What to Measure Financially in Your Child Care

During my time in this industry, I can’t tell you how many amazing, passionate child care business owners I have met that truly want to make a difference in the lives of children. They are constantly working on creative ways to grow their businesses and improve their quality of care and positive staff culture in their school.

However, a common theme I find among these owners is that they are missing a huge key component to running a successful school – having a great financial system in place.

In the video below I share with you why it is a MUST, as a child care business owner, to have a solid financial system in place, basic benchmarks you should be hitting, and why sharing that system and benchmarks with your staff will help bring them together as a team.

Here are the key takeaways from this video:

Although having a passion and purpose behind your child care business is vital to providing quality care, it is also vital to have a profitable school. Running a profitable school will allow you to continuously improve upon the quality of care in your school and maintain a positive staff culture.

There are 3 things you need for financial success:
1. A reliable financial system
2. A comparison of your numbers versus benchmarks
3. A budget

To be a truly financially fit child care business owner, you should know your revenue and profit margin from the previous year off the top of your head.

As a rule of best practice, create a monthly plan with your financial manager to review your financial statements from the previous month. If you don’t have at least a part-time financial manager, get one right away. This will allow you to catch anything that needs to be improved on early before it spirals out of control.

There are 5 main expense categories of revenue that you should look at each month.
– Labor and wages (should be no more than 65%)
– Equipment
– Facility costs
– Food
– Supplies

Understand and analyze your EBITA (Earnings Before Interest, Taxes, and Amortization) when reflecting on your past year and for planning ahead.

For child care businesses in the United States, a healthily annual EBITA earnings number is between 12 and 16 percent.

Never wait for an emergency to hit, always be prepared. To protect yourself in case of an emergency, you should be preapproved for a $100,000 line of credit and have enough money in the bank to cover three payroll cycles.

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