U.S. Small Business Administration                          MP-30





                     CHILD DAY-CARE SERVICES





                 Management and Planning Series



_________________________________________________________________



The Office of Business Development of the U.S. Small Business

Administration would like to acknowledge the excellent work of

the Kansas State University Small Business Institute, Frederick

H. Rice, director, in preparing the report. Student team members,

Sonya Martin, team leader, Janelle M. Andra, Jeffrey D. Farrell

and Sandra K. Marihugh conducted research for this report with

technical guidance provided by Sheila Dannells, advisor, and

production assistance by Barta Stevenson, technical assistant.



Copyright 1991, Kansas State University. "How to Write a Business

Plan." Copyright 1990, Linda Pinson and Jerry Jinnett. All rights

reserved. No part may be reproduced, transmitted or transcribed

without permission of the author. SBA retains and irrevocable,

worldwide, nonexclusive, royalty-free, unlimited license to use

this copyrighted material.



While we consider the contents of this publication to be of

general merit, its sponsorship by the U.S. Small Business

Administration does not necessarily constitute an endorsement of

the views and opinions of the authors or the products and

services of the companies with which they are affiliated.



All of SBA's programs and services are extended to the public on

a nondiscriminatory basis.

_________________________________________________________________



                       TABLE OF CONTENTS



INDUSTRY AND BUSINESS ENVIRONMENT

     Trends Affecting the Industry 1

     Current State of the Industry 1

     Government's Role in the Industry  2

     The Legal Environment    3



SMALL BUSINESS FACTORS

     Start-up Information     4

     Business Plan  4

     Cash Flow Analysis  4

     Financial Sources   4

     Marketing 4



MODELS OF DAY-CARE OPERATIONS

     The Home-based Business  5

     The Center-based Business     7



CONCLUSION     12



REFERENCES     13



APPENDIXES

     A. Addresses of State Regulatory Agencies   15

     B. Summary of Child-care Licensing Requirements  19

     C. How to Write a Business Plan   21

     D. Monthly Cash Flow Projection   25

     E. Information Resources     27

_________________________________________________________________



INDUSTRY AND BUSINESS ENVIRONMENT



Trends Affecting the Industry



Approximately one-half of the children in the United States today

are cared for by someone other than an immediate family member

during some portion of each day. In two-thirds of two-parent

homes, both parents work, providing a large and ever growing

consumer base for the day-care industry. In addition, 12 million

children, more than 20% of the children in the United States,

live with single parents who need child care in order to work

(Caldwell, 1987).



Married women with children have been the fastest growing segment

of the labor force since 1972. Estimates show that 67% of all new

jobs from 1988 to 1995 will be held by women, 80% of whom will

have children at some point during their career. A national

survey conducted in 1982 indicates that 27% of mothers of

pre-school children say they would seek a job if they could find

adequate child care, and 21% of part-time working mothers claimed

they would seek more hours of work if given better child care.



Employers and co-workers often feel the impact of inadequate or

unreliable day care. Sometimes parents are preoccupied at work

about their children's care. They may arrive late and leave early

to meet their children's schedules. Absenteeism may occur or time

may be lost in making phone calls to check on children. Both

mothers and fathers have been known to reject promotions because

of conflict with their parental obligations (Wojahn, 1988).

Co-workers may be affected by lost productivity and may feel

resentment if called upon to pick up the slack.



Some employers are taking steps to reduce the struggle between

career and parental obligations by offering flexible work

schedules and parental leave, both for mothers and fathers.

Employers are also helping employees find options for quality

child care, by offering referral services to employees seeking

day care. This usually provides a starting point for the parents

by giving them a better idea of what is available and allows them

to talk with other parents who have had some experience with a

particular caregiver. Some employers are also providing financial

assistance by arranging for parents to pay their child-care

expenses with pre-tax dollars or offering child-care subsidies as

part of their benefit package.



A less common practice that has gained support is on-site child

care, a day-care facility sponsored by the company and located on

its property. Since on-site care can be very expensive, employers

normally do not underwrite the entire cost. Usually, parents have

part of the expense deducted from their paychecks or elect a

flexible benefit option. Depending on the amount of subsidy

provided by the employer, rates for on-site care can be below

that of other quality day-care centers. However, most companies

that have some type of child-care facility or assistance program

believe the benefits, public relations, increased employee

dependability and improved recruiting and retention efforts far

outweigh the costs to them (Thompson, 1988). With the additional

advantage of proximity, parents do not have to go out of their

way to drop their children off before work and are able to visit

them during breaks and the lunch hour. Because of the growing

demand in the day-care industry, many opportunities exist for

potential small business owners. Parents now place a high value

on quality child care and are willing to search for the best care

providers.



Current State of the Industry



Almost 4,800 small businesses with less than 20 employees each

provided child day-care services in 1986. These small businesses

account for approximately 70% of the businesses in the industry

(see Chart 1). They were also the fastest growing segment of the

industry from 1980 to 1986, adding more than 20,000 workers a

106%

increase.



For-profit businesses are only one of the several different types

of day care that now exist with each type used by different

groups within the day-care market. Many of the small child

day-care businesses are home-based, or operated out of a

privately owned home. By contrast, center-based operations tend

to be larger in size and include franchise, on-site company

sponsored, cooperative and individually owned centers. Currently,

15% of employed mothers use center-based day care for their

preschool children as their primary source of child care. An

additional 13% of working mothers use center-based care as their

secondary source and use a baby-sitter or family member as their

first choice. Surveys show that more affluent, better educated

families rely more on paid care and center-based care than lower

income families, who rely primarily on relatives.



The market demand for child care has also led to the development

of chains of day-care facilities. Changing Times reported in 1984

that . . . top chains enroll just 6% of all children under

6 years old who attend day-care centers and nursery schools. Not

surprisingly, the chains' managements say they intend to expand

as quickly as staff time, capital resources, and interest rates

allow . . . Enrollments are soaring everywhere.



Some of the chain leaders of day-care operations are Kinder-Care,

founded in 1969, with more than 850 locations in 40 states and

Canada; LaPetite Academy, started in 1970, with 358 centers in

20 states; ARA Services, which bought National Child Care in

1980, with 142 schools in 11 states; and Gerber Products with

57 Gerber Children's Centers in six states. (Changing Times,

1984).



Government's Role in the Industry



Child-care needs have recently attracted national attention with

the U.S. Congress debating whether to establish a national

program and regulatory standards. However, individual states

already regulate child-care providers. State laws are extremely

diverse, ranging from strict licensing requirements to almost no

regulation at all. Each state has its own laws regarding zoning

ordinances and insurance requirements, as well as regulations for

the actual facility, such as capacity limits, fire alarms, fenced

play areas, number of exits and health standards for food

preparation areas. In addition, there are usually regulations

regarding the minimal number of staff required for specific

levels of enrollment (see Appendices A and B for state regulatory

agencies and licensing requirements).



Current federal proposals emphasize the cost and availability of

child care, as well as setting national health and safety

standards. One proposal, called the Child Care Services

Improvement Act, would authorize tax credits of up to $1,000 to

low-income parents, issue grants to public, private and family

day-care centers and provide an insurance pool to help lower the

cost of liability coverage. The plan also includes a revolving

loan fund to improve child-care facilities.



Another proposal, called the Act for Better Child Care, would

subsidize day care for low-income families. In addition, this

bill would provide funds to improve the training of child-care

workers and establish minimum federal standards for child-care

providers (Thompson, 1988).



The federal government already provides some assistance to

low-income families through Title XX of the Social Security Act,

passed in 1974. Families with an income below 115% of their

state's median income are eligible for benefits, and families

with an income above 80% of their state's median income are

required to pay some part of the expenses based on their income

level (Shaw, 1986).



In 1981, the funds for Title XX were cut back at both the state

and federal levels. Originally, the federal government

contributed 75% of the funding and the states contributed 25%.

The program was then cut back 21% at the federal level; the

states were no longer required to contribute, resulting in many

children being dropped from the program due to more limited

eligibility requirements. Funding has since increased but still

does not match the original, pre-1981 level (Shaw, 1986).



Head Start is another federally funded program aimed at

low-income children. The purpose of this program is to prepare

children from very low-income families for school by focusing on

reading and positive social interaction. Some perceived that

low-income families were unable to provide their children with

the books, games and activities that middle-class children

enjoyed. An unforeseen by-product of this program is free child

care to parents who enroll their children. The federal government

continues to fund Head Start and approximately 350,000 children

are currently enrolled (Shaw, 1986).



In addition, a tax credit is available that reduces families'

federal income taxes to help compensate for child-care expenses.

In 1976, the tax credit was established at 20% of total

child-care costs up to $400 for one child and $800 for two or

more children. In 1981, the credit was changed to favor lower

income families. The rate was increased to 30% for households

earning less than $10,000 and declined gradually to 20% for

families earning over $28,000. The maximum credit is $720 for one

child and $1,440 for two or more children (U.S. Department of the

Treasury, 1984). Unfortunately, few poverty-level households are

actually able to benefit from the entire credit because they

cannot receive an amount larger than their original tax

liability. Therefore, the prime beneficiaries from the credit are

middle- to upper-income families (Shaw, 1986).



Day-care providers need to stay informed of federal programs and

proposals because of the direct consequences on new and existing

day-care businesses. For example, new financing opportunities

might be created or a major shift in public attitudes towards the

provision of quality child care might occur.



The Legal Environment



Although starting a day-care business is relatively easy, the

legal issues facing the potential day-care center operator or

in-home provider are complex. Because of recent court cases,

day-care providers must have substantial knowledge of the laws

for operating a center or providing care in the home.



Child-care providers need to have a clear understanding of their

relationship with the children and which decisions are theirs to

make concerning the children in their care. An important step in

precluding lawsuits filed by parents is to require them to sign a

consent form that outlines the policies of the center and the

procedures to be followed in special situations and emergencies.

Also, the responsibilities and expectations of the day-care

provider and the parents should be clearly understood. Signed

consent forms will not always prevent lawsuits from being filed;

however, the written document is important evidence of good faith

on the caregiver's part.



The most common legal problems faced by child-care providers

involve negligence by a staff member whose failure to act

responsibly or follow specified procedures results in injury or

civil rights violations. Civil rights cases are typically filed

when a parent or the state feels there has been inappropriate

behavior or abuse by staff members (Corder, 1984).



Proper insurance coverage is essential to cover the costs of

lawsuits, liabilities and unexpected expenses. Even though

precautions may be taken, accidents can happen. Therefore, the

child-care provider should be covered with liability insurance in

case of an accident resulting in injury. An insurance agent can

advise what type of coverage is needed and prepare a plan

specifically designed for the owner's particular needs. Coverage

for a day-care operation should include the following:



   *  General liability, which protects against claims of injury

      or property damage involving clients.



   *  Fire, business interruption and crime insurance.



   *  Workers' compensation, unemployment insurance and optional

      employee benefits such as health and life insurance.



Some ways to obtain the coverage include adding a rider to a

homeowner's policy, purchasing a separate policy to cover

day-care related accidents or purchasing a separate family

day-care group policy from agencies that serve the special needs

of that profession, such as the National Association for Family

Day Care's group policy.

_________________________________________________________________



SMALL BUSINESS FACTORS



Start-up Information



Training is available for starting and running a child-care

facility through either specific classes or literature. The local

child-care Resource and Referral Agency or local Family Day Care

Association can be contacted for information. In some states,

such as Massachusetts, New Jersey, Texas, New York and Georgia,

assistance is provided through community agencies that recruit,

license, train and monitor family day-care providers (see

Appendix E for information resources). One source of particular

interest is the National Association for Family Day Care (NAFDC),

a nonprofit organization that provides literature, quarterly

newsletters and group insurance to home day-care providers.



Business Plan



No matter how small a business is, one can benefit from writing a

business plan. It helps organize thoughts and assures that all

information needed to start a business is available. A plan

should include goals and objectives and the step-by-step details

of how to reach them (see Appendix C for business plan

guidelines). In addition, a business plan should include

financial requirements and projections. If financial assistance

is needed, a business plan is an invaluable aid in convincing

lenders of one's seriousness and dedication.



Cash Flow Analysis



All businesses require a cash investment to get started. Cash

flow is often limited in the first few months, so it makes sense

to keep expenses as minimal as possible; for example, by shopping

around for the best price for rent, fixing up an office and

buying a business telephone. Utilizing home furnishings for a

while will enable more money to be used for essential business

equipment. How much financing is needed? A business plan can

provide a good idea of how much money will be required to start

and sustain a business for the first few weeks or months. An

income projection (see Appendix D for income projection

statement) can help determine the following:



   *  Start-up costs.

   *  Estimated gross monthly sales.

   *  Type of service(s) to be provided.

   *  Monthly operating expenses.

   *  Expenses with industry averages.

   *  Monthly draw and how much additional cash will be needed.

   *  Whether the business can support its debt service.



Financial Sources



Once it is determined how much money is needed, sources for

obtaining these funds may include the following:



   *  Personal savings.

   *  Cash value of life insurance.

   *  Value of stock or bonds.

   *  Cash value of other assets available or that may be used

      for collateral.

   *  Cash loans from relatives or friends.

   *  Investments from partners.

   *  Chattel mortgages on vehicle or equipment purchases.

   *  Advance payments from contracts or prepaid memberships.

   *  Commercial bank loans (usually limited to a few thousand

      dollars on signature loans).

   *  Second mortgage on real estate or other assets (it is

      common to pledge two dollars in assets for every dollar you

      borrow).



Banks are not speculators or gamblers; consequently, most small

businesses are financed through private sources. However, even if

a bank offers financial assistance, it is not wise to commit to

specific payments in the first few months. A flexible repayment

schedule is important so that as much operating capital as

possible can be retained in the business during the initial

period.



Government loan guarantees through the Small Business

Administration (SBA) or the Farmers Home Administration are

available during the initial start-up and later expansion phase

of a business. Specific eligibility criteria must be met to

qualify for these programs.



Marketing



Once the training, business plan and financing are complete, the

small business owner must attract potential customers through an

effective marketing program. The more care and attention devoted

to marketing, the more successful the business can be.



The minimal marketing program should include



Name -- Be sure to have a memorable and distinctive name. If it

is easy for prospects to remember the name, the marketing program

will be more cost effective.



Logo -- Choose a memorable style in which to print the name. If

well done, the logo will tell the story efficiently. Have

original art work photoreproduced so it can be used consistently.



Business cards -- This is a simple way of creating a business

-like image and probably the least expensive-per-impression

advertising available. Hand business cards out to everyone. One

never knows when a contact will turn into a business referral.



Flyers -- Visit a local quick-print shop to learn how to use clip

art and dry-transfer lettering to create flyers. Post them on

bulletin boards and hand them out to prospective (expecting)

parents.



Signs -- A plastic magnetic sign on the door of a car or van will

attract a lot of attention at a low cost.



T-shirts -- These are a popular and low-cost method of spreading

the word. They are also a natural for field trips to keep track

of groups by color coding the children.



Classified ads -- Learn how to write short attention grabbers.

Get results cheaply. Action words attract attention.



Brochure -- As the business grows, the owner may wish to invest

in a brochure to enhance the business' image while telling the

story in a professional manner.

_________________________________________________________________



MODELS OF DAY-CARE OPERATIONS



Child day-care activities often are classified according to where

the services are provided, as home-based or center-based.

Home-based operations are small businesses run out of a person's

home. Center-based operations may be small or large businesses or

nonprofits.



While each form of day care has its own unique considerations,

several issues are universally applicable such as licensing,

financing, health and safety, record-keeping, insurance and

marketing. The ways in which these and other activities affect

the prospective business person are discussed as each form or

model of child care is examined in greater detail.



The Home-based Business



Offering home day care is a good, low-cost method of starting a

business that is especially attractive to people who have

children themselves and want to stay at home to raise them.



For a home-based operation, the prospective small business owner

needs to consider whether his or her house is suitable for child

care by consulting the state regulations. Some common

requirements include smoke alarms, railed stairways and an

outdoor play area protected from nearby traffic or other hazards.



From a state regulatory standpoint, there are two basic kinds of

home-based care that can be provided registered and licensed.

Some states further subdivide these categories depending on the

number of ages of children being cared for. Registered care may

entail as little work as a basic background check by the police

department unless someone lodges a complaint against the business

owner. Licensing entails more stringent requirements, such as

annual checks by the health and/or fire departments, periodic

drop-in inspections, etc. In some states it is possible to

operate home-based child care without any regulatory status;

however, the move is toward some type of control. Being

registered or licensed is often a consideration of parents when

looking for care and can also be a valuable advertising tool.

Many states and cities maintain lists of licensed and registered

providers that are shared upon request with parents and employers

looking for quality child care. Being listed may provide the

day-care business with exposure, advertising and an implied

endorsement. Since the regulations vary greatly from state to

state, obtaining a copy of the state regulations is a necessary

first step.



Another issue to consider is financing. While caring for children

at home is not usually capital intensive, there will be costs

associated with running a business such as costs to equip the

home

with the appropriate toys and other equipment. All new or

expensive equipment is not necessary; however, safety and

liability should be kept in mind. Toys should be selected that

are too large to swallow, made with nontoxic materials,

nonelectric, etc. Most day-care owners find they are better off

investing in a few well-made items rather than many cheap ones.

Many items needed can be found at garage sales or thrift shops.

Some states maintain resource banks for day-care providers that

make toys and other equipment available on a loan or exchange

basis.



State agencies can also provide information on programs and

support networks to assist the business owner with the day-to-day

operation of the business. Although it is entirely possible to

run a successful business without information on current events,

staying abreast of pertinent legal issues, industry trends and

new ideas will help the small business owner to provide better

care and to increase the chances of being profitable. At the

national level, the National Association for Family Day Care

provides family day-care support (see Appendix E).



For example, the Child Care Food Program (CCFP), administered in

most states by the State Department of Education, helps

child-care centers and family and group day-care homes serve

nutritious, well-balanced meals. Each month providers complete

the appropriate forms and are then reimbursed for the meals they

serve. The amount paid depends upon the number of meals served

per month multiplied by the reimbursement rate. The maximum

reimbursement is two meals and one snack per child per day. The

current rates per child are $.3725 for snacks, $.6675 for

breakfast, and $1.2525 for lunch or dinner.



Well-defined policies, contracts and procedures are essential to

running a day-care business. Having the parent sign a contract at

the initial interview will legalize the business agreement and

help to avoid conflict in the future. Obtaining all the necessary

emergency information and the first payment at this time is

advisable. Receiving each period's payment up front is considered

normal practice, and for good reason. Prepayment ensures that the

money needed will be available to provide food and other items

for the children. It also avoids the unfortunate, but not

infrequent, problem of caring for children, then finding that the

parents cannot or will not pay.



A good record-keeping system is important to track payments

received and for tax purposes. A detailed list of all revenues

and expenses must be kept for the business. Accurate records also

are needed for parents who want to figure their tax credits. A

separate weekly income record or attendance form can be used to

record income. In either case, the total number of hours of care

for each child and the amount received should be included as well

as the reimbursements received from the CCFP. Reimbursements are

considered income and must be included on a tax return.



Certain expenses can be deducted from business income on a tax

return. Such expenses are classified as direct and indirect.

Direct expenses benefit the children only. The full amount paid

may be deducted from these items. Some examples are food, toys,

bookkeeping costs, depreciation and tax credit allowances for

major purchases. Indirect expenses benefit both the business and

personal parts of the home. Only the business portion of these

expenses can be deducted. Some examples are utility costs, real

estate taxes, homeowner's insurance and home repairs and

maintenance. All receipts should be kept to substantiate expense

deductions on an income tax return. More detailed information on

record keeping for tax purposes can be obtained from an

accountant or found in publications such as Tax Guide for Small

Businesses (PUB 334) and Business Use of Your Home (PUB 587)

available from the Internal Revenue Service (IRS).



Development of business procedures should include setting up a

daily schedule outlining what the children will do during the

day. Parents generally feel more comfortable knowing what their

children will be doing, and children adapt more readily when

there is a sense of order to their day.



The final step is to develop a marketing plan for the business

and selecting ways to advertise, for example, listing the

business at the local governmental agency, placing an

advertisement in local papers, passing out flyers, putting

notices on public bulletin boards, telling friends, contacting

schools and churches, etc. Any place frequented by families of

working parents is a good place to advertise.



Advantages of home day care are that the owner can sometimes

provide the service at a lower cost to parents than center-based

care, while providing a closer, family-type setting for the

children. Both of these features should play heavily in

advertising as cost and a home-like environment are of utmost

concern to parents who must leave their children on a daily

basis. Disadvantages to the business owner include long hours 10-

to 12-hour days are not uncommon. Working alone and being the

sole operator of the business can also be a problem if the owner

becomes ill or needs a day off. Therefore, planning ahead for

backup support is necessary.



The following case histories illustrate the differences between a

registered and a licensed home care provider.



Registered Home Care Model



Vicky is a registered home day-care provider in Kansas. In her

state, this means that she can care for no more than six

children, including her own, under 16 years of age. No more than

three may be under 18 months of age. Being registered indicates

that the provider has assured the state department of health that

all requirements are being met. In this less formal type of

regulatory environment, parents play an integral role in ensuring

the quality of care that their children receive. While the

specific requirements differentiating licenses and registered

care vary from state to state, in general, registered care

entails fewer regulatory constraints but allows the owner to care

for fewer children. Specific requirements pertinent to each state

can be obtained from each state's health department.



Vicky went through a three-step process to become registered.

First, she obtained and completed an application packet from the

health department. Second, she filled out a Kansas Bureau of

Investigation form that authorized the state to do a background

investigation for arrests or convictions, especially as they

pertain to abuse issues. And finally, she paid an application fee

of $5 and must pay an annual renewal fee of $5.



To help reduce her operating costs, Vicky participates in the

Child Care Food Program, which reimburses day-care providers for

some food costs. To be reimbursed she completes two forms each

month: an attendance sheet verifying the number of children

served meals and a menu chart for each meal served, which must

meet state guidelines. She is reimbursed the following month at

the current standard rate, which currently covers all her food

costs. Vicky's marketing strategy to advertise by word of mouth

has kept her home day-care business at maximum capacity since

1982. Vicky also sets her fees competitively for her location and

estimates her annual gross income is $9,000 with a net income of

about $8,000 after expenses. However, with her various

entitlement and tax write-offs, her taxable income is only about

$1,000.



Licensed Home Care Model



Jennie is a licensed provider who started baby-sitting informally

and became aware of the many programs and tax deductions

available as she became more established in her work. As a

licensed provider, Jennie may care for up to ten children under

the age of 14. No more than six may be younger than kindergarten

age and no more than three may be under 18 months of age.

Licensing requires that her home be inspected annually for

health, safety and program offerings.



The rates she charges are competitive for her community. She

participates in her local Family Home Association Food Program to

subsidize her food costs, following the same procedures as those

in the registered care example. The insurance needed to cover her

family home day-care business is provided by a rider on her

homeowner's policy. Jennie works from 7:30 A.M. to 5:30 P.M.,

Monday through Friday. For tax purposes, she nets approximately

$1,000; however, she realizes significantly more for the reasons

cited in the previous example.



Since Jennie became licensed, she has fenced in her yard, bought

a swing set and an eight-passenger van, and has transformed a

room of her house into a playroom for the children. Also, she

deducts one-third of the utilities from her taxes based on the

square footage of her house devoted to the business. Jennie shops

for toys and equipment at garage sales and discount department

stores. In order to adhere to the state requirements, her home is

inspected annually, the first time by the fire department and

thereafter by the health department. Jennie's marketing strategy

is simple. I don't advertise, she says. I believe that word of

mouth from satisfied parents gets better results. Her perception

as to why parents choose home care is that it is less expensive

than center-based care, the children contract fewer illnesses at

her home and that shy children can easily get lost in the crowd

at a day-care center. She feels that providing a warm home

environment for the children to enjoy while their parents are at

work is beneficial and appealing to families.



The Center-based Business



While the need for day care continues to grow, individuals

interested in providing this service may find it is not a

profitable activity. Day care on a scale that requires more than

one employee can be expensive to provide due to the

caregiver-to-child ratios that are strictly enforced by state

regulators. The potential day-care owner should, therefore, fully

analyze revenues and expenses early in the start-up process to

determine if some form of sponsorship is necessary to cover

costs. An alternative is center-based care that may be provided

through a variety of organizational structures including

corporate- or employer-sponsored centers, franchised business

centers, cooperative centers and nonprofit agency centers.



A typical example illustrates the current income and expense

structure of a day-care center in a mid-size midwest community.

The facility accommodates 10 toddlers, 24 children ages 3 to

school age and 28 kindergartners, attending on a half-day basis

with one-fourth of the children eligible for Social

Rehabilitative Services (SRS) reimbursement for meals.



After total expenses are deducted from total income, this

hypothetical center earns approximately an $8,600 annual profit,

part of which must be used to pay for capital expenditures or

debt retirement (see Table 1).

     ______________________________________________________



                Table 1 -- Income Statement For a

                   Hypothetical Day-care Center



              Income                                Annual

                                                    Amount  



     10 toddlers @ $13/dayx260 days                $ 33,800

     24 3-yr. to school age children @$11.50         71,760

     28 kindergartners @ $10.50                      76,440

     SRS food reimbursement                           7,346

     Total income                                  $189,346



              Expenses                              Annual 

                                                    Amount

     Rent (3600 sq.ft.@$4.00)                     $ 14,400

     Utilities                                       9,600

     Custodian                                       2,400

     Custodial supplies                                600

     Play and art supplies                           1,300

     Kitchen help                                    2,400

     Kitchen supplies                                  250

     Lunch expense                                  20,150

     Snacks                                          9,235

     Building maintenance                            1,500

     Equipment repair                                  300

     Office supplies                                   300

     In-service training                               200

     Insurance                                         800

     Lead teacher salary 3 FTE* 

       40 hrs/wk, @$5/hr                            31,200

     Asst.teacher salary 4 FTE*

       50 hrs/wk, @$4.30                            44,720

     Payroll taxes and insurance est. of 15%        11,388

     Owner's salary                                 30,000

     Total expenses                               $180,743



     * Full time equivalent



     After personnel and food, the center's largest expense

     item is rent and related facilities costs.

     -- Source: KSY-SBI 1988

    ________________________________________________________ 

 

When initial decisions on the facility location and layout are

made, the cost is only one factor that should be considered.

Others are zoning, health and safety, convenience and

availability of existing facilities. In the ideal case, when a

wide range of locations are available, the most important

considerations should be the convenience to parents, the quality

of the neighborhood and zoning restrictions. Ideally, a center

should be located on the approach to the business district of the

city, on the right-hand side of the street and with a covered

carport to make drop-off and pick-up of children as convenient as

possible. Using a building vacated by a business has many

advantages, such as zoning restrictions are usually not a

problem; the basic structure is in place; and parking is

generally available. While an existing building may be otherwise

suitable, health and safety must also be considered. If, for

example, the facility is located in a run-down section of town or

is located near hazardous industrial sites, parents may hesitate

to enroll their children, fearing for their children's

well-being.



The Corporate Center Model



Corporate-sponsored centers have grown phenomenally as companies

realize that they need to address family issues affecting their

employees. Most of the companies that already offer child care

are fairly large corporations but opportunities do exist for

small business entrepreneurs. Other large corporations may be

interested in providing day-care services if properly approached

by an entrepreneur who could take on the responsibility of

setting up and running the center in exchange for the financial

backing and/or other support necessary to get the venture off the

ground. The small business owner would then have the financial

resources needed to get started while the company would have the

benefit of on-site care for its employees.



Corporate-sponsored day care may be either on or off the job

site. On-site day care is the most desirable to employees because

of the convenience. Having the center located in the same

building or complex allows the working parents peace of mind and

the freedom to visit their children during breaks. The

advantages, such as reduced absenteeism and turnover, increased

productivity, and improved morale and employee-employer

relations, increase the cost-effectiveness for the corporate

sponsor.



An example of an employer-sponsored day-care center is the

Employee Center for Young Children (ECYC), Inc., a nonprofit

corporation established in 1980 and funded by Merck and Co., a

New Jersey-based pharmaceutical firm. Recognizing the need for

this type of service for its employees, Merck obtained a $100,000

grant, leased a building and hired a director. Operating revenues

came from fund-raisers and tuition paid by parents. Merck

subsidizes phone, mail and duplicating services and provides an

annual grant for staff development. Current management of the

center is by a board of eleven trustees, six elected by the

members, parents and interested persons, and five elected by the

board of trustees themselves.



Several variations of this corporate-sponsored model exist, such

as the consortium model in which two or more persons or

businesses work together to run the center. In addition,

industrial parks often have center-based care available with

several corporations providing the financial backing for the

operation. Sometimes these centers are labeled cooperatives as

parents are active participants in governing the center's

activities in exchange for providing their time to build and

repair recreational equipment, paint, create bulletin boards and

offer many other services that significantly reduce operational

expenses.



The Franchise Model



Franchise day-care centers are another area of opportunity for

the small business entrepreneur. Under a franchise, a company

that develops a prototype sells to an individual the legal rights

to open and operate centers based on the prototype. The

individual pays a franchise fee to get started and then pays a

percentage of gross income for the ongoing use of the franchise

(see Table 2).

     _______________________________________________________



        Table 2 -- Characteristics of Selected Franchises



                      Total       Roy-                 

     Name of         capital Adv.  al-  #  franchises   Co.

     franchise   Fee  needed fee   ty  '84 '85 '86 '87 owned



     Tegeler     

      Time Day   $25K  $50K   --   --   NA  NA  60  NA   NA

       Care Inc.

     10 Forbes Rd

     Braintree MA



     Lollipop     $35K $70K-  --   --   NA  NA   7  NA   NA

      Daycare Ltd

      10255 E Via

      Linda #2039

      Scottsdale AZ



     Primary Prep $15K $60K   --   --   NA  NA  10  NA   NA

      Inc. 5690

      Roosevelt Blvd.

      Clearwater FL



     Youthland    $20K $50K   5%  $250   1   1   1   1    1

      Academy                      mo.  

      3174 Mack Rd.

      Fairfield OH



     Alphabetland $20K $50K   --  10%   13  14  15  NA    1 

      6 Passaic St.

      Hackensack NJ



     Mary Moppets $75K $40-   --   6%   67  54  NA  NA   41

      2505 W. Hunt-    $50K

      ington Dr.

      Tempe Az



     Child Enrich- NA  $20K   --   --   NA  NA  15  NA   NA

      ment

      6 Passaic St.

      Hackensack NJ



     Source: Annual Franchising 500 Report. Entrepreneur, 1988;

     Show Schedule. Franchise Handbook, 1986-87; and Business

     Opportunities Handbook, 1988.

     _______________________________________________________

 

The franchisor trains the franchisee, sets policy and conducts

audits of the operations of each franchise. The franchisor

provides prototype building and program plans, logos, brochures

and advertisements and, in some cases, will help select the

location, build the building, buy the equipment and otherwise do

much of the set-up work. The franchisor also continually monitors

the franchised centers to ensure compliance with company

standards of quality and management.



From the viewpoint of the prospective entrepreneur, there are

both advantages and disadvantages to a franchise.

Standardization, name recognition and reputation are advantages

because they help to market the center. Standardization of the

educational and/or the day-care program itself appeals to many

parents because they know that their child will be enrolled in a

program that has been designed to meet children's needs. Name

recognition of the franchisor and its reputation can also

influence a parent's decision. For example, a parent who is

looking for day care for the first time may favor a center that

is familiar and that has a reputation of providing good quality

care.



Disadvantages for the franchisee are hidden costs such as

royalties paid to the franchisor, advertising assessments,

requirements to buy materials, equipment or supplies from the

franchisor and legal fees. These requirements are part of the

contract agreement between the franchisor and the franchisee who

operates the day-care center. In general, this agreement includes

the following:



   *  General provisions -- These would include a description of

      the parties involved (franchisee and franchisor), the

      nature of the business of the franchise, the territories

      contained in the franchise, a protection from competition

      clause and clauses stating the promises of both parties.



   *  Start-up provisions -- These must cover the deposit fee and

      how it will be paid, who will provide the equipment and

      facilities, the required training of the applicant, a

      transmission of standards and details for the opening of

      the business.



   *  Operating provisions -- Included here might be information

      about obtaining assistance in purchasing, guidance in

      bookkeeping, management and promotion procedures, standard

      fee and tuition levels, expected performance by franchisee,

      details of reports and royalties, procedure of payment of

      insurance and taxes and confidentiality of disclosures.



   *  Termination provisions -- These would state the terms of

      renewal, the transfer of rights, terminations for cause,

      terminations without cause, obligations on termination,

      resolution of disputes, relationship of parties and other

      miscellaneous provisions (Vaughn, 1974).



The Cooperative Model



Cooperative day-care facilities are typically started by a group

of parents who have a need or desire to have a direct influence

on the kind of care their children receive. Since a cooperative

belongs to the people who use it, the owners are also the

customers of this type of business so that making a profit is not

a goal.



In a day-care cooperative, the parents share in management

decisions and responsibilities. They volunteer their time, work

closely with the staff and set the policies of the center. The

parents also work closely with the director who could be a

cooperative member or hired from outside the membership. A parent

with minimal financial resources interested in getting into the

child-care business on a larger scale than home-based care might

find a cooperative appealing. The opportunity for direct parental

involvement in their children's care can help make the center a

success if properly channeled. Satisfied parents are likely to be

the best form of advertisement, fueling continued growth by

bringing in new members.



However, some possible disadvantages of the cooperative modes are

the following:



   *  Good-intentioned parents may not have the business

      experience to make the difficult decisions of running an

      organization.



   *  The manager may receive confused messages from a board with

      mixed agendas.



   *  The nonprofit mentality does not allow for the accumulation

      of a sufficient cash cushion to weather financial

      difficulties and may lead to loose fiscal controls in the

      areas of tuition collection, expense control and

      supervision of personnel.



 An example of a parent-sponsored co-op is the Childcare

Cooperative at Kansas State University (KSU). It began operation

in August 1985 in response to the increasing need for child care

for the university's staff and students. To be enrolled, a child

must have one family member affiliated with the university. The

center was started as a nonprofit entity, receiving

administrative assistance from the KSU Division of Continuing

Education. To help fund the center, a loan was obtained from the

university and money was allocated by the Student Governing

Association (SGA) from available student fee funds.



A cooperative organizational structure was chosen by the parents

who believed that the co-op structure would provide a superior

educational program for their children. Parents were required to

pay membership dues and to volunteer time for the center's

operation. A board of directors was formed by the parents. The

board has been very involved in fund-raising, building equipment

and maintenance of the facilities.



The licensing requirements set by the state of Kansas and

followed by the center allow the facility to hold a maximum of

223 children; currently, there are 177 children enrolled. The

facility also is inspected on an annual basis by the state. The

daily rate for each child is competitive for the area and

includes transportation to and from area schools.



In January 1987, financial and management problems led to a

reorganization from a parent co-op to an agency center affiliated

with the university's Department of Housing. This department is

now responsible for the center's finances while the child-care

center itself is responsible for the curriculum.



The day-to-day operations of the agency-sponsored center remain

the same as they were under the cooperative structure. The

center, as a nonprofit organization, is eligible for both federal

and state tax exemptions, and recently became eligible for

property tax exemption. The insurance purchased by the center

includes general liability and workmen's compensation and fire

insurance on the building's contents. The buses available for

transportation are state vehicles and are covered by the

university's insurance. Accident insurance is covered by the

children's parents. The center's projected budget for the year

1989 shows income comes from four main sources: tuition, Student

Governing Association (SGA) Childships, Social and Rehabilitative

Services (SRS), and the USDA (see Table 3). The $32,000 SGA

Childship contributes an allocation from the Student Senate to

help needy families afford the day-care center. The allocation

allows the center to be an SRS recipient and also helps those who

do not qualify for SRS funding. The $29,000 from the USDA is a

federal government subsidy for the center's food costs.

     _______________________________________________________



                 Table 3 - Child-care Cooperative

                Projected Income and Expenses, 1989



     Income

     Regular Tuition                        $284,436     73%

     SGA Childship                            32,000      8%

     SRA                                      32,000      8%

     USDA                                     29,000      7%

     Other                                    11,850      3%

     Total                                  $389,286    100%



     Expenses

     Salaries and wages                     $280,000     72%

     Rent                                     24,000      6%

     Food service                             48,000     12%

     Other                                    36,700     10%

     Total                                  $388,700    100%



     Source: KSU

     _______________________________________________________ 



The Agency-sponsored Model



Located in both rural and urban areas, agency day-care operations

serve families of all income levels and are financially supported

by the sponsoring agency. Included are nonprofit early childhood

education programs sponsored by community agencies, such as

church groups, labor unions, community centers and neighborhood

organizations. Agency-sponsored day care may be full day-care

centers or half-day enrichment programs that serve children from

infancy through school age. Some are center-based while others

include a network of day-care homes. Most agencies set up a board

of directors to assist in the development of a business plan, as

well as to retain the right to accept or reject the plan.

Additional support is obtained from tuition and/or government

funds. The break-even point based on the expected number of

children and costs determines the amount of tuition charged,

which should be enough to cover costs and yet be competitive with

rates charged by comparable facilities in the area.



While licensing requirements vary by state, liability insurance

covering both teachers and assistants is mandatory in many

states, as is an annual safety inspection of the center. Setting

up an agency-sponsored day-care center is similar to other models

in that each state and local government has certain regulations

that must be followed, such as the number of children allowed,

the square footage required per child and the zoning regulations.



Normally a church, school or civic organization sponsors the

center with funding from grants, donations, in-kind contributions

and matching funds. Obtaining a suitable facility at low or no

cost is often easier in this situation. Several alternatives are

to rent a vacant home with a large lot for playground space (be

sure to check out the city zoning regulations) or to use a

church, school or civic club facility. Usually the cost of

remodeling is much less expensive than constructing a new

building.



A parochial school-sponsored day-care center in a mid-size town

is one example of an agency-sponsored center. The start-up cost

was financed by a $15,000 grant from the parish, which also

allows rent-free use of the building in which the day care is

conducted. The center also received loans from the diocese and

the Catholic school system in the amount of approximately

$29,000. These funds were used to renovate the building, obtain

equipment and pay salaries and other expenses. Salaries are the

principal operating expense of the center (see Table 4).

Donations provided many of the smaller cost items including toys

and equipment.



     _______________________________________________________



          Table 4 -- Distribution of Operating Expenses

                  for an Agency-sponsored Model



     Salaries                                           66%

     Food and utilities                                 32%

     Bookkeeping costs                       (less than) 1%

     Insurance:

          Property                           (less than) 1%

          Workman's                          (less than) 1%

     Compensation

          Liability and accidental           (less than) 1%  



     Source: KSU- SBI files

     _______________________________________________________

The center hires personnel by advertising positions in newspapers

and through placement centers. All applicants are screened to

ensure that they are qualified and that they meet the job

description. The turnover rate is very high -- most teachers stay

one to two years due to low wages, moving and other circumstances 

-- making it hard to find qualified workers. Wages range from

$3.80 an hour for assistants to $4.65 an hour for lead teachers.



This day-care center currently has 85 children. The

teacher-to-student ratios are dictated by state law, which varies

by state. Most of those who attend the center are from families

with children attending the Catholic school system; however,

other children are accepted.



The agency affiliation -- whether it is a church, school or civic

association -- is a factor considered by parents when choosing

day care. Parents also consider the location of the center, the

convenience of the center (operating hours, part-time care and

availability of transportation services), the quality of the

teachers and educational program, the safety of their children,

the facility itself (the size and the amount of equipment) and,

of course, the fees.

_________________________________________________________________



CONCLUSION



With the increasing demand for child day-care services, many

small business owners now have opportunities to provide quality

services that weren't available in the past. Many programs are

now being established by private organizations to assist the

small business owner in providing quality care. Federal and state

agencies are providing guidance through regulations and offering

help through aid programs. Prospective business owners need only

find the type of day care for which they qualify; and then, by

staying informed of developments in the industry and implementing

good business practices, a successful business can be achieved.

_________________________________________________________________



REFERENCES



A Boom Ahead for Kid-Care Companies? Changing Times, August

1984, pp. 3738.



Babysitting-Good for Business, Management World, 1986,

pp. 1113.



Business Opportunities Handbook, Enterprise Magazines, Inc.,

1988, pp. 4445.



Caldwell, Betty M., Professional Child Care: A Supplement to

Parental Care, Group Care for Young Children. Lexington Books,

1987, pp. 110.



Child Care Cooperatives, National Cooperative Business

Institute, Washington, D.C., 1987.



Childcare Co-ops Are Family Affairs, Everybody's Money, 1985,

pp. 2122.



Child Care Licensing Laws. Kansas Department of Health and

Environment, Amended July 1985.



Child Care: What Parents Want, American Demographics. 1988,

pp. 4647.



Corder, B.F., Legal Issues Affecting Residential Child Care

Workers, Child Welfare, 1984, pp. 217224.



Corporate Child Care: Making an Impact on Productivity, Chain

Store Age Executive, 1985, p. 13.



Durant, Louis Jr., and Kathleen Pullan Watkins, Day Care: A

Source Book. New York: Garland Publishing, Inc., 1987,

pp. 121129.



Facts About the Child Care Food Program in Family Day Care. The

Children's Foundation, Washington, D.C., 1988.



Family Day Care, Kansas State University Cooperative Extension

Service, Manhattan, Kansas, September 1986.



Graser, Rick, Employer-Sponsored Child Care on the Rise,

Current Issues in Day Care: Readings and Resources, 1986,

pp. 4750.



How to Start Your Own Day Care Center. Premier Publishers,

Inc., 1986.



Hoyt, Mary Finch, Good News for Working Moms, Good

Housekeeping, January 1988, pp. 6466.



HRM Update, Personnel Administrator, 1986, p. 22.



Jaisinghani, Vijay T., Ph.D., and Vivian Gunn Morris, Ph.D.,

Child Care In a Family Setting; A Comprehensive Guide to Family

Day Care. Family Care Associates, 1986.



Kansas Regulations for Licensing Preschools and Child Care

Centers. Kansas Department of Health and Environment, Revised May

1, 1987.



Kid's Stuff, Inc., 1987, pp. 127130.



Laws, Regulations, and Procedures for Registration of Family

Day Care Homes. Kansas Department of Health and Environment,

Revised July 1987.



Mission Possible: Meeting Family Demands, Personnel

Administrator, 1987, pp. 7079.



Nelson, Margaret K., Providing Family Day Care: An Analysis of

Home-Based Work, Social Problems, 1988, pp. 7891.



The NEW National Perspective. Washington, D.C., National

Association for Family Day Care, 1987.



Priority Day Care, Small Business Day Care, Bank of America,

1983.



Quality Child Care Makes Good Business Sense. U.S. Small

Business Administration, Washington, D.C., 1989.



Regulations for Licensing Day Care Homes and Group Day Care

Homes for Children. Kansas Department of Health and Environment,

Amended May 1, 1987.



Rice, Frederick H., Marketing Basics for Small Business. Kansas

State University Small Business Development Center, 1986.



Rice, Frederick H. Starting a Home-Based Business. The Kansas

Rural Enterprise Institute, Kansas State University, 1990.



Shaw, Lois B., Childcare Policy in the United States of

America, Childcare and Equal Opportunities. London: HMSO, 1986,

pp. 5461.



Starting Your Own Family Day Care Business. National

Association for Family Care, Washington, D.C., 1988.



Stautberg, Susan, Can Business Afford to Neglect Family Issues?

CPA: The Journal, 1988, pp. 68.



Tax and Record Keeping Information for FDC. National

Association for Family Day Care, Washington, D.C., 1988.



Thompson, Roger, Caring for the Children, Nation's Business,

May 1988, pp. 1825.



U.S. Department of Treasury, Internal Revenue Service. 1984

Federal Income Tax Forms, 1984.



Vaughn, Charles L., Franchising. D.C. Health and Co., 1974,

pp. 2741, 36147.



Wojahn, Ellen, Bringing Up Baby, Inc., November 1988, pp. 6475.



Working Solutions for Working Parents, Management World, 1986,

pp. 810.

_________________________________________________________________



APPENDIX A: ADDRESSES OF STATE REGULATORY AGENCIES



ALABAMA  State Department of Human Resources, 503

Administrative Bldg., Montgomery, AL  36130-1801



ALASKA  Dept. of Health and Social Services, Division of Family

and Youth Services Box H-05 Juneau, AK  99811



ARIZONA  Admin. For Children, Youth & Families, Department of

Economic Security Bldg., 13727 E. McDowell Rd., Phoenix, AZ 

85008



ARKANSAS  Department of Human Services Division of Children and

Family Services, PO Box 1437 Slot 720, Little Rock, AR 72203



CALIFORNIA  Department of Social Services, Community Care

Licensing Division, 744 P St. M.S. 19-50, Sacramento, CA  95814



COLORADO  Division of Family and Children Services, Department of

Social Services, State Social Services Bldg., 1575 Sherman St.

Denver, CO  80203



CONNECTICUT  State Department of Human Resources, 1049 Asylum

Ave. Hartford, CT  06105



DELAWARE  Licensing Services, Dept. of Svcs. for Children, Youth

& Fam., 330 E. 30th St., Wilmington, DE  19802



DISTRICT OF COLUMBIA  Licensing Office, Department of Human

Services, Randall School Bldg., 1st and I Sts., SW, Washington,

DC 20024



FLORIDA  Dept. of Health and Rehab. Services, Children, Youth &

Family Svcs. Program, 1317 Winewood Blvd., Tallahassee, FL  32301



GEORGIA  Div. of Family and Children Services, Department of

Human Resources, 315 Health Bldg., 47 Trinity Ave., SW, Atlanta,

GA 30334-1202



IDAHO  Department of Health and Welfare, Towers Bldg., 450 W.

State St., Boise, ID  83720



ILLINOIS  Dept. of Children and Family Services, 406 E. Monroe

St., Springfield, IL  62706



INDIANA  State Department of Public Welfare, Child

Welfare/Social Svcs. Div., 141 S. Meridian St., 6th Fl.,

Indianapolis, IN  46225



IOWA  Department of Human Services, Hoover State,Office Bldg.,

1300 E. Walnut St., Des Moines, IA  50319



KANSAS  Children in Need of Care/Youth Svcs., Dept. of Social and

Rehab Services, Smith-Wilson Bldg., State Hosp. 2700 W. 6th St.,

Topeka, KS  66606



KENTUCKY  Children's Services Branch, Dept. for Social Services,

Cabinet for Human Resources, Human Rsrcs. Bldg., 6th Fl. W275 E.

Main St., Frankfort, KY  40621



LOUISIANA  Div. of Children, Youth & Fam. Svcs., Dept. of Health

and Human Resources, 1755 Florida Blvd., P.O.Box 4437, Baton

Rouge, LA  70804



MAINE  Division of Child and Family Services, Department of Human

Services, Human Services Bldg., State House, Station 11, Augusta,

ME 04333



MARYLAND  Office for Children and Youth, Executive Department,

1502, State Office Bldg., 301 W. Preston St., Baltimore, MD 

21201



MASSACHUSETTS  Office for Children, 10 West St. Boston, MA  02111



MICHIGAN  Department of Social Services, Commerce Center, 300 S.

Capitol Ave., Lansing, MI  48909



MINNESOTA  Department of Human Services, Human Services Building,

444 Lafayette Rd., St. Paul, MN  55155-3802



MISSISSIPPI  State Department of Health, P.O.Box 1700, Jackson,

MS  39215-1700



MISSOURI  Missouri Division of Family Services, Broadway State

Office Bldg., P.O.Box 88, Jefferson City, MO  65103



MONTANA  Department of Family Services, Box 8005, Helena, MT 

59604



NEBRASKA  Department of Social Services, Box 95026, Lincoln, NE 

68509



NEVADA  Bureau of Services for Child Care, 505 E. King, Room 606,

Carson City, NV  89710



NEW HAMPSHIRE  Department of Human Services, 6 Hazen Dr.,

Concord, NH  03301



NEW JERSEY  Division of Youth and Family Services, Bureau of

Licensing, 1 S. Montgomery St. CN717, Trenton, NJ  08625



NEW MEXICO  Social Services Division, Human Services Department

518, PERA Bldg., P.O. Box 2348, Santa Fe, NM  87503-2348



NEW YORK  State Operations, Department of Social Services, Ten

Eyck Bldg., 9th Fl. 40 N. Pearl St., Albany, NY  12243



NORTH CAROLINA  Child Day Care Section, 1701 Barbour Dr.,

Raleigh, NC  27603-2008



NORTH DAKOTA  Children and Family Services Division, Department

of Human Services State Capitol, Bismarck, ND  58505



OHIO  Department of Human Services, Bureau of Child Care

Services, 30 E. Broad St., Columbus, OH  43221



OKLAHOMA  Department of Human Services, P.O.,Box 25352, Oklahoma

City, OK  73124



OREGON  Children's Services Division, 198 Commercial St., SE

Salem, OR  99210



PENNSYLVANIA  Office of Children, Youth, & Families, Department

of Public Welfare, Health & Welfare Bldg., 1st Fl., Annex

Harrisburg, PA  17102



RHODE ISLAND  Dept. for Children & Their Families, 610 Mount

Pleasant Ave., Providence, RI  02908



SOUTH CAROLINA  Office of Children's Services, Department of

Social Services, North Tower Complex, 1535 Confederate Ave., P.O.

Box 120, Columbia, SC  29202-9988



SOUTH DAKOTA  Child Protective Services, 700,Governor's Dr.,

Pierre, SD  57501



TENNESSEE  Children's Services Division, Office of the Governor,

1600 James K. Polk St. Bldg., 505 Deaderick St., Nashville, TN 

37219



TEXAS  Office of Programs, Department of Human Resources, John H.

Winters Human Svc. Ctr., 701 W. 51st St., Austin, TX  78751



UTAH  Department of Social Services, Office of Licensing, 120 N.

200 W., Salt Lake City, UT  84103



VERMONT  Children's Day Care Unit, Dept. of Social & 

Rehabilitative Svcs., 103 S. Main St., Waterbury, VT  05676



VIRGINIA  Department of Social Services, Division of Licensing,

8007 Discovery Dr., Richmond, VA  23229



WASHINGTON  Div. of Children and Family Services, Dept. of Social

& Health Services, 500-B Modular Bldg. Airdus. Pk., 7580

Armstrong St., Olympia, WA  98501



WEST VIRGINIA Families and Children Unit, Department of Human

Services, B-850 State Office Bldg., 61900 Washington St. E.,

Charleston, WV  25305



WISCONSIN  Dept. of Health & Social Services, Bureau for

Children, Youth & Families, P.O. Box 7851 St., Madison, WI  53707



WYOMING  Dept. of Public Assistance & Soc. Svcs., 383 Hathaway

Bldg., 2300 Capitol Ave., Cheyenne, WY  82002



_________________________________________________________________



APPENDIX B: SUMMARY OF CHILD-CARE LICENSING REQUIREMENTS



State  (1) Regulation     (2) Regulated    (3) Children enrolled 

(4) LFDCH reg'n (5) Liab.insur. (6) Training (7) Exam or TB test

(8) Criminal check



   1             2                  3             4  5  6  7  8

   Reg.        Regulated     Children enrolled

   L R   Ctr.  Home  Tot.    Ctrs.  Home  Total



AK x x    191   383   574                               x  x

AL x     1000  2700  3700   48000   8000  56000      x  x

AR x     1351   558  1909   46000   6000  52000   x     x  x   

AZ x                                              x        x  x

CA x     8623 38902 47525  421116 249959 671075   x  x     x  x

CO x      750  6000  6750   55590  30109  85699   x     x  x  x

CT x     1350  4200  5550   65000  25000  90000   x  x  x

DC x               N/A  N/A                                x

DE x      184  1102  1286   11217   5458  16675   x  x  x  x  x  

FL x     4377  2726  7103  337894                       x     x

GA x x                                            x     x     x

HI   x                                            x        x  x

IA   x   1174  1928  3102   52545  16980  69525   x     x  x  x

ID        128   359   487                         x           x

IL x     2254  5416  7670  115000  38000 153000   x        x  x

IN x      586  1441  2027   42734  10679  53413               x

KS x x                                            x     x  x  x

KY x                                              x  x  x  x  x

LA                                                      x

MA   x   2564  9200 11764  115000  43500 158500            x  x

MD x                                              x        x  x

ME x                                                    x  x  x

MI x     3050 10500 13550   12000  60000 180000   x        x  x

MN x     1200 10000 11200   35000  65000 100000   x     x  x  x

MO x      930  1593  2523   54978  15199  70177            x

MS x                                              x

MT   x    154   769   923    5855          5855   x  x  

NC x x   2872  4627  7499  117433  13446 130879   x     x  x  x  

ND x                                              x        x  x

NE        333  2145  2478   23688  16104  39792   x        x  x

NH x      600   389   989   21700   3300  25000   x     x  x  x

NJ       1913   855  2768  107901   7125 115026         x  x

NM x                                              x     x  x  x

NV x       271  315   586   16775   2112  18887   x  x  x  x  x

NY x                                              x     x  x

OH x      2475    4  2479  120000  12000 132000   x     x 

OK x      1233 1806  3039   62131   9030  71161      x     x

OR   x     560 3200  3760   27000    N/A  27000   x           x

PA x x    2168 4384  6552  118000    N/A 118000   x        x  x

RI         170  500   670   10000   3000  13000         x  x  x 

SC x                                              x        x  x

SD   x      81  432   513    4784   3467   8251   x        x  x

TN x                                              x  x  x  x

TX x x                                            x           x

UT x       245 1842  2087                         x     x  x  x

VA         971 2386  3357   78436    N/A  78436         x  x  x

VT x x     250 1100  1350   12000  10000  22000   x  x  x     x  

WA                                                x  x        x 

WI x      1350 3351  4701   70000  14000  84000      x  x  x  x 

WV                                                      x  x  x

WY x       202  631   833                         x     x



(1)  These states license register or certify family day-care

providers  L=Local; R=Regional; C=county; O=other. LA, NE, NJ,

RI, VA, WA, WV have "O"; AZ, ID, OH, OR, WI have "C"



(2) This is the number of regulated day-care centers and day-care

homes in each state.



(3) This is the number of children enrolled in day-care centers

(including preschools) and in home-based care.



(4) These states have established provisions for Large Family Day

Care Homes (LFDCH).



(5) These states require some providers to have liability

insurance.



(6) These states require some type of provider training.



(7) These states require a physical examination and/or a TB test

for providers.



(8) These states conduct some sort of criminal check on

potential providers.



Some of these responses are from a survey conducted by the Kansas

State University Small Business Development Center Fall 1988. The

rest are from the 1988 Family Day Care Licensing Study by the

Children's Foundation November 1988.

_________________________________________________________________



APPENDIX C: HOW TO WRITE A BUSINESS PLAN



The following pages provide a suggested outline of the material

that should be included in your business plan. Your final plan

may vary according to your needs or because of the individual

requirements of your lender.



What Are the Benefits?



Every business can benefit from the preparation of a carefully

written plan. There are two main purposes for writing that plan:



   1.  To serve as a guide during the lifetime of the business.

       It is the blueprint of your business and will provide you

       with the tools for analysis and change.



   2.  A business plan is a requirement if you are planning to

       seek a loan. It will provide potential lenders with

       detailed information on all aspects of your company's past

       and current operations and provide future projections.

 

Business Plan Outline



I.   Cover sheet



     Serves as the title page of your business plan. It

     should contain the following:



     *  Name of the company

     *  Company address

     *  Company phone number (include area code)

     *  Logo (if you have one)

     *  Names titles addresses phone numbers (include area code)

        of owners

     *  Month and year your plan was issued

     *  Name of preparer

 

II.  Statement of purpose



     (Same as executive summary.) This is the thesis statement

     and includes business plan objectives. Use the key words

     (who, what, where, when, why, how, and how much) to

     briefly tell about the following:

     *  What your company is (also who what where and when).

     *  What your objectives are.

     *  If you need a loan why you need it.

     *  How much you need.

     *  Why you will be successful.

     *  How and when you plan to repay your loan.

 

III. Table of contents



     A page listing the major topics and references.



IV. The business



    Covers the details of your business. Include information

    about your industry in general, and your business in

    particular. Address the following:



    *  Legal structure -- Tell what legal structure you have

       chosen and state reasons for your choice.

    *  Description of the business -- Detail your business. Tell

       about your history present status and future projections.

       Outline your product or service in terms of marketability.

       Project a sense of what you expect to accomplish in the

       next few years.

    *  Products or services -- Give a detailed description of

       your products from raw materials to finished items. Tell

       about your manufacturing process. If you provide a service

       tell what it is how it is provided and why it is unique.

       List future products or services you plan to provide.

    *  Location -- Describe site and why it was chosen. (If

       location is important to your marketing plan focus on this

       in the marketing section below.)

    *  Management -- Describe who is behind the business. For

       each owner tell about responsibilities and abilities.

       Support with resumes.

    *  Personnel -- Who will be doing the work why are they

       qualified what is their wage what are their

       responsibilities?

    *  Methods of record keeping -- What accounting system will

       you use? Who will do your record keeping? Do you have a

       plan to help you use your records in analyzing your

       business?

    *  Insurance -- What kinds of insurance will you need? What

       will these cost and who will you use for a carrier?

    *  Security -- Address security in terms of inventory control

       and theft of information.



V.   Marketing



     Covers the details of your marketing plan. Include

     information about the total market with emphasis on your

     target market. Identify your customers and tell about the

     means to make your product or service available to them.



     *  Target market -- Identify characteristics of your

        customers. Tell how you arrived at your results. Back up

        information with demographics questionnaires and surveys.

        Project size of your market.



     *  Competition -- Evaluate indirect and direct competition.

        Show how you can compete. Evaluate competition in terms

        of location market and business history.



     *  Methods of distribution -- Tell about the manner in which

        products and services will be made available to the

        customer. Back up decisions with statistical reports rate

        sheets etc.

     *  Advertising -- How will your advertising be tailored to

        your target market? Include rate sheets promotional

        material and time lines for your advertising campaign.

     *  Pricing -- Pricing will be determined as a result of

        market research and costing your product or service. Tell

        how you arrived at your pricing structure and back it up

        with materials from your research.

     *  Product design -- Answer key questions regarding product

        design and packaging. Include graphics and proprietary

        rights information.

     *  Timing of market entry -- Tell when you plan to enter the

        market and how you arrived at your decision.

     *  Location -- If your choice of location is related to

        target market cover it in this section of your business   

        plan. (See location in the business section of this

        outline.)

     *  Industry trends -- Give current trends project how the

        market may change and what you plan to do to keep up.

 

VI.  Financial documents



     These are the records used to show past, current and

     projected finances. The following are the major documents

     you will want to include in your business plan. The work is

     easier if these are done in the order presented.



     *  Summary of financial needs -- This is an outline

        indicating why you are applying for a loan and how much

        you need.

     *  Sources and uses of funds statement -- It will be         

        necessary for you to tell how you intend to disperse the

        loan funds. Back up your statement with supporting data.

     *  Cash flow statement (budget) -- This document projects

        what your business plan means in terms of dollars. It

        shows cash inflow and outflow over a period of time and

        is used for internal planning.

     *  Cash flow statements show both how much and when cash

        must flow in and out of your business.

     *  Three-year income projection -- A pro forma income

        statement showing your projections for your company for

        the next three years. Use the pro forma cash flow

        statement for the first year's figures and project the

        next according to economic and industry trends.

     *  Break-even analysis -- The break-even point is when a

        company's expenses exactly match the sales or service

        volume. It can be expressed in total dollars or revenue

        exactly offset by total expenses or total units of

        production (cost of which exactly equals the income

        derived by their sales). This analysis can be done either

        mathematically or graphically.



        Note: The following are actual performance statements

        reflecting the activity of your business in the past. If

        you are a new business owner your financial section will

        end here and you will add a personal financial history.

        If you are an established business you will include the

        actual performance statements that follow.



     *  Balance sheet -- Shows the condition of the business as

        of a fixed date. It is a picture of your firm's financial

        condition at a particular moment and will show you

        whether your financial position is strong or weak. It is

        usually done at the close of an accounting period and

        contains assets liabilities and net worth. 

     *  Income (profit and loss) statement -- Shows your business

        financial activity over a period of time (monthly

        annually). It is a moving picture showing what has

        happened in your business and is an excellent tool for

        assessing your business. Your ledger is closed and

        balanced and the revenue and expense totals transferred

        to this statement.

     *  Business financial history -- This is a summary of

        financial information about your company from its start

        to the present. The business financial history and loan

        application are usually the same. If you have completed

        the rest of the financial section you should be able to

        transfer all the needed information to this document.



VII. Supporting documents



     These are the records that back up the statements and

     decisions made in the three main parts of your business

     plan. Those most commonly included are as follows:



     *  Personal resumes -- Should be limited to one page and

        include work history educational background professional

        affiliations and honors and special skills.

     *  Personal financial statement -- A statement of personal

        assets and liabilities. For a new business owner this

        will be part of your financial section.

     *  Credit reports -- Business and personal from suppliers or

        wholesalers credit bureaus and banks.

     *  Copies of leases -- All agreements currently in force

        between your company and a leasing agency.

     *  Letters of reference -- Letters recommending you as being

        a reputable and reliable business person worthy of being

        considered a good risk. (Include both business and

        personal references.)

     *  Contracts -- Include all business contracts both

        completed and currently in force.

     *  Legal documents -- All legal papers pertaining to your

        legal structure proprietary rights insurance titles etc.

     *  Miscellaneous documents -- All other documents that have

        been referred to but are not included in the main body of

        the plan (e.g. location plans demographics advertising

        plan etc.).



Putting Your Plan Together



When you are finished: Your business plan should look

professional, but the lender needs to know that it was done by

you. A business plan will be the best indicator he or she has to

judge your potential for success. It should be no more than 30 to

40 pages long. Include only the supporting documents that will be

of immediate interest to your potential lender. Keep the others

in your own copy where they will be available on short notice.

Have copies of your plan bound at your local print shop, or with

a blue, black or brown cover purchased from the stationery store.

Make copies for yourself and each lender you wish to approach. Do

not give out too many copies at once, and keep track of each

copy. If your loan is refused, be sure to retrieve your business

plan. For a more detailed explanation of each section of the

business plan outline, see SBA's publication, How to Write a

Business Plan, which includes step-by-step directions and sample

sections of actual business plans. Also available from the SBA is

a VHS videotape and workbook, The Business Plan: Your Roadmap for

Success.

_________________________________________________________________



APPENDIX D: MONTHLY CASH FLOW PROJECTION



This is a form which cannot be reproduced in .txt format.

_________________________________________________________________



APPENDIX E: INFORMATION RESOURCES



U.S. Small Business Administration (SBA)



The SBA offers an extensive selection of information on most

business management topics, from how to start a business to

exporting your products.



SBA has offices throughout the country. Consult the U.S. 

Government section in your telephone directory for the office

nearest you. SBA offers a number of programs and services,

including training and educational programs, counseling services,

financial programs and contract assistance. Ask about



     *     SCORE: Counselors to Americas Small Business, a 

           national organization sponsored by SBA of over 11,000

           volunteer business executives who provide free

           counseling, workshops and seminars to prospective and

           existing small business people.  Free online counseling

           and training at www.score.org. 



     *     Small Business Development Centers (SBDCs), sponsored

           by the SBA in partnership with state governments, the

           educational community and the private sector. They

           provide assistance, counseling and training to 

           prospective and existing business people.



     *     Womens Business Centers (WBCs), sponsored by the SBA  

           in partnership with local non-government organizations

           across the nation. Centers are geared specifically to 

           provide training for women in finance, management,

           marketing, procurement and the Internet.



For more information about SBA business development programs and

services call the SBA Small Business Answer Desk at 1-800-U-ASK-

SBA (827-5722) or visit our website, www.sba.gov. 



Other U.S. Government Resources



Many publications on business management and other related topics

are available from the Government Printing Office (GPO). GPO

bookstores are located in 24 major cities and are listed in the

Yellow Pages under the bookstore heading. Find a Catalog of

Government Publications at http://catalog.gpo.gov/F 



Many federal agencies offer Websites and publications of interest 

to small businesses. There is a nominal fee for some, but most 

are free. Below is a selected list of government agencies that 

provide publications and other services targeted to small 

businesses. To get their publications, contact the regional 

offices listed in the telephone directory or write to the 

addresses below:



Federal Citizen Information Center (FCIC)

Http://www.pueblo.gsa.gov 

1-800-333-4636

The CIO offers a consumer information catalog of federal

publications.



Consumer Product Safety Commission (CPSC)

Publications Request

Washington, DC 20207

http://www.cpsc.gov/cpscpub/pubs/pub_idx.html 

The CPSC offers guidelines for product safety requirements.



U.S. Department of Agriculture (USDA)

12th Street and Independence Avenue, SW

Washington, DC 20250

http://www.usda.gov 

The USDA offers publications on selling to the USDA. Publications

and programs on entrepreneurship are also available through 

county extension offices nationwide.



U.S. Department of Commerce (DOC)

Office of Business Liaison

14th Street and Constitution Avenue, NW

Washington, DC 20230

http://www.osec.doc.gov/obl/ 

DOC's Business Liaison Center provides listings of business

opportunities available in the federal government. This service

also will refer businesses to different programs and services in

the DOC and other federal agencies.



U.S. Department of Health and Human Services (HHS)

Substance Abuse and Mental Health Services Administration

1 Choke Cherry Road

Rockville, MD 20857

http://www.workplace.samhsa.gov 

Helpline: 1-800-workplace. Provides information on Employee

Assistance Programs Drug, Alcohol and other Substance Abuse.



U.S. Department of Labor (DOL)

Employment Standards Administration

200 Constitution Avenue, NW

Washington, DC 20210

The DOL offers publications on compliance with labor laws.



U.S. Department of Treasury

Internal Revenue Service (IRS)

1500 Pennsylvania Avenue NW

Washington DC 20230

http://www.irs.gov/business/index.html 

The IRS offers information on tax requirements for small

businesses.



U.S. Environmental Protection Agency (EPA)

Small Business Ombudsman

1200 Pennsylvania Avenue NW

Washington, DC 20480

http://epa.gov/sbo

Hotline: 1-800-368-5888

The EPA offers more than 100 publications designed to help small

businesses understand how they can comply with EPA regulations.



U.S. Food and Drug Administration (FDA)

5600 Fishers Lane

Rockville MD 20857-0001

http://www.fda.gov

Hotline: 1-888-463-6332

The FDA offers information on packaging and labeling requirements

for food and food-related products.



For More Information



A librarian can help you locate the specific information you need

in reference books. Most libraries have a variety of directories,

indexes and encyclopedias that cover many business topics. They

also have other resources, such as



     *     Trade association information

           Ask the librarian to show you a directory of trade

           associations. Associations provide a valuable network

           of resources to their members through publications 

           and services such as newsletters, conferences and

           seminars.



     *     Books

           Many guidebooks, textbooks and manuals on small

           business are published annually. To find the names of

           books not in your local library check Books In Print,

           a directory of books currently available from

           publishers.



     *     Magazine and newspaper articles

           Business and professional magazines provide 

           information that is more current than that found in

           books and textbooks. There are a number of indexes to

           help you find specific articles in periodicals.



      *    Internet Search Engines



In addition to books and magazines, many libraries offer free

workshops, free access to computers and the Internet, lend 

skill-building tapes and have catalogues and brochures 

describing continuing education opportunities.

