PIVOT: Childcare Business Blogs

We, Richa Kapur and Rick Kapur, met in 11th Grade in 1981, and the rest is history!

Between the two of us, we have a collective 50 years of direct experience in the ECE business. Additionally, we have more than 12 stellar teachers in our Childcare and Preschool Center programs, with a combined ECE experience of >200 years to draw from.

Our journey in Early Childhood Education (ECE) and Childcare began in 1987 when Richa Kapur earned her Bachelor's degree in Child Development, followed by a Master's degree in Psychology with a focus on Play Therapy in 1991. She managed Head Start Programs as large as 650 children across 11 sites. In 1991, Rick Kapur earned his Business Master's degree with a focus on marketing and finance, and he worked in strategic business planning, deals, and implementation for 32 years until 2023.

In 2005, we formed RK Education Services LLC in Oregon, and bought a small Center in Beaverton, Oregon. Rick negotiated the purchase price, agreement terms, and conditions, while Richa took the operational lead. Over three years, we grew the Center enrollment from 3 children to 45 children, including infants, toddlers, and preschoolers. In 2008, due to family requirements, we had to sell the Center and move to San Jose, California. Rick estimated the center's business value using a triangulation model, created the sales offering memorandum, listed the center for sale, negotiated with multiple buyers and the landlord, drove the Sale Agreement, and executed the sale. We were able to increase the value of our Center purchase by 6x in just three years.

Upon moving to San Jose, California, in 2008, we began looking to start a new Center. After months of searching, Rick identified a suitable property that was previously used as a center but was now slated for demolition to make way for 20 apartments. Rick approached the seller's real estate agent directly as a buyer Principal, but was refused engagement without a buyer's agent. He then recruited a buyer's agent, with a split Buyer's commission, to represent us in the purchase. Rick worked with the City of San Jose to apply for and secure a Conditional Use Permit for reusing the property as a childcare and preschool center. Additionally, he worked with SBA/Wells Fargo to secure funding for the new center, which opened its doors in 2009. Within the first month of operation, we received an unsolicited offer to sell the program we had just created, essentially doubling our investment, which we promptly rejected. The program has been operating successfully since 2009, and is well respected in the community.

You can learn more about our programs at Blue Skies & Butterflies and Creative Minds Child Development Center.
https://www.creativemindscdc.org/
https://blueskies-butterflies.com/ 

There are multiple factors that come into play to establish business value for an Center; and a combination of these need to be used to establish a bespoke business value range and a sweet spot. There is no one size fits all answer!

Some of these key factors are:

1) Revenue trends,

2) Capacity upside,

3) Community needs assessment,

4) Net margin trend and ratios,

5) Staffing trends/tenure/cost-ratios,

6) Real Estate included, or rented?

7) If rented, then rent ratios, rental terms and actual costs (including NNN)

8 ) Program reputation. Licensing history.

9) Moat around the business: how easy or hard is it for someone to recreate a similar program nearby

10) Competitors and their tuitions

Contact PIVOT to help you if you are interested in establishing value for your Center.

https://www.creativemindscdc.org/wp-content/uploads/2024/01/Jan-16th-ECE-Business-Primer-with-Zoom-Meeting-Recording-Link.pdf

FCCH owners often consider upgrading to a larger Center-based program. And many have done so successfully! 

While their hand-on experience as an FCCH owner and an operator is directly useful, a Center requires a change of mind-set; going from a control model to a leverage model.

Center-based programs are inherently more complex with more moving parts than an FCCH. As an FCCH owner-operator, you are likely accustomed to handling most everything yourself. As a Center owner-operator, you will need to start building a reliable team, nurture and grow them, so you can then start relying more on your staff to scale.

Additionally, when approaching banks or SBA for funding loans, the past FCCH financials are not directly applicable as the size and scale of a center-based program may be 3x-6x or more. This requires fresh P&L projections for 2 to 3 years in the future, based on needs assessment, market factors, and a credible startup curve to accurately reflect the potential of the new center.

As a first step, for a Feasibility Assessment, we can work with you to discuss your vision, aspirations and goals, providing guidance to refine them. We will discuss potential project related costs/budgets, funding options, a target timeline, opportunities & issues to plan for. Think of this as a reality check, before you invest a lot of energy and resources. Based on the assessment, we may recommend proceeding to "Starting A New Center" phase.

https://docs.google.com/spreadsheets/d/1qJVtJCF1Ev-Y5J1BejzAM-sOYr1WdIVIDTddOIkYduE/edit?gid=887542308#gid=887542308