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Business support guidance for childcare providers

Drafting a business plan

Drafting a business plan does not have to be a complex process. The list below explains the key areas that a plan should include.

Business plan format

Include an introductory page at the front of the plan to provide all of the necessary contact details including names of key personnel, addresses, telephone, fax, mobile numbers, email addresses and a web page address if applicable.

The executive summary should be your sales pitch of the plan. It should be written in such a way as to encourage the reader to want to read on.

It should contain a brief summary of the reasons why the plan has been drafted comprising 5 or 6 paragraphs at most and it should fit ideally on to 1 page of A4 paper.

The paragraphs should “cherry pick” the key points from the plan and could cover areas such as:

  • the purpose of the plan
  • setting services
  • the market opportunity
  • the management team
  • details of track record to date, if any
  • financial projections
  • funding requirements, if any

If this is a finance-raising business plan please state in the first paragraph of the executive summary how much you are seeking, what the money is for and what kind of finance you think might be the most appropriate.

Include a brief potted history stating when the setting was formed and outline any key moments in the past.

Key moments could include times of fluctuating performance, changes of key personnel and actions taken.

In summary brief comments explaining how the setting has progressed from where it started to where it is today.

You will need to provide bullet points relating to your objectives and strategy.

a) Objectives

Provide bullet points detailing the setting's objectives to cover the next 3 years.

For example:

  • to grow the setting occupancy by x% per annum over the next 3 years
  • to expand childcare provision to capitalise on an identified opportunity in the locality
  • to improve the staff costs to income ratio from x% to y%

b) Strategy

Provide further bullet points stating the key elements of the setting’s strategy.

What will the setting do in order to achieve the above objectives? What are the reasons why this particular course has been chosen?

What services are offered currently and what changes, if any, are planned for the future?

In particular:

  • how many places are offered for each setting?
  • what is the current occupancy level?
  • comments on recent Ofsted reports
  • brief details of the premises, staffing and key operational issues
  • any other comments if appropriate and relevant

The paragraphs covering the executive summary, the local demand for childcare, the management team and the financial summary are generally the most important elements of most business plans.

Within this paragraph you need to demonstrate your knowledge of the local area and the need for childcare in that area and the fact that your setting will be and will continue to be successful.

Commentary could include:

  • key research information on the local demand for childcare
  • details of current providers in the locality
  • details of how quality is measured
  • critical success factors - what is it about the setting’s services that are so special? This could be for example its location, quality of service, lack of competition and facilities offered
  • the benefits and drawbacks of the current location

Include a SWOT (strengths, weaknesses, opportunities and threats) analysis for the setting.

Typical areas and examples to cover are:

5.1 Strengths

Below are some typical examples of setting strengths which might help (some may not apply to your setting; there may also be other strengths which do apply that are not covered):

  • positive cash flow
  • growing income and profitability
  • a good local reputation and strong brand name
  • an established customer base
  • quality services
  • good or excellent Ofsted report
  • management strength
  • the ability to make quick decisions
  • good motivation and morale
  • efficient administration
  • skilled employees and effective training and development
  • good premises and equipment

5.2 Weaknesses

Some typical examples of weaknesses are:

  • losses incurred leading to poor cash flow
  • undercapitalised
  • poor or unacceptable Ofsted rating
  • unresponsive attitudes to customer requirements
  • high child turnover
  • high staff turnover
  • strong local competition
  • poor planning and monitoring
  • failure to delegate appropriately and train successors
  • expertise locked up in a few key personnel
  • inability to take outside advice
  • poor location and run down premises
  • outdated equipment

5.3 Opportunities

Some typical examples of opportunities are:

  • deterioration in a competitor’s performance
  • improved access to potential new customers and markets. For example, new housing in the area
  • word of mouth recommendations from existing parents
  • the introduction of sound financial backing
  • political, legislative or regulatory change
  • economic trends
  • social developments

5.4 Threats

Some typical examples of threats are:

  • improved services from local competitors
  • key personnel leaving
  • lenders reducing credit lines
  • rent reviews
  • legal action
  • political, legislative or regulatory change
  • economic trends
  • social developments
  • new technology

Key issues are centred around how you will market and raise awareness of your setting.

Some issues to consider are:

  • is the setting high quality and high price?
  • has the setting got a good or excellent Ofsted rating?
  • what unique selling features do you have, if any?
  • explain how price sensitive your services are
  • look at each service offered
  • identify where you will make your profits and where there is scope to increase margins or sales
  • what kind of marketing has been or will be undertaken? This could include for example; direct marketing, advertising, PR - explain which method you will be using and why it is right for your setting
  • what level of selling activity will be done and does this relate to the planned increase in sales levels?

The quality of the management team will drive the business and ensure that it achieves its objectives.

Don’t hold back, if you have skills then state them clearly here.

Brief paragraph summaries are suggested below with reference to full CVs, if provided, in the appendices:

  • details of the setting's structure with comments
  • key personnel details to include background, skills, experience and achievements to date. (Essentially mini CVs to explain why these key people are going to achieve the setting’s objectives)
  • details of any recruitment or training plan with time scales and costs

The plan should contain 2 years’ historical accounts, if available, together with forecasts to cover at least 2 years ahead.

The forecasts should include predictions of future income and expenditure and cash flow if possible. If any help is needed with preparing the forecasts, then please email [email protected].

In this section you are adding your comments to the recent figures and you should specifically address:

  • any recent trends in income, costs and profits generated or losses incurred
  • commentary on the forecasts for, at least, 2 years ahead including the underlying assumptions - specifically, state how the predicted income will be achieved and how costs will be managed
  • consider including a sensitivity analysis for example; what happens if occupancy levels fall by 10%
  • comment on any financial requirement that has been identified and how this will be funded

Include any supplementary information which does not form part of the main plan.

It is not essential to include anything here but do so if you believe that it strengthens your case. Information that you might include could be:

  • management CVs
  • market research data
  • product literature examples
  • other summaries relevant to the proposal

Financial planning and control – setting budget and cash flow forecasts

Once your business plan has been written and clear plans have been set out for the future, financial forecasts can then be drafted which summarise, in financial terms, what this will mean for your setting.

Financial planning and control can be split into 3 key areas.

1. Budgeting

  • Setting targets for income and expenditure for the next 12 months
  • Income forecasts will normally start from information such as planned opening hours,
  • The number and ages of the children likely to attend and fee income rates
  • Cost forecasts will be calculated from the number of staff needed, their hourly rates, hours worked, rent and rates payable
  • Ultimately the budget set will generate a profit and loss forecast

2. Financial forecasts

Profit and loss forecasts

  • Summarise the income and expenditure likely for the setting for 2 to 3 years ahead
  • Income is shown when it is earned by services offered, costs are included as they relate to that income and so a monthly forecast and annual profit or loss can be predicted

Cash flow forecasts

  • These are related to the profit and loss forecasts but instead of forecasting income and expenditure they predict when the cash is likely to be received into and paid out of the setting’s bank account
  • The bottom line of a cash flow forecast predicts what is likely to happen to the setting’s bank balance
  • Good cash flow forecasting is crucial to make sure that the setting does not run out of cash

3. Monitoring performance

  • As part of the budgeting process you are setting targets for what should be achieved
  • With monitoring performance, you are comparing actual levels of income and expenditure with the forecast, investigating and correcting any variances, feeding back the results and if necessary, amending the plan
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Last updated 30 September 2021