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Foundations Child Care & School Blog

Foundations School blog covers a range of topics relating to the care and education of young children, with special focus on development, brain research, and progressive education.

Another One Bites the Dust: Financial Health of Daycare Centers

The title of this article is hopefully just a little bit shocking, and that is purposeful–several sudden daycare closures have happened in the West Cobb area over the past year, and another (Children’s Corner Childcare in Marietta) was announced this week.  This should be alarming to anyone with children in daycare in this area.  Why is it happening? How do I determine the financial health of a daycare?  Will my daycare close suddenly?  These are crucial questions for anyone with children in daycare.
This is the fifth daycare closing within this small part of West Cobb in the past year.  Why?  There are many factors, but they are all related to enrollment.  Daycare centers need a minimum number of enrolled children in order to pay the basic operational costs.  When enrollment goes below this minimum, the daycare center cannot continue to operate, and so that’s the simplistic answer as to why these daycares have closed.
When trying to assess the health of daycare program, you could try directly asking the owner or director.   But, some places might not be forthcoming if they are facing financial troubles. Instead, when you tour, look for things that could be indicators of financial health, or the lack thereof.
8 Signs of Financial Health (or lack thereof) in a Childcare Center:
  • Well Enrolled Classrooms: while it might seem appealing to see a class with only a handful of children in it, extremely low teacher to child ratios are not financially sustainable without extremely high tuition
  • Classes in Each Room: even if a center has a full classroom, if they have three empty classrooms, this could be a sign that they do not have the minimum number of students to meet basic operation costs
  • New & Varied Class Materials: groups of children are tough on materials, and they need to be replaced frequently; if you notice old and worn out materials in a classroom, this could be a sign that the center does not have the funds to replace them, and is cutting corners to save money.
  • Low Teacher Turnover: in a well-run center, teacher pay is one of the highest expenses, so it’s often the first place a center cuts if it is having financial difficulties; low pay often causes high teacher turnover, so when you tour, ask how long each of the teachers have been there.  If it’s in the months for most of the teachers, then they have very high turnover, and that can be a sign of poor financial health of the center (high turnover is also an indicator of a low quality experience for your child and yourself).
  • High Quality Food Program: most childcare centers include food with tuition, so if a center is experiencing financial trouble, they might cut the quality of the food program in order to save money.  If you see things like juice (a low cost alternative to meeting the fruit requirement), cookies, and pastas/rice, you may be seeing a sign that they are cutting the quality of the food program to reduce expenses.
  • Well Maintained and Upgraded Facilities: another large expense for programs is facility maintenance.  Because these might be considered “non-essential” expenses, they would be one of the first to be cut in a time of financial hardship for a center.  So if the facility and grounds look like they are not well cared for, this could be a sign that they are cutting “non-essential” expenses.  Instead, look for a center that constantly invests in facility care and maintenance and upgrades, as that is a sign that they believe they will be staying in their building for many years to come.
  • Happy Children and Families: family satisfaction is a direct indicator of whether families will recommend the center to other families, helping it grow, or if they are not happy, discouraging others from enrolling there, reducing enrollment.  When you tour a center, observe whether or not families seem happy.  Many unhappy families can be a sign that the quality of the program is low, which will reduce enrollment and financial health.
  • Many Years in Business: new childcare centers are new businesses, and the failure rate for new businesses is very high.  50% of new businesses fail within the first 5 years, and 70% fail within the first ten years.  Childcare centers are not exempt, and so it is important to look for at least ten years of successful operation history, to reduce your chances of enrolling in a center that may be on the path to failing.
So, when considering a childcare center, financial health of the organization should be one of the essential factors to consider, and hopefully these observable indicators will help you be able to determine that.
If you live or work in the West Cobb area, we encourage you to come visit Foundations Creative Childcare and Elementary School.  You will see that we embody all these indicators of financial health and quality care and education, and you can be assured that Foundations School will be a stable place for your family’s early care and education needs.  Please contact us at 770-429-4799 or visit our Take A Tour page to schedule a private tour at your convenience.

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