How to start a nursery: The insider’s view

Tell us why your nursery business stands out? How many children do you have in your care?

Danesmoor House Day Nursery stands out because of the staff that we employ. This is a business built on trust and to succeed we need to employ the best possible candidates we can. Our team are our first contact with the public and they need to present themselves as caring but at the same time knowledgeable and professional.

It is thanks to this dedicated team that we have around 130 children on our books at any one time and a maximum of 70 on site at any given time.

Why did you start a nursery?

The nursery was initially started so that we could spend time with our own children, whilst at work. Our children have all benefitted from a nursery education but also from spending time around us as parents.

How did you find the right location?

Our location was one that we used to drive by on a daily basis and joke that it would be the perfect place to start a nursery in. It is located next door to a school without a pre-school and close to the town centre with off street parking for around 15 cars.

When it became available, we didn’t waste any time and phoned the estate agent straight away. It took time to convince the agents we were suitable and able to run the business successfully – we even arranged a meeting with the landlord to show him our business plan and convince him we were a suitable tenant.

What was essential to get the business up and running?

To get the business up and running we had to first identify if there was a need for our services in our location through market research. We also spent six months looking at the legal framework we would need to operate in and identifying policies and procedures we would need to put in place. 

How much did it cost to get your nursery started and how do you manage cash flow on a day-to-day basis?

To get the business up and running cost more money than we anticipated. Large amounts were spent on legal fees and stamp duty, planning permission, and fitting out the premises. We were lucky and were able to come in at around the £40,000 mark.

We have a flexible mortgage, so we used some equity from our house and some savings. We tried to not get into too much debt as that can be a problem whilst building up a customer base. We were also able to take a mortgage break for a few months so that our personal outgoings were reduced whilst the business was in its early stages.

When starting up, it is very easy to see your opening day as your goal. It isn’t, it’s really the end of the first year when you are balancing the books. Breaking even is an admirable goal. If it doesn’t happen in the first year that’s ok, as long as you are still growing. Keeping that energy and commitment up is the key.

Estimating those costs and having access to a reserve pot for emergencies is essential. Having an online accounting package, we use Sage One, that can keep track of your income and expenditure on a daily basis is a vital part of your toolkit as an entrepreneur. It’s easy to overspend and leave yourself short of cash or essentials.

Managing cashflow is not always easy, your online banking shows you how much you are spending but online accounting helps as it allows you to see what you are spending it on and that allows you to budget more effectively. It also allows you to see who has paid and who hasn’t, simply by linking it to your bank account.

What is your average working day like?

My working day starts at 8:00am and my first checks are that the setting is staffed correctly, I then do a school run – yes, I get all the glamorous jobs! If the chef is off I will cook, and if not, I will spend time talking to staff from all the different areas of the business to get any feedback I need.

Mornings will be spent overseeing finance. We used to do that ourselves but the job has become too big. We were able to employ our financial controller and she now spends four days a week doing that side of it for us. Before we had Elaine, it was often the last job to get done, but experience tells us it should always be a priority. It has allowed us to grow, and by having a dedicated financial controller, it also allows us to concentrate on creating positive customer relations whilst Elaine looks after the money.

Afternoons are spent on paperwork and the school run and finally contact with parents of the children we look after.

What’s the biggest challenge for nurseries right now?

The biggest challenge for nurseries right now are the rising staffing costs associated with the living wage and pensions as well as the possibility of 30 hours free childcare being provided by the government. All of these changes will be in place by 2017 and will directly affect our cashflow.

What’s the best business advice you ever got?

The best business advice I ever received was that you can’t please everybody. Stick to what you do and do it as well as you possibly can. If a potential customer doesn’t buy into your vision, don’t panic there will be someone else out there that will. You are better off having customers who are happy to pay for your services than customers that are not fully satisfied. Your reputation is built on happy customers who recommend you.

What do you think the childcare market will look like in two years? Where are the opportunities?

In two years’ time the opportunity will be to offer 30 hours free education to working parents as it will make day-care affordable for more families. This will fundamentally alter the marketplace. There will be winners and losers, but we feel we are well placed to meet the challenge.

What’s the best resource for nursery business owners?

The best resource any nursery can have is its staff. The best apps are for internet banking and accounting apps. At the end of the day, a nursery is a business and like any other operation it is only as healthy as its cashflow.

What regulation affects you the most as a nursery owner? What’s the biggest misconception about running a nursery?

All nurseries have a statutory legal framework that they need to meet as well as the OFSTED regulations and local authority requirements. The biggest misconception of running a nursery is that looking after children is relatively easy.

It is hard work but it is very rewarding and we are helping families in or community of all shapes and sizes to achieve a work/life balance. I hope to think that we make life a little easier by providing the type of childcare that children are secure in, and parents can walk away from every morning knowing that their children are happy and settled in a place where they can play, learn and grow.

If you launched your company again, what would you do differently?

If I was launching the company again the thing I would do differently would be to use an accounting solution from the start. It will help in those early days when it often feels like there is more money going out of the business than in.

Also, we would use social media more effectively. We spent a lot of money on leaflets and put them through all the doors in a two mile radius. They had a very low return rate. Advertising needs to be focused at your key demographic. The cheapest way to do that is through social media. We now use our website and Facebook more effectively and are more proactive in terms of monitoring.

If you’re interested in starting a nursery business, check out our comprehensive guide on how to start a nursery business.