Can running a nursery be financially rewarding?

Last month, Laing and Buisson’s report on the childcare sector suggested that nurseries were simply ‘ticking along’ post-recession, and that cuts to public spending threaten to decrease demand in the coming year.

This news is reflected in the fact that over 500 nurseries were forced to close last year, with many others struggling financially.

As a nursery owner, or manager, do you feel that running a nursery can still be financially rewarding? Is it worth the everyday challenges or are there too many restrictions in place to allow a nursery to be profitable?

Is there any practical advice that has worked well for your business that you could share with others? What would you say to those thinking of starting a nursery business? Does the love of providing quality care outweigh the financial risk involved?

Please leave your experiences and suggestions below to join in with the discussion…


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14 Responses to “Can running a nursery be financially rewarding?”

  1. Sam Munroe October 20, 2012 at 3:04 pm #

    When looking at setting up a nursery you need a balance . Firstly you need to provide a suitable environment as well as qualified staff but you also have to look at supporting your day to day expenses. The major costing we looked at were premises, we looked at this company http://wintechmodular.co.uk/modular-nursery-buildings-and-nursery-classrooms/ by using a modular building we could reduce the start up cost a lot.

    You want to provide the best for your nursery but sometimes you need to rob Peter to pay Paul at least in the beginning. I believe that with the right planning it can be profitable but running a nursery is not just about making money for many its about doing something for the children.

  2. Rebecca December 4, 2011 at 12:08 am #

    Don’t assume you have to commit a significant amount of money, you can start by setting up a small home based affair first to test the water then look to expand. You can save weeks of research by using a guide found at http://www.howtostartanursery.co.uk. Research is the most important task you will need to undertake when looking at whether this is a realistic business opportunity, there are many other opportunities around childcare not just setting up a nursery for example after school care or a transportation service- You just need to know what is the greatest need in your area.

  3. David Smith October 26, 2011 at 1:36 pm #

    I am just glad that I no longer have any borrowings as we come into our 19th year. In the past we were able to make a reasonable living by drawing a salary. Matters such as a decent return on capital could never be addressed.
    The Early Years Grant was mostly treated as a subsidy for parents and we charged top-up fees. That has all changed and we are now rewarded for supplying flexible childcare on behalf of the local authority. In the main this does not cover the cost of the provision.
    The single point of admission to full-time school in the September after their fourth birthday means that we will always be short on numbers in the Autumn Term and will spend the other two terms trying to build up reserves to see us through. I doubt that the local authorities will be satisfied until all funded children are in maintained provision

  4. Ken September 19, 2011 at 3:17 pm #

    Over the years I have been involved with childcare one of the most consistent complaints I hear from Owners/Managers of Early Years settings is the inconsistency of Ofsted inspectors. These range from the personal idiosyncratic nature of the individual inspector to the outright blatantly bias for or against a particular setting or individuals within that setting.
    My own experiences of Ofsted inspectors are mixed and some of the comments/reflections they come out with are bazaar.
    A couple of examples:
    A few years ago we had undergone a major redevelopment during the Christmas period, we managed to re-open for the start of the new term but the decorators had only moved out on the Sunday afternoon. My staff work like heroes to get the rooms ready for 8.00 am but as most people could appreciate whilst the major things were in place, some of the minor items were still to be completed. So by Thursday that week we were 90% of the way there and that was the day the Ofsted inspector came to call. We did explain about the redevelopment and that not everything was as we would normally have it but we felt that the children were not suffering because of this. At the end of the inspection we were criticised for ‘not have enough numbers displayed in the environment’ basically we had not got round to all our displays and the numbers that would normally be on the walls, displays, etc. were missing. When I raised this, the reply was, ‘I can only inspect on what I see’. Often I would accept that as a justified reason for an inspector to raise a concern, a setting may say that they normally have this and that available but that particular day it was broken, being replaced, on order and an million and one excuses a setting can make up for not having something. But in our case any reasonable person could smell the fresh paint work especially after being told at the start that some things were ‘missing’ due to the redevelopment work but that was only temporary. I guess we are talking about Ofsted inspectors and in some cases ‘reasonable’ is not an appropriate word.
    I was discussing an amendment to some regulation or other with another Ofsted inspector when they told me that this was the first they had heard of this change and it was quite normal for them to hear of changes via setting they were inspecting and not from Ofsted.
    Until the sector itself challenges Ofsted about these inconsistencies I do not thing things will ever change. I accept that any form of inspection is subjective but there needs to be improved training and supervision of inspectors to reduce the huge swings between individual inspectors.
    One final observation, all the Outstanding setting I know of all have QTS or EYP in charge. Whilst I am all in favour of improving the quality and qualifications of early years practitioners by not employing a QTS and/or EYP mean being consigned to never achieving the highest grade?

  5. Jason September 8, 2011 at 3:29 pm #

    A nursery has more responsibilities than many businesses but I feel it its not a bad thing if it can make a sensible profit. Profit after all can indicate popularity and quality of provision, not just cutting corners. Its also a question of how the profit is used. Some of it can be used to ensure the stability of the business, invested in improvements and used to reward staff, not simply line the pockets of the owners. Having said that if the owners make a decent return for their hard work and for running the business well then I don’t see anything wrong with that either. It comes down to the owner’s choice and particularly whether they have investors or a bank to answer to. If someone is borrowing a load of cash to speculatively enter the business then they are probably in the wrong line of work.

    In many cases profitability isn’t achievable at all. Costs are high and the government expects nurseries to offer free hours at less than the cost of provision. There might be a case for controlling prices perhaps but less than cost? This is madness and not sustainable. It’s a big concern.

  6. Debbie Creech September 7, 2011 at 7:53 pm #

    We have recently had our rent increased by 90% by our Church, and we can not increase fees by that amount, we do not know how we are going to survive

  7. Libby September 6, 2011 at 9:03 pm #

    Martin’s comments are just what this country doesn’t need. I own a chain of nurseries, and have committed the best part of £1m of my own money (not borrowed from a bank) into my business.
    Frankly, I didn’t do this for altruistic reasons. I did it because 1) I believe in the concept of nursery education for all pre-schoolers, 2) I wanted a business that would allow me the freedom to run a business and also be at the school gate for my own children, 3) would offer work to women in the community and also allow women with children freedom of choice and 4) most importantly, would allow me to make a profit on my business and to pay me back for my investment.
    I didn’t invest to listen to people like Martin wibble on about social responsibilities etc. Perhaps he should lobby government to do this on his behalf and to ask that they invest in nursery education. Until such time as government buys nursery schools and runs them as not for profit, then we as a country will have to live with the fact that people like me buy into the industry and need/want to run them for money.

    Money isn’t a dirty word, and we should cease to see it as such. Martin, you make my blood boil!

  8. Rebecca September 6, 2011 at 9:02 pm #

    Running a nursery is definitely not like other businesses. We are totally dependent on government funding levels and making a profit takes real determination and lots of work outside of hours. At our setting we just about cover basic wages for all staff, but there is no spare money after that. The only flexibility we have is the fees we charge to non-funded children, but even that is really limited because we are competing with other local settings and there seems to be a set rate. Besides, if you set fees too high then parents will choose to do elsewhere, so it’s a real balancing act. We have tried lots of different ways to try and get the profit margins up, but because we overstaff (out of necessity rather than choice, in order to meet all the childrens individual needs, and government requirements), we are unable to increase our profit.

  9. diana hastings September 6, 2011 at 1:49 pm #

    I have been in the nursery business for almost 16 years (prior to that I managed other peoples) and there has always been a fine line between making profit and not!
    I am single and my only income is my nursery but I also feel strongly about delivering quality care and have done this at my own detriment both by sacrificing my own desire for children and having to input thousands of pounds of my own money in order to sustain my business to a high standard The problem I feel is that, although parents want quality child care for their precious little ones they would pay more to have their car fixed.
    I feel strongly that private settings struggled drastically with the introduction of new government legislation,and all this from people who have no idea how to care for children in a nursery setting!

    This said, I love my job and will continue to struggle financially in order to do it.

  10. Jackie September 6, 2011 at 12:55 pm #

    Nurseries can be profitable if they are managed well and carefully. This does not mean you have to compromise on quality, as we certainly don’t. Having said that our profit margains are definately much reduced and although I don’t pay minimum wage, there is another considerable rise per hour in the offering which may mean yet another rise for staff to keep wages in line with experience. The huge rise in the cost of food is certainly impacting profits and I am very concerned about the planned implementation of the new pension scheme which will employers forced to make a contribution to employees pay. Even though this doesn’t have to be implemented in my setting for a couple of years, it will impact our wage bill.

    Ways our setting has kept sustainable is by ensuring our parent partnership is really as good as it can be, being as flexible as I can with parents payments, and by that I don’t mean letting them pay late I mean letting them pay weekly or monthly or in 12 monthly equal payments.

    My one concern with the sector is that I am becoming more and more aware of people opening nurseries or buying nurseries that have no experience of owning a nursery or childcare, thinking it will make them a huge profit and then when they realise it won’t insisting managers cut corners resulting in a reduction in the quality of the setting. I would be interested to hear if this is the experience of staff at other settings.

  11. Nichola September 6, 2011 at 12:29 pm #

    Childrens needs should always come first, but with no profit and good nurseries closing due to financial difficulties how can that benifit the children?? profit is always in the forfront of any bussiness so it can carry on running for the benifit of staff, children and parents.

    Unfortunately with the lack of the banks back up,mortgages being high, the rise in gas, electricity, business tax and insurances, i feel all PVI nurseries may be in a sinking ship.

  12. Gary September 6, 2011 at 11:56 am #

    Dear Martin,

    I wonder how far you are prepared to extend that altruistic stance before self interest begins to balance things.

    All businesses have social resposnibilities.

    Gary

  13. claire Dupoy September 6, 2011 at 11:44 am #

    Profitable!!!!!
    With the constraints of eyee, cost of courses, wage rises etc, this is not a word associated with nursery schools nowadays / we need to tke power back for our private nurseries and not be restricted by governement plans, ideas that change on a whim !!!!

  14. Martin Pace September 6, 2011 at 11:14 am #

    Nurseries can still be profitable – however, we have concerns about any operator who views the nursery sector as just another business sector; with profit as the primary motive.

    For us at Reflections there are social responsibilities we seek to fulfil alongside running a successful nursery operation. We believe in putting children’s needs first – sometimes ahead of parents’ needs, should they ever conflict. And putting children’s interests first can compromise profitability – but this is a way of thinking we are happy to embrace.