more information on how to draw up a business plan, see Chapter 3 in Starting A Nursery published by Nursery World at 8.99.
Case history
Alison and Mark Watson are due to open their nursery, Major Minors, in a converted primary school in mid August. It is likely to take 70 to 80 children and is in a Grade II listed stone building built in 1812 in Godalming, near Guildford.
One important source of information for their market research was the internet. This helped them establish, amongst other things, the demographic profile of the area, even going as far as identifying local fertility rates.
To confirm their belief of a serious lack of provision in the area, they accessed the Childcare Link web site (http://www.childcarelink. gov.uk), which has centralised information from all the Childcare Information Services around the country; they obtained Surrey's Early Years Development and Childcare Plan, and lists of nurseries in their area.
Previous research into local provision, conducted when they needed full-time nursery care for their two children, and close experience of the parental demand for the highest standards, as seen in the demand for places at a chain of nurseries run by one of Mark's close relatives, helped them identify the particular niche that they are targeting. 'It is perfectly feasible to have standards that are higher than the norm and that is what we are trying to do.'