Under 5 magazine

BEST PRACTICE

Being business smart

Alliance business manager Gary Croxon explains the importance of taking a business-minded approach to running your early years provision – and how the Alliance can help

Gary is an Alliance business manager who supports CPD offerings, with a focus on business support packages and budget toolkit.

Alongside the delivery of high-quality education and care, remaining sustainable should always be at the forefront of our minds as early years providers. Budgeting and forecasting are crucial when making sure that your business can continue for many years to come.

Ask yourself a question: “Do I consider myself a business?” The answer should be a clear “Yes”; however, if you said “No” or even had to consider the question, it’s worth asking yourself why.

The Cambridge Dictionary definition of a business is “the activity of buying and selling goods and services”. Whatever your structure – committee-managed, privately-owned or childminding professional – you sell places to build your occupancy (whether this be parent/ carer fees or government-funded places) and buy goods to support the education and care for families. As such, you are a business – and need to be run as one.

Know your breakeven point

To run a successful early years business, having a good understanding of your financial position is key. This requires clear budgeting that is regularly reviewed to make sure you are on track, or to determine if you need to make adjustments. Setting a budget isn’t just a once-a-year event; you need to be looking at your key pinch points across the budgeted period to ensure you are hitting your breakeven point as a minimum.

A break-even point is the point at which total revenue equals total costs and expenses. At this point, there is no profit or loss: you are ‘breaking even’. No matter what your business is, knowing your break-even point is key to ongoing sustainability.

How do you find your breakeven point?

The Alliance’s Budget Toolkit is a user-friendly budgeting tool that can support you to find this - bit.ly/Budget-Toolkit-Apr24.

The interactive toolkit also allows you to:

forecast sales/occupancy and allocate expected number of funded children

add in any other expected income

input staffing salaries and associated expenditure, alongside all other income and expenditure.

If you are making a surplus, that’s great – you can use that to support a reserve based on your reserves policy and also to invest it back into the community by looking at additional resources within your provision.

However, if you have a deficit, you need to address this straightaway and reflect on what changes you can make. For example, if you have lower occupancy than budgeted, are you adjusting your expenditure in line with your lower numbers of children? If you are not regularly reviewing your actuals against budget, you are not putting yourself in a position to address concerns quickly before they start to spiral out of control.

Review your income sources – and looking for new ones

With the rollout of the new government funded entitlements, alongside the Department for Education’s new wrap-around offers, it’s important that you regularly review your current business model to ensure the long-term sustainability of your provision.

For example, could you consider extending what you currently offer, either age range or hours or maybe even both?

Undertake SWOT analyses

As part of your business plan, you should also consider undertaking a SWOT analysis.

A SWOT analysis makes you reflect on your strengths, weaknesses, opportunities and threats. Once completed, take a look at the weaknesses and threats and work out if and how these can be made into opportunities.

This is not a solo process, however – make sure you talk to your team or peers to help get the ideas flowing. You may not come up with something straight away, but a small idea can be grown into something bigger in the longterm, while and an initial ‘blue sky’ thought can always be deconstructed and elements of that built upon in smaller stages.

How can the Alliance help?

Budget Toolkit

The Early Years Alliance’s Budget Toolkit has been developed to help you take a proactive approach to budgeting – and has now been updated to allow you to forecast the potential impact of the new funded offers on your early years business.

Just £55 + VAT for Alliance members, the Toolkit also includes a one-hour virtual consultation with one of the Alliance’s early years experts.

You will also receive a 20% discount for the Operating a Viable Early Years Provision publication.

Find out more or purchase the Toolkit here: bit.ly/Budget-Toolkit-Apr24.

Payslip service

Our bespoke payslip service is tailor-made for early years settings and other charitable organisation. Alongside professional payslips, electronic and secure data transfer and real-time information, our popular service will provide you with tax and NI contribution calculations, information on how and when to pay HMRC and how much to pay them, pensions auto-enrolment assessment and letters plus direct transfer to provider, and much more

You can get a free quote at bit.ly/Payslipservice-Apr24.

CPD support

Our Business Blocks suite of CPD resources can help you build a strong business foundation, or if you are further along in your business management journey, identify and address any gaps in your current business approach.

Support includes consultations, virtual Insight sessions and a range of mini-guides.

Find out more at: bit.ly/CPD-support-Apr24.