320: How Can Childcare Centers Thrive Without Financial Bailouts?

In this episode of Childcare Conversations, you’ll feel like you’re sitting down with two wise friends over coffee. Kate and Carrie get real about the financial ups and downs of running a childcare center, think about unexpected repairs, snow days, and the tricky balance between personal and business finances. They share smart strategies for building resilience, keeping staff in the loop, and planning for the unexpected. 

Plus, there’s a sneak peek at their upcoming summit packed with expert advice. It’s a resourceful, honest chat for anyone navigating the world of childcare business! 

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Transcript

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Marie 00:00:00  Welcome to Child Care conversations with Kate and Kerry.

Kate 00:00:06  Building profitable childcare centres without bailout and without burnout. Kerry, why do we need to get owners to stop bailing out their programs? Because we want them to not bankrupt themselves. I mean, I did that, I definitely put in money that should have been spent elsewhere in my life, and I put it into the center, or centers at various times. But I think part of the issue is, and I've talked about this on the podcast before, and so, you know, this is a squeaky wheel for me. But this whole discomfort with letting people fail and learn from that and move forward. Like failure that you learn from is not failure. It's the first 52 times a kid tried to crawl, right? They tried and they tried and they didn't get anywhere. And then they fell down, and then they went backwards. And, you know, all of that happened. And people are like, cool. Once you learn how to walk, we're not letting you fail anymore.

Kate 00:01:20  And, yeah, I get that. It's different when it's your money on the line than when it's somebody walking. But people can't learn if they don't have any stress. Like, you learn through the stress, and your school is going to go through stress periods where enrollment is down and you have to work with your team, not come in and swing in on a vine like Tarzan and magically make everything better and then swing back out. You've got to work with the team. That's really hard. And you and I have a couple of clients like this who have more than one business and, you know, as a household or as a person, you know. Money is not really an object. And so sometimes we get that director or even the staff who are like, well, why does it matter that we're down 15 kids? You've got plenty of money to handle the bank accounts. And and so that's exactly what happens, right? The the owner comes in and figures out the budget instead of making the hard calls with staff, you know, teaching the staff, maybe even teaching the leadership what it means to, you know, staff based on ratios, perhaps versus staffing because you like everybody and because everybody wants their full time hours.

Kate 00:02:50  And so hopefully during the next, you know, 15 minutes or so, Kerry and I will kind of have this conversation. And if you're an owner listening to this, we're not telling you that you can't. Hopefully we will get you to think about maybe come up with some other ways. One of the biggest ways is that vocabulary piece. And that also goes both ways. Your vocabulary, how you come dressed, how you present yourself. So if you are coming in, always, talking about new trips or new this or new that, and meanwhile in the next breath, you're telling your staff they have to, you know, trim the budget or whatever. There's a disconnect in your staff's head. I don't think there's a disconnect. I think that they're like, to heck with you. You go to the Bahamas. I'm not sending anybody home early because our ratios are down. If you can afford a trip to the Bahamas, you can afford to pay this person for the entire amount of time they were scheduled.

Kate 00:03:59  Well, but I do think it. But I do think it's a disconnect. I think it's a disconnect because I think your staff, your leadership need to understand a business, a business budget and what it means to break even and cover your costs. Yes, but because you haven't communicated that, and because there's this thought that if the owner or if the board can afford nice things, then it's not a big deal if we're having a financial hard time. So we see this a lot of times with our programs that are in non-profits, that are in churches and stuff like that, and they're like, you just had a capital campaign. You can't tell me that. We can't afford to have Susie work her whole 35 hours this week. You just did a capital campaign, and you put it out in the newspaper that you raised $8 million. If you raised $8 million, Susie can work the 35 hours. But the fact that the church has the 35, the the whatever million. I said, is different than the childcare that maybe it's own separate nonprofits, that church or that that is a mission of the church.

Kate 00:05:14  And if it keeps being a huge drain on the finances, they're going to set up a soup kitchen and close down the child care center. That's why. So that's why like.

Carrie 00:05:23  So today, our goal is to have this conversation about the owner and the director disconnect specifically about building profit. And sometimes I think profit comes out is almost a dirty word. I think that and and we've run into this a lot with directors who do what I joke and call and back of the envelope math. Right. So they like, do a headcount and they know what you're published, tuition is on your website and boom, they think they know how many, you know how much money you're bringing in and how you know how big your bank account must be. But, you know, let's talk realism. Carrie, you were an owner. You had four locations. Yeah. You know, when you had 100, you know, let's just go. We're making numbers easy. 100 kids, even if.

Kate 00:06:11  The published.

Carrie 00:06:11  Rate was $500, was all 100 kids paying $100?

Kate 00:06:16  Absolutely not. Because I had discounts for my employees. And then, of course, I had subsidy kids. And depending on the campus, I also had some discounts for large employers in the area or for multiple kids. So households that had four children, they all four children did not pay full price. Because I'm a compassionate human being and I'm like, I had some of the highest rates. And so I knew it was a full more than a full time income for most people to have two kids. And if you have four, I'm going to give you some discount. And so, you know, I would say, I don't know, it's probably not as high as 50% of the kids had some sort of discount, but it definitely felt that way some months. Well.

Carrie 00:07:06  Especially because there were times in your ownership cycle that staff even got free tuition. Yeah. And so my favorite though is when they look at that number. So they're looking they're like, oh you got 100 kids.

Carrie 00:07:20  They all pay 500 bucks. Boom. They know how much money's coming in every month. But in reality you might have 25% that are paying that full tuition. And then you've got all these other rates from zero. If you give free tuition to your staff to maybe 90% of the published rate. Like so, maybe you do a 10% discount on each child in a family. Right. So so we've got owners who aren't clear because nobody they think, well, I'm the only one that handles the finances, but that finance, that profit determines so much. I mean, Carrie, how many things do you determine as an owner based on profit?

Kate 00:08:04  I mean, pretty much everything. whether we can take on an additional school because we have a waiting list that is three years long. And whether, you know, because obviously there's a need and people like our care.

Carrie 00:08:16  But as a director, I don't care if you open another school. I want to know what what's mean to my school today?

Kate 00:08:21  Yeah, they do, because they're tired of getting phone calls from the people on the waiting list.

Kate 00:08:25  but also, it determines whether we can replace the equipment on the playground. It depends on whether we can hire another member of the admin team. So it's not just the director doing it, it's the director and assistant director. And maybe you can have a curriculum coordinator or an enrollment specialist, right. Who does all of the dealing with the parents and the people on the waiting list? or can I bring on somebody who's doing Spanish language classes with the kids, and they come in and they do an hour in each of our classrooms every week. or can I replace equipment or. I always talk about googly eyes, but you can have a supply of googly eyes, and you can have all the yarn you want. When?

Carrie 00:09:17  What about what about staff pay raises? Does that does that.

Kate 00:09:20  Determine you want to give staff pay raises? Oh, okay. If I have the money in the budget, we can do that. And if I don't have the money in the budget because 50% of the kids are coming at a discount, then I can't afford to give much in the way of raises.

Kate 00:09:38  I might be able to give inflation based raises, but I can't give any more than that.

Carrie 00:09:43  But even that it's even not just it's not so much the budget, right? Because it could be in the budget, but did it actually come in the door. Right.

Kate 00:09:50  It the cash flow. Yeah. It depends on what's in the cash flow. and I think it I've had several directors who had the feeling that if somebody was scheduled for 35 hours, that they needed to give that person 35 hours every week, even if that person came in two hours late one day because their car wouldn't start, they would help them make up those two hours. No, ma'am. No, ma'am. They didn't come in for two hours. They're at 33 hours if I need them. That entire 33 hours. And I again, I can hear in my inner ear the people going, well. But that's what we contracted. Okay. If Texas isn't at real estate and contracts are baloney. And I didn't do them.

Kate 00:10:39  But even if you had a contract, it says up to that number of hours.

Carrie 00:10:44  But it's also you. You asked them kind of. You told them when they were supposed to be there and they chose not to be there. Right. But but that's I mean, that has to be I mean, on both ends. Right? Because when you get that, you also can turn that around to the. Because we know this happens because we had it happen where we would have folks who everybody clocked in a couple of minutes early, like 10 or 15 minutes early, and everybody chatted at the end of their shift and therefore clocked it out of their shift. And I know that this is I mean, I got to be careful and go watch the clock on you, because if I'm not careful, you're going to get into a soapbox on theft, because that's exactly what it was. If I didn't tell you to clock like I tell everybody, you know, you need to be clocking in 10 to 15 minutes before your shift starts.

Carrie 00:11:29  That's not 30 minutes, and it's not 30 minutes afterwards because you were talking to your buddy. And so if you're if I've got you scheduled for 40 hours a week, and now all of a sudden you've got an hour a day, an additional time, it comes out as overtime.

Kate 00:11:48  Yeah. And I think the issue is how do owners and directors talk about this? It's that making sure we have the same language. So if profit is a word that makes your director's eyeball twitch, then don't use that term. Say budget or say it's. We do not have the money to give the raises we want unless and so make it a, you know, an if then statement. If we can keep expenses to here and revenue here, you know, enrollment here, then we can afford to give raises at this rate, or we can afford to do $3,000 worth of updates to the playground outside of the new fall surface. Right? It's that whole giving people that if then I think works really well, if again, that whole profit word is making people's eyeballs twitch, find ways to talk about it.

Carrie 00:12:50  Absolutely. So if you aren't sure how to talk about it, I mean, when's the last time you had fun at a staff meeting. So even if you don't use real numbers, even if you just pulled out board games, pull out the board game life, pull out the board game monopoly and just play for a while. And then after everybody's had a chance to play one or both of those games, start talking about even things like, okay, so currently in the last month or so, you've been exposed to probably some, I don't know, maybe ice or bad weather if you are in the South. And so as a result you might have been closed one, 2 or 3 days, maybe even a whole week. If you're closed for a whole week, the parents aren't planning to pay you. If you're closed for a whole week. Subsidy is not necessarily going to pay you in most states. So all of a sudden you have a week where you have no income. But Kerry, is your bank going to let you not pay your mortgage for that week?

Kate 00:13:52  No, the utilities were going to keep having to pay.

Kate 00:13:56  The staff are going to want to be paid. All of those expenses continue, and if you have a well written handbook, the parents will be paying as well and you can decide to give them a discount. But that's entirely on. Really the owner like that is not a director.

Carrie 00:14:15  And so so and so that's an owner risk. So. Right. Those are the kind. That's why I'm saying like to me that's one of that. Like this is a perfect opportunity to to have a one on one conversation or a one on three a, an owner and leadership conversation. And just be really clear, because if you happen to lose power, that means you probably lost food. And that's an expense, right? If you add any damage, you have to get that fixed. That's an expense.

Kate 00:14:43  And so where are those classrooms? Where are those kids going to be while those rooms are being repaired? Because you can't just do it on the weekend. I mean, if if you had a pipe burst in the ceiling.

Kate 00:14:57  Then you have to take down the ceiling tiles or the ceiling. You have to repair that. And if I have to hire people over the weekend, they're going to charge me time and a half if I can even get them. And it's probably more than a two day job, because we've also got to dry out the whole building or the rooms that were affected. So I now have to rent a portable or move those kids into. Maybe you have a multi-purpose room. If you do, that's great, but a lot of programs don't have a multi-purpose room. So where does that classroom full of kids go?

Carrie 00:15:34  Well, unfortunately.

Kate 00:15:35  Room from the church down the road.

Carrie 00:15:37  Or they're like a lot of our other programs, you probably had extra space. And so now you're trying to figure out, but you've got teachers, now you've got too many teachers. Yeah, you've got you've got ratios that are at maybe state minimum standards, but your staff are a little grumpy about it, right? Like there's all kinds of things that happen.

Carrie 00:15:56  but situations like this are the perfect time to have these open dialogues with your staff and to help them understand. Yes, we have this. And so, you know, I want to continue to pay everybody, but here's what I need everybody to do over the course of the next month when I'm bringing in tours. And I want to fill the last four, but last four seats because my expenses the month before were double expected. You guys need to be really welcoming. You need to be like, oh, we love it here. Please come join our program. and I think even if people just play basic monopoly in basic life, they see how things can happen and your income can change.

Kate 00:16:44  Yeah, I think I think that that explaining the risk profile, not everything in the risk profile, but that you have issues of natural disasters, changes in the economy. Air conditioners going out in the middle of the summer. Heating going out in the middle of the winter, all those kinds of things. And that there has to be money saved away for those things.

Kate 00:17:10  And if they say, but you and your spouse have plenty of money, that is our money for our retirement. That is not the school's money. The school has to handle its own money, just like you're, you know, I guess this is I'm a mom. And so the conversation of I may have plenty of money, but if you're a grown adult who, you know, came from my household, my money is not your money. So it's the same thing. The business is money is not the owner's money. It is the business's money. And your your 20 something kid can't expect to be able to have everything they had when they lived at home and they were using your money. They have to figure that out.

Carrie 00:18:01  I think that's a great example, especially again, if we're thinking about this scenario, especially if there were schools that were closed. Because chances are, if you've got staff, some of those staff probably had relatives, significant others children, somebody who was working, who didn't get paid because of the ice storm.

Carrie 00:18:21  Yeah. And I think just kind of pulling it back to them, go, hey, you know, did you did you and your significant other or your household, did everybody in your household make all their money this past week? Oh, no. My husband did get called into work and he gets paid hourly. Okay. And did your electricity maybe even be a little higher this week? Yeah, it was higher. Okay. So how did you make up for that? Oh, well, he now knows he's got to go pick up an extra shift if he can. He's going to try to get some overtime. Okay great. Same thing with my same thing with the business. Right. So the business now has to figure out how to work overtime. And that could be exactly what it does, right? Maybe all of a sudden we're going to have a whole bunch of spring break stuff that we hadn't originally planned to do.

Kate 00:19:06  Or maybe you guys are going to have some evening and weekend care so that families that are having to deal with remodeling, you know, repair work on their houses because of damage, because of the storms, have a place for those kids to be.

Kate 00:19:23  I think that's a way for you to have some overtime. Just notify your insurance and notify licensing before you add those. Okay. We're going to be safe. We're going to moderate our risk by making sure insurance and licensing know. But yes, if they're saying, yeah, we've got some people in our lives that are now working overtime go great. So the school is now going to work overtime. Let's brainstorm. And again, let other people give you ideas for how to brainstorm for how to work overtime. This does not all have to be the director. It doesn't all have to be the owner. It can be the whole team or all of the leadership team. Like if your team is 100 people, maybe not the whole team, but at least the leadership team.

Carrie 00:20:09  And it should be. I mean, this is how you get buy in, and it's also how you get resentment. If you haven't had this conversation with the leadership team and the staff, and all of a sudden everybody's being told they now have to work one weekend a month for the next two months, they're going to be a little grumpy because they don't understand why all of a sudden you're open on Saturdays.

Carrie 00:20:30  You've never been open before on Saturdays before. Why are we opening 1 or 2 evenings a week? We've never done that before. Does the community have the need? Does the business need the revenue? Right? Both of those are so totally, totally true. All right, so this is just part of those difficult conversations that sometimes need to happen when you are aiming to have a profitable business and so building a profitable childcare center is not a nasty word. Carrie. If people want to know more, what should they be doing?

Kate 00:21:03  Well, I was going to say it's a necessary thing if we want this business to continue for the next six months, the next six years, the next six decades, you have to be profitable. If you're not profitable, you're not going to be around in six months. So that is very important. So Kate and I are hosting a profitable. Blah blah blah blah blah blah blah blah.

Carrie 00:21:26  A summit summit.

Kate 00:21:28  A virtual summit that is live, a live virtual summit.

Kate 00:21:31  We do have some special recorded guests that are available if you are doing our VIP program. So some people couldn't make it live. And so they've recorded stuff. And the only way you can get those and that's, you know, I'm just going to give one secret away. Okay.

Carrie 00:21:47  Nope.

Kate 00:21:48  No secrets. Okay. You have to go to the page. if you're listening to this later. I'm sorry you missed this summit. There will be other sites, but we think it's important to occasionally get together and bring experts from around the field together. Something that you don't have to spend $2,000 to go to because the conferences are great, but sometimes we need something where we can do it in our program, and we don't have to go anywhere or at your house if you're, you know, at your house or at your program. So we're doing a virtual summit. We've bringing in experts from all over the industry, and we will be doing this at least once a year. if there are more needs, because there's a lot of chaos like there was at the end of last year and beginning of this year with all the storms and all the other things, then we'll probably do them more often, but at least once a year.

Carrie 00:22:49  All right. So if you are listening to our podcast and you are new to our podcast, thank you for joining Cate and Kerry at Child Care Conversations. Go to our website, Childcare conversations.com and click subscribe to our newsletter. It's a little pop up and when you subscribe to our newsletter, you get emails from us twice a week. Because if you didn't know, we do drop episodes twice a week and we look forward to seeing you in a couple of days.

Marie 00:23:16  Thanks for tuning in. We love bringing you real talk and fresh insight from the world of early childhood education. Be sure to follow us on social media to stay connected and catch all of the latest episodes. And if you're planning a conference, training or special event, Kate and Kerry would love to speak to your audience. You can learn more about their keynote sessions and workshops at Kate and Kerry. If you learned something today. Share the show and leave us a review below. We'll see you next time on Child Care Conversations.