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Business Advice

1. After-school programs are generally easier to start and operate than preschools.

While after-school programs are a smaller market, they have easier licensing requirements, require less and lower cost space, and have less demanding schedules. 

2. A website is important. 

In today’s world, it is rare that a prospective parent visits a school unless they first check out the school carefully on its website. If you need a starting point for a website and you are conversant with Google, check out Google Sites. It is free. All you need is to sign up for a free Google email address and you have what you need to start building a site. If you are incorporated as a non-profit, you can even get a free site upgrade to their Educational product.

3. Church-operated schools are much more management intensive – especially in times of director transition.

Where the church is small, it is statistically unlikely that you can find a suitable replacement director from within the church. During my 18 years at New Life we had 3 different directors. I suspect the typical school has more. We were unusually fortunate in that the Lord provided a new director from within the church each time. But it was still a very challenging. Fortunately our Children’s Pastor, Norma Siberts, managed this transition very well. Without her these transitions probably would have sunk me.

4. Expect a high percentage of kids to attend part-time.

Attendance will be higher on Tuesday, Wednesday and Thursday. Mondays and Fridays will have lower attendance.

5. Assume "rent" for either kind of school is 10% of gross receipts. 

In addition, the school pays its share of utilities, and any property tax assessments resulting from their presence. Expect that your payroll (fully loaded) will be about 75% of total expenses. If the church has a multiple-year lease with the school, the contract can tie the annual rent adjustments to the consumer price index. The one I used at New Life is the U.S. Department of Labor, Bureau of Labor Statistics, Washington, D.C. 20212. Consumer Price Index. All Urban Consumers - (CPI-U). U.S. city average. The government Cost of Living, Urban Centers data.

6. Tuition scales depend on your competitive market for your area.

You'll need to do an analysis of the schools in your area, their quality, and what they charge. If you believe your school is average, then your target tuition should be average. If you are convinced that your school is at the 75th percentile of the market, then your target tuition is at the 75 percentile point. It's a good strategy to determine what percentile of the market you want to aim for and then fund your school staffing and expenses at that level, too. In other words, a school will never be a 75 percentile school if the staff pay and facility quality is at the 25 percentile level.

7. Develop a regular staff performance and goals review calendar.

At New Life the director writes an annual review for each employee, with a check-point at mid-year. The annual review is in February and most pay adjustments come at this time as a result of this process. I wrote the review for the director.

8. Director and staff pay scales depend on the competitive market for your area.

In the early stages of a school, you won't be able to pay as much as a person can get elsewhere, so you'll need to attract strong staff on other grounds. Such is life in any start-up. But there is a danger at the other end, too. When you do experience a time when you have enough money to overpay your staff, be very cautious. This is usually unwise. Contact me if you want to discuss.

9. Keep the church-operated school's financial books separate from the church's books.

At NLNC we used Quick Books for the preschool. Unless you have a very skilled accounting person in the church, I highly recommend outsourcing the payroll function. We did payroll ourselves for several years and it was always a challenge; eventually we made some costly mistakes on quarterly withholding of taxes. So we switched to having professionals do our payroll. We also moved the church non-ministry employees’ payroll to the same company. Outsourcing payroll also improved our handling of vacation and sick time accruals and even made it practical to offer our employees a Section 125 benefit plan (HSA sort of thing).

10. It's okay for the school to donate to the church.

In strong financial years, it was common for the Little People Board to vote to contribute a piece of their profit to the church. Sometimes this was in the form of an offering, other times it was in the form of paying for a capital improvement or major maintenance job that benefited both the preschool and the church (which, of course, shared the facility). Here's a caution, though. It is not wise to donate to the church if you are paying your school staff below the market!

11. Check out Red Apple Research.

This is a small company around the San Francisco Bay Area that does excellent research among and evaluations of existing schools. For instance, in early 2010 we hired Red Apple to survey the current and past two year parents of our Little People Christian Preschool/Daycare. Their analysis prioritized what our parents feel are the most important issues they look for in a preschool from among: security, staff personality, teacher-parent communication, facility, staff training, management-parent communication, flexible hours, classroom setting, location, curriculum, cost, and extracurricular activities. Then they rated our school on all these criteria to determine where we were fine and could use the data to market our school to new clients, where we could get better and how that would impact our future. They told us 48% of our clients found us through Google, 21% through Yahoo. They assessed the clients’ willingness to accept a tuition increase. So far as I can tell, Red Apple has a lot of knowledge about this business and what works. I don't know if they offer consulting to people in the start-up phases of a school, but they certainly would have helpful input.

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