Financing Your Nursery Set Up
Extract from Coram Family and Childcare Trust report
In order to set up your nursery, you need to have a budget. Once you have gained Ofsted registration you will be able to generate income but before that time you will incur costs and will need to employ staff. You need to budget for this.
What core operating costs are you likely to incur before opening?
Costs will depend on your location, local wages and your organisations structure. We have set out the main areas of cost for Friendly Families Nursery. These may vary widely from project to project:
Can you fundraise to cover these costs, get support from your landlord or run local appeals?
There are a number of options to secure the funding you will need to set up your nursery. It may be possible to secure a charitable grant given the social aims of your work. If this is your chosen route, factor in the time taken to research possible grant giving organisations and their timetables for applications and decisions. It is also worth looking to make a number of applications as many grant funders are highly competitive. You should also have a plan for if it is not possible to secure a charitable grant. You may also want to investigate social finance - that is, a loan that recognises the social purpose of the funding and that incorporates lower interest rates and more flexible repayment plans. You will need to develop and submit a business plan to secure social finance, ensuring you and the funder are confident that the loan will be repayable without having a significant impact on your nursery’s finances. Finally, a standard commercial loan could provide the initial funds to finance the set up of the nursery. For either of the loan options, you will need to ensure loan repayments are incorporated in to the financial modelling you do to ensure the fees that will be charged to parents can cover the repayments. For Friendly Families Nursery we secured grants for our initial development stage followed by a social finance loan to support our opening costs.
Summary
The development phase of the nursery will incur costs. It may be possible to find support with this through national or local funders, or supportive organisations who can offer resources to help you move forward. We have developed a draft business plan to help you.
What core operating costs are you likely to incur before opening?
Costs will depend on your location, local wages and your organisations structure. We have set out the main areas of cost for Friendly Families Nursery. These may vary widely from project to project:
- Rent & business rates: you will be liable for these even though the nursery is not open (approx. £9,000 annually)
- Utilities: you will need these if you are running any activities from your site, include water, electricity, phone lines and wifi (approx. £2,600 annually)
- Safety and security: include fire safety checks and fire equipment, burglar alarm, public liability insurance. These are essential to ensure you comply with health and safety requirements ( approx. £2,000).
- Redesign and/or repair of the space: this will vary based on the quality and state of the building you are taking on. Your landlord may support with repairs. You will need approval from your landlord for any structural changes. (approx. £40,000)
- Equipment and resources: Include toys and educational equipment, cleaning equipment, plates, bowls, white goods (e.g. dishwasher & washing machine) and possibly cooking equipment including an oven if you are catering onsite (approx. £30,000). It may be possible to source some toys and equipment second hand.
- Staff: The Nursery Manager needs to be recruited before Ofsted registration and nursery opening. Related equipment including computers, printers, secure filing cabinets, phones and a nursery camera are needed (approx. £21,000).
Can you fundraise to cover these costs, get support from your landlord or run local appeals?
There are a number of options to secure the funding you will need to set up your nursery. It may be possible to secure a charitable grant given the social aims of your work. If this is your chosen route, factor in the time taken to research possible grant giving organisations and their timetables for applications and decisions. It is also worth looking to make a number of applications as many grant funders are highly competitive. You should also have a plan for if it is not possible to secure a charitable grant. You may also want to investigate social finance - that is, a loan that recognises the social purpose of the funding and that incorporates lower interest rates and more flexible repayment plans. You will need to develop and submit a business plan to secure social finance, ensuring you and the funder are confident that the loan will be repayable without having a significant impact on your nursery’s finances. Finally, a standard commercial loan could provide the initial funds to finance the set up of the nursery. For either of the loan options, you will need to ensure loan repayments are incorporated in to the financial modelling you do to ensure the fees that will be charged to parents can cover the repayments. For Friendly Families Nursery we secured grants for our initial development stage followed by a social finance loan to support our opening costs.
Summary
The development phase of the nursery will incur costs. It may be possible to find support with this through national or local funders, or supportive organisations who can offer resources to help you move forward. We have developed a draft business plan to help you.