Painter/businesspl… · Web viewA British Columbia certified teacher and two business associates...

Headstart Daycare & Learning Centre

Prepared for Marv Painter

MPAcc 809 (04)

Prepared by:

Sibil Chan

Lindsay Chiang

Anne Lee

July 12, 2010

TABLE OF CONTENTS

1.0 Executive Summary......................................................................................................................... 4

1.1 Value Proposition......................................................................................................................... 4

1.2 Sustainable Advantage................................................................................................................4

1.3 Summary of Operations Plan.......................................................................................................4

1.4 Summary of Marketing Plan.........................................................................................................4

1.5 Summary of Human Resource Plan.............................................................................................5

1.6 Summary of Financial Plan..........................................................................................................5

2.0 Introduction...................................................................................................................................... 5

2.1 Mission......................................................................................................................................... 5

2.2 Goals and Objectives................................................................................................................... 6

3.0 Industry Overview............................................................................................................................ 6

3.1 Location Overview....................................................................................................................... 6

3.2 Child care Industry Overview.......................................................................................................6

3.3 PESTE Analysis........................................................................................................................... 7

4.0 Operations Plan............................................................................................................................... 9

4.1 Organizational Structure..............................................................................................................9

4.2 Composition of the Board of Directors.........................................................................................9

4.3 Services Offered........................................................................................................................10

4.4 Hours of Operation and Daily Activities......................................................................................11

4.5 Supplier Analysis....................................................................................................................... 13

4.6 Site Layout................................................................................................................................. 14

4.7 Service Providers.......................................................................................................................15

4.8 Capital Budget........................................................................................................................... 15

4.9 Working Capital Management....................................................................................................16

4.10 Operating Capacity.................................................................................................................... 16

4.11 10-Year Projection..................................................................................................................... 17

5.0 Human Resource Plan................................................................................................................... 17

5.1 Roles and Responsibilities.........................................................................................................18

5.2 Training Program.......................................................................................................................20

5.3 Labour and Management Costs.................................................................................................20

6.0 Marketing Plan............................................................................................................................... 22

6.1 Marketing Mix (4 P’s)................................................................................................................. 22

6.2 Segmentation............................................................................................................................. 24

6.3 Target Market............................................................................................................................. 25

6.4 Positioning................................................................................................................................. 25

6.5 Competitor Analysis................................................................................................................... 25

6.6 Market Research.............................................................................................................................. 29

6.6 Marketing Strategy..................................................................................................................... 29

6.7 Marketing Expenses.................................................................................................................. 30

6.8 SWOT Analysis.......................................................................................................................... 31

7.0 Financial Plan................................................................................................................................ 33

7.1 Introduction................................................................................................................................ 33

7.2 Start up Costs............................................................................................................................ 34

7.3 Capital Structure........................................................................................................................34

7.4 Working Capital.......................................................................................................................... 34

7.5 Projected Financial Results........................................................................................................34

7.6 Investment Analysis................................................................................................................... 37

8.0 Appendices.................................................................................................................................... 39

9.0 References.................................................................................................................................... 46

1.0 EXECUTIVE SUMMARY

A British Columbia certified teacher and two business associates have decided to establish a child care facility to not only invest in a thrilling business endeavour, but to also assist in the increasing of the opportunities of children’s futures. The three business entrepreneurs will be providing $112,500 in equity financing, but wish to seek another $37,500 of equity from another potential investor. An additional loan of $50,000 from the bank will total the $200,000 required for initial start-up costs and resources.

1.1 VALUE PROPOSITION

Headstart Daycare and Learning Centre (the “Centre”) will offer full-day child care services to young families in the Clayton Heights area of Surrey, British Columbia. Clayton Heights is a growing young community that is surrounded by multiple elementary schools of the Surrey School District. There is an increase demand for a reliable infant and toddler group daycare as young urban parents commute to downtown Vancouver for work. The Centre will be the first group daycare facility in the area, providing age-appropriate learning opportunities to children in order for them to start to reach their full social, physical, and intellectual potential.

1.2 SUSTAINABLE ADVANTAGE

The sustainable advantage of Headstart Daycare & Learning Centre will be achieved by providing a successful future for the children through our engaging and highly educational program planned and implemented by a certified British Columbia teacher. This is currently an area that is not served by other caretakers.

1.3 SUMMARY OF OPERATIONS PLAN

Headstart Daycare & Learning Centre will obtain a group child care provider license for children from infant to school age. Maximum capacity of the Centre will be set at 74 children, based on the projected floor plan of having four main child care rooms at the Centre. Attending children will be placed into one of the four rooms with children of similar age in order to establish suitable activities for their benefit. The Centre will be staffed with employees who have their Early Childhood Educator certification to provide the children with a highly interactive educational environment. A manager will also be on-site to ensure that day-to-day operations are run smoothly. Minimal working capital will be required, as revenues are primarily rendered from services provided by the staff. The company will receive funds from the prepayments of monthly daycare fees before salary payments are to be made to employees. Therefore, the company will operate with a negative cash flow conversion cycle.

1.4 SUMMARY OF MARKETING PLAN

Our child care facility will be targeting parents who require full-day child care for their young children. These parents would also like to enrol their children in a centre that has an educational and stimulating environment such that their child can grow and have the best opportunities. Headstart Daycare & Learning Centre will become the first licensed group daycare facility in the Clayton Heights area.

Promotion of the new child care centre will primarily come in the form of flyer distributions to new residential developments, community outreach programs, and hosting of open houses for interested families.

1.5 SUMMARY OF HUMAN RESOURCE PLAN

Headstart Daycare & Learning Centre will require a director and a manager. The director will manage the business formalities and administration required for the Centre. The manager will oversee the day-to-day operations of the Centre and provide assistance to the director. The number of educator and assistant educator employees required at the Centre is dependent on the quantity and ages of children that are present at the child care facility. Headstart Daycare & Learning Centre will ensure that they are staffed appropriately in compliance with the standards set-out under the British Columbia Child Care Licensing Regulation. Additional employees would also include a full-time chef to create wholesome nourishing meals and a part-time maintenance worker to handle any repairs required

The director is to receive a salary of $50,000 while the other employees will be paid a starting hourly wage of $10 - $18 per hour, depending on their position and qualifications. All employees will receive benefits in addition to their salary and wages. Total salary and wage expenses will be approximately $126,038 in the first year and are expected to increase at an annual rate of 2%.

Training will be provided to the manager, educators, and assistants and will be led by the director. Training will focus on the Centre’s teaching and child care philosophy and will include a briefing of the Centre’s policies and procedures, the code of conduct, training on the sign-in system, and job expectations for each of the roles. The director, manager, and certified educators are also expected to attend various professional development workshops throughout the year, compensated for by the enterprise.

1.6 SUMMARY OF FINANCIAL PLAN

Based on our preliminary forecasts, the Headstart Daycare & Learning Centre will sustain a positive cash flow within two years of operations. Over a 10-year period, the net present value provided by the Centre will be $26,094 based on a 20% rate of return. The internal rate of return is 22% over 10 years.

2.0 INTRODUCTION

Headstart Daycare & Learning Centre will be known as the group child care facility in the Clayton Heights community that provides an enriching educational and interactive atmosphere for young children to develop into their full capabilities.

2.1 MISSION

Our mission is to provide a safe, educational and nurturing environment for children from infant to pre-kindergarten age during a parent’s work day in the Clayton Heights neighbourhood in Surrey, British Columbia. Our company will ensure a child’s well-being, by providing attentive care in daily activities through a highly educational program that will increase the child’s learning potential.

2.2 GOALS AND OBJECTIVES

Short-Term Goals

The goals to be met within the first two years of operations include:

Obtain a 60% operating capacity Gain name recognition in the Clayton Heights community as a daycare that provides an

educational and stimulating daycare environment

Long Term Goals

Reach an operating capacity of 65%-100% Obtain an annual return on investment of 20%

3.0 INDUSTRY OVERVIEW

3.1 LOCATION OVERVIEW

Surrey, British Columbia

Surrey is the fastest growing suburb in Metro Vancouver, with a growth rate of 4% per year (Selected Trend Data for Surrey, 1996, 2001, 2006 – Statistics Canada, 2010). The median age of an individual in the city is 37 years old, signalling the presence of a young population. The city is populated by couples and families, as 35% of the population contain a couple with children and over 60% of the population are married or in a common-law relationship. Surrey is a city where working professionals reside as housing prices are lower than the metropolitan city of Vancouver. The booming demand for real estate is evidenced by the 23.6% increase in new active listings in Surrey from 2009 to 2010 (Fraser Valley Real Estate Board Statistics Package – Fraser Valley Real Estate Board, 2010). Although working professionals reside in Surrey, according to the 2006 Census, 76.1% of residents commute to work. There is an increase in the number of children in the area, as the Surrey School District is the largest school district in British Columbia and is one of the only few districts that is growing in the province (School District No. 36 (Surrey); 2010) The presence of a young and booming population where young professionals reside to raise their families presents a large market for a daycare.

Clayton Heights is one of the growing communities in Surrey where there is a multitude of new residential townhouse developments housed by young families and working professionals. The nearby elementary schools are of the largest in population of the Surrey School District, and a new school, Adam’s Road Elementary, is ready to open in September 2010. As there is no group daycare facility in the area of an emerging neighbourhood, Headstart Daycare & Learning Centre will capitalize upon the opportunity to set-up in this location.

3.2 CHILD CARE INDUSTRY OVERVIEW

Licensed child care providers in British Columbia are either designated as a family child care facility, a group child care facility, or a preschool. Daycares that fall under the family category are typically in the

child care provider’s home, and can accommodate no more than seven (7) children. Children attending family daycare centres are usually from the residential neighbourhood and of varying ages, thereby having one group of children with differing skills and capabilities to cater to. Licensed group child care centres are not organized in someone’s residential home, but are usually in a community centre, church, school, or commercial building. Group child care centres typically have a license to accommodate an increased number of children based on their floor space available to the children and the number of common rooms. As group centres are able to service more children, children of similar ages can be assembled together for increased social interaction with peers of comparable developmental levels. Certified early childhood educators customarily facilitate the classroom of a group daycare. Some have an educational element to their daycare. Group daycares are also organized as either a private enterprise or a non-profit organization. Child care centres with a designation as a preschool are mainly different in two factors: educational module and hours of operation. Licensed preschools are only able to provide care for children for no more than four hours in a day. Majority of pre-schools, thus, open for sessions of two and a half to three hours. Preschools also typically focus on providing educational value to their students. Some preschools instruct even based on an educational methodology such as Montessori education or Waldorf education. Montessori education philosophy is based on the fact that a child’s own interests will allow for self-directed learning, and the educator is only present to support and remove barriers obstructing the child’s natural learning progressions (Montessori method – Wikipedia, 2010). A school with a Waldorf philosophy will teach children through the use of practical experiential activities (Waldorf education – Wikipedia, 2010).

Children from infant to four-years of age in Surrey comprise of approximately 6.2% of the population, 24,555 children (2006 Community Profiles – Census Subdivision, 2010). All these children require full-day child care from a responsible adult, whether it is from a parent, babysitter, nanny, or daycare centre. In the 21st century, there are an increased number of families that are stepping away from the traditional roles and having both parents work in order to earn income for the family. New Surrey elementary schools currently being constructed shows that there are an increasing number of children to the Clayton Heights area and that there is demand for child care facilities. Child care centres are also becoming early education classrooms, allowing children to partake in interactive activities to teach them early educational skills that are traditionally taught later in elementary school (McClure, 2010). This trend has come from the pressure that parents want their children to have early educational experiences in order to have a head start to their intellectual and social well-being.

3.3 PESTE ANALYSIS

3.3.1 Political Factors

The British Columbia child care industry is directly affected by the Child Care Licensing Regulations as set out in the Community Care and Assisted Living Act by the Province of British Columbia. These regulations outline the licensing and functioning conditions, health and safety requirements, prerequisites to staffing the facility, as well as other program standards for any BC licensed child care settings. Headstart Daycare & Learning Centre is restricted by these regulations in running their facility, especially in the maximum number of children that the Centre is able to accommodate and the number of certified early childhood educators needed to meet the ratio requirements of educators to children. It is essential that Headstart Daycare & Learning Centre specifically monitor for any changes to these regulations, and continue to abide with the British Columbia child care standards in order to keep their license to practice.

Currently, the Ministry of Children and Family Development in British Columbia provides child care subsidy to parents. The subsidized child care amount provided by the provincial government is dependent upon factors such as the parents’ income, the number of dependent children who requires child care in a family, and spousal information. A major part of Headstart Daycare & Learning Centre’s revenue stream comes in these child care subsidies received directly from the provincial government on behalf of the parent. A decrease in the amount of funding for child care would affect the Centre as parents may not be able to fund the governmental shortfall and they would begin to seek less expensive alternatives of child care.

The provincial government also provides a daily operating fund to child care providers to assist in the funding of the care of British Columbia children in a registered facility. This government subsidy provides $12 per day for children up to 35 months of age and $5.48 for 3 year-olds to kindergarten age (British Columbia: Ministry of Children and Family Development; 2010). This additional revenue stream greatly assists child care centres in covering the daily costs of child minding. Loss of this government funding may cause some facilities to operate in a net loss position, resulting in the risk of business failure.

3.3.2 Economic Factors

As Canada continues to rebound from the worldwide economic downturn, there has been a reduction in spending of supplementary items that are believed to be excessive. Even though child care is considered a primary necessity for families, parents may be in search for daycare facilities that are more economical in order to make their dollar stretch further. This would affect the enrolment of children at higher-priced learning centres as parents may explore other family daycare settings that would not have such an educational component or choose a daycare that has decreased fees from meals and diapers being supplied by the parent each day.

3.3.3 Socio-Demographic Factors

The British Columbia government has been putting a greater emphasis on education recently. This is shown by the Ministry of Education announcing in 2009 that full-day kindergarten will be available to all BC eligible five-year olds by September 2011 (British Columbia: Ministry of Education, 2009). This will affect child care facilities as those kindergarten children will only require care on a reduced time-frame of before and after-school care hours.

Another socio-demographic factor affecting the child care industry is that there is a declining birthrate (British Columbia Stats: Local Health Area Total Fertility Rates, 2009). Families are not having as many children, which, thus, affect the need for child care facilities for them. Some cultures also do not believe in sending their children into group daycare facilities, which would also decrease the need for child care from external groups.

3.3.4 Technological Factors

The increased technological shift does not have a significant impact on the child care industry at the early childhood age levels. School-age children, though, are being exposed to technology at an earlier age. Many before and after-school child care programs in British Columbia do not have the capital funds to have increased technology resources for their programs. Child care has still been based on the social and development play through health and wellness, and physical activity.

Technology is, however, permitting parents to verify the well-being of their children through installed video cameras (McClure, 2010). The use of ‘nanny cams’ allows parents to surveillance their child’s activities with their child care provider, giving the parent comfort that their child is being taken care of appropriately. This technology has not yet progressed to the British Columbia child care industry, even though some daycares may desire to use in-house video cameras to prevent possible liability accusations.

3.3.5 Environmental Factors

Cold and rainy weather conditions and climate changes would move outdoor child care attendees to an indoor safe play area. It is a current requirement of all licensed British Columbia child care facilities to have both an outdoor and indoor suitable play area for children. Thus, these environmental factors would not affect the child care industry.

4.0 OPERATIONS PLAN

4.1 ORGANIZATIONAL STRUCTURE

Headstart Daycare & Learning Centre will be incorporated under the British Columbia Corporations Act. The corporation will be owned and operated by Anne Lee, a Canadian resident. Incorporation will provide the owner with limited liability, and will provide a reduction in the amount of taxes payable through incentives such as the small business deduction.

4.2 COMPOSITION OF THE BOARD OF DIRECTORS

The appointment of the following experienced and competent individuals will provide appropriate oversight for Headstart Daycare & Learning Centre.

Director – Anne Lee is the owner and director of Headstart Daycare & Learning Centre. She is an internal board member who oversees the operations at Headstart Daycare & Learning Centre.

Early Childhood Educator – Jane Jones is a certified Early Childhood Educator who has her own daycare, Little Galileos, in Port Moody, British Columbia. She has extensive experience in providing an educational environment for infants and toddlers. Jane will be a key individual in evaluating the integral parts of educational programs and other endeavours at the daycare.

Chartered Accountant – Loacker Chong is a Chartered Accountant who has extensive experience in the audit of small businesses. His experience and advice in the accounting and tax implications of certain transactions will be highly-valued.

Parent – Kim Sloan is a working professional with a 13-month-old son and a 3-year-old daughter. She has numerous connections with parents in the Clayton Heights area due to her daughter’s involvement in extracurricular activities. Her knowledge in the needs of a working professional with children will be essential in the development of services offered by Headstart Daycare & Learning Centre.

Lawyer – Jim Claw is a lawyer with Jim Claw Law. He has extensive experience in children and family law. His expertise will help Headstart Daycare & Learning Centre avoid potential lawsuits.

Investor – A position on the Board of Directors is reserved for the investor. The investor will be able to provide oversight on the overall strategic goals of the company.

4.3 SERVICES OFFERED

Headstart Daycare & Learning Centre will provide the following services:

Educational Program: Headstart Daycare & Learning Centre is committed to the growing the minds of children, providing them with the skills and tools necessary for future success. Our tailored educational plan is designed by a certified Early Childhood Educator (“ECE”) and sample learning themes and expected prescribed learning outcomes are shown in Figure 1.

Figure 1 – Sample Learning Themes and Prescribed Learning Outcomes

Sample Learning ThemesDinosaurs TransportationNature FarmsCommunities AnimalsSpace Health & NutritionSports Fairy TalesCircus Seasons

Sample Prescribed Learning Outcomes – Late Tykes Age

Social Responsibility Willing to participate in circle activities Begins thinking of alternatives to solve problems in peaceful ways With support, follows basic rules for working with others (eg. taking turns, sharing) Recognizes importance of good daily hygiene (eg. washing hands, brushing teeth)

English Language Arts Use speaking and listening when engaging in exploratory and imaginative play to express

themselves, ask for assistance, exchange ideas, sharing ideas, and experiment with new ideas Engages in reading-like behaviour Create simple messages through combination of pictures and symbols to convey meaning

Numeracy Identification of repeating patterns with two elements Begin to sort 3-D objects using single attribute Begin to recognize number sequence by 1s, starting anywhere from 1 to 10

Physical Development Perform movements in personal space while maintaining control Use their body to create shapes (eg. bending, pulling, twisting, stretching) Following rules and directions when participating in physical activity

Safe Environment: All employees are provided with quality training to ensure that the safe environment is provided to all children in our care. A criminal check is required for all employees before employment commences. Periodic training ensures that our employees provide children with the protective and secure environment.

Physical Comfort: As children at the infant and toddler age may not have the capabilities to ‘know when to go’, our child care providers will assist these children in toilet training events and supply the diaper equipment required for each child to carry on with their daily activities.

Food and Beverages: Headstart Daycare & Learning Centre provides a nutritional breakfast, lunch and a snack for all children each day. The food is prepared by an on-site chef and is in accordance with the Canadian Food Guide, ensuring that essential nutrients are provided to the strengthening of children’s growing bodies. Figure 2 shows a sample food plan for a typical week.

Figure 2 – Weekly Sample Food Schedule

Food Monday Tuesday Wednesday Thursday FridayBreakfast Oatmeal

BananasMilk

Rice KrispiesStrawberriesApple Juice

Banana BreadOrangeMilk

English MuffinsStrawberriesMilk

PancakesPearsMilk

Morning Snack Rice CakeApple Juice

English MuffinGrape Juice

Cheerios TreatApple Juice

Carrot SticksWater

CeleryPeanut Butter/Cheese Wiz

Lunch Hot DogYogurtMilk

Turkey SandwichFruitMilk

Chicken FingersCarrotsPeachesMilk

Scrambled EggsHash Brown PotatoesCherriesBreadMilk

Peanut Butter & Jelly SandwichMilk

Afternoon Snack

Cheese and CrackersMilk

Oatmeal CookiesMilk

CrackersPeaches

Fruit Juice

BagelsMixed Fruit

4.4 HOURS OF OPERATION AND DAILY ACTIVITIES

The daycare will operate from 7:00am to 6:00pm daily. The hours are scheduled to accommodate the working hours of a working professional. Please refer to Figure 3 for a sample daily activities schedule for toddlers and pre-school age kid children.

Figure 3 – Daily Activity Schedule

Schedule Toddlers

7:00am – 8:15am Individual Quiet Exploration

8:15am – 8:30am Arrival of Majority of Children to the Centre Cleaning of station area for breakfast Washing hands

8:30am – 9:00am Breakfast

9:00am – 9:15am Clean-up after Breakfast Toilet training (diaper changing) Washing hands

9:15am – 9:45am Circle Time Monthly theme, interactive song

9:45am – 10:15am Arts & Crafts

10:15am – 10:30am Morning Snack

10:30am – 11:15am Numeracy Teacher-led interactive activity

11:15am – 12:00pm Outdoor Physical Activity (weather permitting) Individual & group movements

Indoor Teacher-Led Safe Movement / Table Activities12:00pm – 12:15pm Preparation for Lunch

Toilet training (diaper changing) Washing hands

12:15pm – 12:45am Lunch

12:45pm – 1:00pm Read Aloud Theme Story

1:00pm – 2:30pm Quiet Rest

2:30pm – 3:00pm Individual Quiet Exploration

3:00pm – 3:15pm Afternoon Snack

3:15pm – 3:30pm Social Responsibility Toilet training (diaper changing) Washing hands

3:30pm – 4:15pm Carpet time theme activity Language arts

4:15pm – 5:00pm Outdoor Physical Activity (weather permitting) Individual & group movements

Indoor Teacher-Led Safe Movement / Table Activities

5:00pm – 6:00pm Station Exploration

Schedule Preschool Age

7:00am – 8:15am Individual Quiet Exploration

8:15am – 8:30am Arrival of Majority of Children to the Centre Cleaning of station area for breakfast Washing hands

8:30am – 9:00am Circle Time Monthly theme, interactive song

9:00am – 9:30am Breakfast

9:30am – 9:45am Clean-up after Breakfast Use of washroom / washing hands

9:45am – 10:30am Carpet Time Language arts

10:30am – 10:45am Morning Snack

10:45am – 11:30am Numeracy

11:30am – 12:15pm Outdoor Physical Activity (weather permitting) Individual & group movements

Indoor Teacher-Led Safe Movement / Table Activities12:15pm – 12:30pm Preparation for Lunch

Use of washroom / washing hands12:30pm – 1:00pm Lunch

1:00pm – 1:15pm Read Aloud Theme Story

1:15pm – 2:45pm Quiet Rest

2:45pm – 3:15pm Individual Quiet Exploration

3:15pm – 3:30pm Afternoon Snack

3:30pm – 4:15pm Arts & Crafts

4:15pm – 5:00pm Outdoor Physical Activity (weather permitting) Individual & group movements

Indoor Teacher-Led Safe Movement / Table Activities5:00pm – 6:00pm Station exploration

4.5 SUPPLIER ANALYSIS

Due to the nature of the services provided by Headstart Daycare & Learning Centre, the determination of suppliers is not an integral part of the business. However, it is important to identify suppliers that will provide the business with its daily operational needs.

Food: Food will be purchased by the cook at a local grocery supermarket. The cook will have discretion over the items to be purchased; however, the items purchase must be in line with the Canadian Food Guide.

Daycare Location: Headstart Daycare & Learning Centre will be renting a location in the Clayton Heights area for the daycare. We will need to work with the landlord to ensure that noise is tolerated at the location and extensive leasehold improvements can be accomodated.

Rental costs have been incorporated into the income statement in Appendix III.

4.6 SITE LAYOUT

We have designed an indoor and outdoor layout that is in accordance with the standards set out by the Ministry of Children and Family. The floor plan for the Centre takes into consideration the educational and physical needs of the children. Toddlers, infants, early tykes and late tykes will have their own play area, allowing children to socialize with peers in their own age group. An outdoor area, equipped with a sandbox and play structures, for toddlers and preschool aged children has also been set up. A toilet training area is set up for toddlers and infants, while toilets are set up for preschool aged children. A detailed floor plan is shown in Figure 4.

Figure 4 – Floor Plan

4.7 SERVICE PROVIDERS

4.7.1 Janitorial Services

Janitopia Utmost Janitorial Service will be providing janitorial services for Headstart Daycare & Learning Centre. We will be employing the services of the janitorial company everyday to ensure that a safe, sanitary environment is provided for the children.

4.7.2 Legal

Jim Claw Law will be providing legal services and advice for Headstart Daycare & Learning Centre. However, we do not anticipate that there to be any litigation associated with the business.

4.7.3 Technology Support

Tyco Consulting will provide the Centre with computer technology support and with ongoing website maintenance. The fees associated with technology support are under website costs of Advertising and promotion in Appendix III: Projected Income Statement.

4.7.4 Surrey College and Langley College

Headstart Daycare & Learning Centre will be recruiting for assistants and employees from nearby private institutions approved to train early childhood educators (British Columbia: Ministry of Children and Family Development; 2010). As such, Surrey College and Langley College will be focal points for recruiting qualified employees.

4.8 CAPITAL BUDGET

To commence the business, Headstart Daycare & Learning Centre will need to purchase numerous capital assets. A list of costs associated with each item is listed in Appendix I: Start-Up Costs at the end of our business plan.

4.8.1 Leasehold Improvements

Leasehold improvements will include the construction of dividers needed for the separation of classrooms, toilets, outdoor playing areas for toddlers, infants, early and late tykes. Other costs include costs for preparing the site in order to satisfy the building requirements stated by the Ministry of Children and Family Development. Leasehold improvement costs are estimated to be $100,000 and are estimated to have a useful life of 10 years based on the lease term.

4.8.2 Playground Materials

Headstart Daycare & Learning Centre will purchase outdoor playground slides and obstacle courses from International Play in Langley, BC. The cost listed includes an outdoor playground structure that has a slide and miscellaneous obstacle equipment suitable for children aged three to five. The playground material is expected to have a useful life of 5 years.

4.8.3 Furniture and fixtures

The Centre will purchase furniture, fridge, stove, tables, lighting, and shelving. All furniture and fixtures will be purchased from IKEA and is expected to have an estimated useful life of 5 years, except for the stove and fridge, which has a useful life of 10 years.

4.8.4 Educational Material

To support the educational progress of the children, we will need to invest in books and stationery. Books and charts will be purchased from Collins Education. Stationery is purchased from Staples. Due to the Centre’s focus on education, the estimated useful life of the books, charts and stationery is 2 years. The costs associated with educational material vary with the number of children that are enrolled at the Centre. We have taken into consideration these as variable costs per child. Amounts of educational materials per child is shown in Appendix I:Start-Up Costs.

4.9 WORKING CAPITAL MANAGEMENT

4.9.1 Liquidity Management

The Centre will receive monthly daycare fees from parents on the first date of every month, which is the industry norm. Expenses will be paid as incurred. Employees will be paid on a biweekly basis and purchases for food will be made two times a week. Due to the nature of the business, the Centre is expected to have cash on hand at all times.

4.9.2 Inventory Management

The only main inventory the Centre will have is food. Food will be purchased twice a week and prepared on the premises. Expired food will be discarded at the end of the week by the in-house chef.

4.9.3 Accounts Receivable

Due to the prepayment of monthly daycare fees at the start of the month, Headstart Daycare & Learning Centre will not have an accounts receivable balance.

4.9.4 Accounts Payable

Headstart Daycare & Learning Centre will have an accounts payable to employee as hours are worked during the month. There will be minimal balances in accounts payable as the Centre will mainly pay for expenses on a cash basis (ie. purchase of educational materials, food).

4.10 OPERATING CAPACITY

The Ministry of Children and Family Development imposes strict regulations with regards to the maximum number of infants, toddlers and children that are permitted in a group daycare. Based on the regulations, Headstart Daycare & Learning Centre will have a maximum capacity of 74 children at any given time. A breakdown of the age groups is shown in Figure 5.

Figure 5 – Total Licensed Capacity

Age Number

Infant (9 months -18 months) 12

Toddler (18 months -35 months) 12

Early Tykes (3 years) 25

Late Tykes (4 Years) 25

Total Capacity 74

It is projected that Headstart Daycare & Learning Centre will reach an operating capacity of 22 children in the first year, 44 children in the second year, and minimum 48 children in Year 7.

The Ministry of Children and Family Development also stipulates the number of staff that must be on site for each group of children in the daycare. The staff ratio analysis, which is discussed in further details in Labour and Management Costs in the Human Resource Plan, has been taken into consideration the expenses that will be incurred at each operating capacity reached.

4.11 10-YEAR PROJECTION

We have assumed that the Centre will only open for 6 months in Year 1. This results in a net loss of $59,550 in Year 1. However, we have projected to have a net income of $155,634 in Year 10 of operations. This can be seen in Appendix III: Projected Income Statement. Dividends of $75,000 are projected to be paid out to investors beginning in Year 3, representing a 26% external rate of return on investment. The initial operating capacity is projected to be 30% in Year 1, but averaging 60 - 65% of maximum capacity over the projected 10-year period.

5.0 HUMAN RESOURCE PLAN

The organizational structure of Headstart Daycare and Learning Centre is shown in Figure 6.

Figure 6 – Organizational Chart

5.1 ROLES AND RESPONSIBILITIES

5.1.1 Director

The director has five years of management experience in the child care industry as well as experience in accounting and finance. She has been certified by the British Columbia College of Teachers and has had four years of teaching experience. As such, she has an understanding of the BC education system requirements and has the aptitude to design and implement a curriculum based on the provincial government’s prescribed learning outcomes which will help give the children a head start for the future. The director also has her early childhood educator certification and her first aid and CPR certification and is knowledgeable in child medical care. The director is responsible for overseeing the child care programs for each age group and services and for ensuring they are in compliance with the BC Child, Family, and Community Services Act (BC Child Care Licensing Regulation, 2010). She also can issue early childhood educator certification to those who meet the required criteria set out by the BC Child Care Licensing Regulation.

The director is responsible for addressing any issues and concerns that the parents may have as well. In addition, she performs the accounting and business administration for the Company, as well as increasing sales through marketing initiatives.

5.1.2 Manager

The manager has two years of experience in the child care management industry and extensive experience in working with infants and toddlers. She is not allowed to be managing another child care facility during her employment (Province of British Columbia: Community Care Licensing Branch – Ministry of Healthy Living and Sport; 2007). The manager also has her early childhood educator certification, a valid first aid and CPR certification and her undergraduate degrees in family studies. A criminal record check is required from the manager, since she will be providing oversight to the day to day operations of the business and will be working closely with children, relieving the educators while they go on their lunch breaks.

The manager assists the director in hiring the educators, chef, maintenance staff, and the assistants. The manager reports directly to the director. The manager has to handle supplies management, which entails ordering the supplies the educators will need for their daily activities. Her daily role is primarily to ensure that the Centre is implementing the services and educational program that has been designed for the children. The manager is also responsible for answering parents’ inquiries in the absence of the director.

5.1.3 Educator

The educators all have at least one year of prior experience in working with infants and toddlers and have completed a basic early childhood education program at an accredited education institution. They are not required to hold an early childhood education certificate, but are all at least in the process of qualifying for such certification.

The educators have a valid first aid and CPR certification and have had a criminal record check conducted prior to the start of employment, as they will be working closely with the children. They are responsible for planning and executing the child care programs that the director has pre-approved. The educators also have to help with any minor clean-up and sanitization of various areas once the children are done with an activity.

The educators report directly to the manager and oversee any assistants and volunteers.

5.1.4 Infant-Toddler Educators

The infant-toddlers educators have the same qualifications and meet the same requirements as the other educators. However, the infant-toddler educators also have an infant/toddler educator certification. As such, they will be responsible for the children under 36 months.

Like the educators, the infant-toddler educators report directly to the manager and oversee any assistants and volunteers.

5.1.5 Assistants

The assistants help the educators execute the child care programs and help provide supervision to the children. They all have had experience in working with children and have the capability of taking care of young children. BC Child Care Regulation further stipulates that the assistants must have completed at least 20 hours of coursework in child development, guidance, health and safety, or nutrition. The assistants are not required to hold an early childhood education certificate per BC Child Care Regulation. However, they are required to hold a valid first aid and CPR certification and they must complete a criminal record check prior to the start of employment.

The assistants directly report to the educators and are selected by the managers through an interview process.

5.1.6 Volunteers

Our daycare centre will accept volunteers from time to time seeking early child care experience. These volunteers are required to have a criminal record check performed prior to any volunteer work. They will be assigned one of the age groups and will be supervised by the educator in that room.

5.1.7 Chef

The chef is responsible for preparing the nutritious meals and snacks for the children and for cleaning up the kitchen and child table areas after the meals. The chef has three years of experience in food preparation and has his Food Safe certification to ensure basic safe food handling procedures are known. He is required to ensure that the meals and snacks meet the recommended daily food intake guidelines stated in Canada’s Food Guide (BC Child Care Licensing Regulation, 2010). He is also responsible for handling the food inventory and supplies and for maintaining the general cleanliness of the kitchen and designated eating areas. A criminal record check has been done for the chef, as he will be in close contact with children.

The chef works closely with the managers and the director to develop the daily menus and reports directly to them.

5.1.7 Maintenance Staff

The maintenance staff will work part-time at the Centre and has two years of carpentry experience. He is mainly responsible for the maintenance and repairs at the facility. The maintenance person is also expected to help with any rearrangement of furniture and any heavy lifting that may be required. The maintenance staff reports directly to the manager.

5.2 TRAINING PROGRAM

An in-house two day training program has been developed by the director for the managers, educators, infant-toddler educators, and assistants. The training is led by the director and focuses on Headstart Daycare & Learning Centre’s teaching and child care philosophy. It will also include a briefing of Headstart Daycare & Learning Centre’s policies and procedures, the code of conduct, training on the sign-in system, and job expectations for each of the roles. Also, the managers, the educators, and the assistants are required to attend professional development workshops once every three months and the director, the managers, the infant-toddler educator, and the educators must renew their early childhood educator certification every five years.

5.3 LABOUR AND MANAGEMENT COSTS

The number of educators and assistants that Headstart Daycare & Learning Centre will require depends on the number of infants and toddlers that are enrolled in the program. The required adult-to-children ratios are as follows:

For children under 36-months, there must be one infant-toddler educator for every four children, one infant-toddler educator and one educator for every five to eight children, and two educators and one assistant for every nine to 12 children;

For children from 36-months to school age, there must be one educator for every eight children, one educator and one assistant for every nine to 16 children, and one educator and two assistants for every 17 to 25 children (Province of British Columbia: Community Care Licensing Branch – Ministry of Healthy Living and Sport; (2007).

Headstart Daycare & Learning Centre does not expect that many children to be enrolled in early and late supervision which run from 7:00am to 8:15am and 4:45pm to 6:00pm respectively. As such, the manager and the director will work staggered shifts, with one person being present for early supervision hours and the other person being present for late supervision.

Infant-toddler educators, educators, and assistants are expected to arrive at work during their scheduled full-day shift. Majority of the children are expected to arrive by 8:15am, and will leave by 4:45pm. There will be 2 educators who work in shifts, with one of the educators starting work earlier in the morning than another educator. The maintenance staff will begin at 10:00am and will end at 2:00pm. The chef is expected to begin at 7:00am and will finish at 4:00pm. Depending on the week, the manager will begin work at 7:00am and will finish at 4:00pm while the director will alternate with the manager with a 9:00am to 6:00pm shift. All staff will be given an hour break throughout the day. Please refer to Figure 7 and Figure 8 for the respective hours of operations and staff schedule.

Salary will start at $50,000 for the director. The managers, the infant-toddler educator, and the educators are offered an hourly wage of $18.00 per hour, $15.50 per hour, and $14.00 per hour respectively. The assistants, the chef and the maintenance staff are all offered a starting hourly wage of $10.00 per hour. All employees will receive CPP, EI, and holiday pay as well as basic extended health care. Wages are expected to increase at an annual rate of 2% each year.

Figure 7 – Hours of Operations

Figure 8 – Staff Schedule

Start EndDirector 9:00am 6:00pmManager 7:00am 4:00pmInfant-Toddler Educator 1 7:00am 4:00pmInfant-Toddler Educator 2 9:00am 6:00pmEducator 1 7:30am 4:30pmEducator 2 8:30am 5:30pmAssistants 8:00am 5:00pmCook 7:00am 4:00pmMaintenance Staff 10:00am 2:00pm

Days of the Week Open Close Total Hours

Monday 7:00am 6:00pm 11.0Tuesday 7:00am 6:00pm 11.0Wednesday 7:00am 6:00pm 11.0Thursday 7:00am 6:00pm 11.0Friday 7:00am 6:00pm 11.0

6.0 MARKETING PLAN

6.1 MARKETING MIX (4 P’S)

6.1.1 Product and Services

Headstart Daycare & Learning Centre will offer full-day child care to children from infant to five years of age. The Centre’s program will include a safe learning environment allowing the child to develop physically, socially, and emotionally. To create a suitable learning environment, Headstart Daycare & Learning Centre will combine the child’s experiences with structured age-appropriate activities as well as individual child exploration. Monthly theme educational topics will be introduced to children in order to enhance their learning at an early age. Children will be placed among others their own age falling into one of the following categories: infants, toddler, early tykes, and late tykes.

Other services offered at Headstart Daycare & Learning Centre include a certified Early Childhood Educator in each classroom in accordance to the ratios set out by the Ministry of Education. The Centre will provide children with breakfast, lunch, and two snacks per day for full-day participants from our in-house cook. Also, diaper necessities for changing infants and toddlers will be provided by the Centre throughout the day. Parents are expected to supply their child with appropriate footwear, sunscreen, and a hat for safety precautions.

6.1.2 Price

Headstart Daycare & Learning Centre will price their services on a competitive basis to similar offerings in the Surrey and Langley region area of the Fraser Valley. As Headstart Daycare & Learning Centre provides things such as healthy meals and snacks, structured educational development activities, and diapers, prices for this full-time daycare will be on the high-end based on these inclusiveness value-added services. Part-time set-day services will also be offered to children of the toddler, early tykes, and late tykes age groupings. Monthly child care rates beginning in Year 1 of operations are outlined in Figure 9 below.

Figure 9 – Monthly Fee Schedule – Year 1Age Group Full-Time Part-Time (3 Days) Part-Time (2 Days)

Infants (9mths-18mths) $1,100 Not available Not availableToddlers (18mths-35mths) $1,050 $700 $475Early Tykes (3yrs) $925 $625 $425Late Tykes (4yrs) $925 $625 $425

6.1.3 Promotion

To announce the grand opening of Headstart Daycare & Learning Centre, promotion will be focused on the community of Clayton Heights and its immediately surrounding areas. The area that we will be distributing our flyers to has an abundant number of residential developments that are occupied by families with young children. The flyers will emphasize our focus of providing full-day child care which includes building a child’s physical, emotional, and social development. Within the first couple of months

of opening, Headstart Daycare & Learning Centre will waive the required child registration fee which is required at many group daycare locations to cover administrative costs. This administrative fee discount will allow parents to switch child care locations at no extra cost. It is thought that once a child is attached to a daycare, then they will stay for a long duration and we will be able to generate revenues from one child for an extended period of time. Promotion of our products and services will be centred upon the interactive educational environment that we are providing so that a child can have a head start into the future. A sample flyer is shown in Figure 10.

Figure 10 – Sample Flyer Initial Promotion

Marketing of the Centre will also be done at parenting and pre-natal classes at the local community centres. This will allow us to concentrate our marketing strategies on our target market of people with young children in the Clayton Heights area. As we are unable to promote the daycare facility directly at the school sites in person, Headstart Daycare & Learning facility will also rely on ‘word of mouth’ of initial participants to their family and friends in the community.

6.1.4 Place

Location of the Headstart Daycare & Learning Centre will be conveniently situated in Clayton Heights at 65A Avenue and 185th Street. This site is walking distance to multiple elementary schools, including a new school Adam’s Road which is opening in September 2010. The proposed location is also positioned

next to community parks and surrounded by recently developed residential townhouse property. Clayton Heights is a fast growing community of Surrey, British Columbia which has welcomed many young families due to all the new residential development in the past few years. Please refer to Figure 11 for a map of Clayton Heights with schools of the Surrey School District surrounding Headstart Daycare & Learning Centre.

Figure 11 – Map of Clayton Heights and Surrounding Schools

6.2 SEGMENTATION

Child care facilities tend to be segmented by geographical location, hours of operation, age category of license permits, educational focus, and price. Family cultural beliefs of specific child care environments (family babysitter vs. family daycare vs. group daycare facility) would also affect where a child would

obtain the necessary care. Family daycare facilities tend to care for children for long hours of the day providing a safe babysitting service. Places dedicated as preschools usually have a clear structural educational focus to their day, but only for a few hours at a time.

6.3 TARGET MARKET

6.3.1 General Description

The target market of the Centre comprises of young families with professional working parents that want to ensure their child’s education is started on the right developmental track. This may entail families who have two working parents, single parents who require child care as they earn income, or families where the parent is returning to the workforce from maternity leave. Given the high focus on experiential learning at Headstart Daycare & Learning Centre, we are targeting parents who place a strong emphasis on the importance of education. Due to the highly competitive school environment, the parents are concerned about exposing their children to numerous educational opportunities at an early age.

6.3.2 Demographic

Due to the high cost of fees charged at Headstart Daycare & Learning Centre, we will be targeting families that have an income above the median household income of $60,000 in Surrey (Selected Trend Data for Surrey, 1996, 2001, 2006 –Statistics Canada, 2010). Also, we will be focusing on families that would qualify for sufficient child care subsidy from the government to cover the necessary fees that they are unable to contribute.

6.4 POSITIONING

Headstart Daycare & Learning Centre will be a full-day child care facility, supplying an educational focus. The Centre’s differential factor is our educational focus promoting the child’s whole-self from certified educators, as well as our services to provide necessities, including healthy snacks and meals and diapers to toddlers and infants, throughout the day.

6.5 COMPETITOR ANALYSIS

The child care industry in the Surrey/Langley area comprises of an array of options for parents from small family in-home daycares to large group-care facilities. Full-day child care centres in the vicinity of Clayton Heights are compared in the Figure 12 below based on location, hours of operation, fees, maximum capacity, and teaching philosophies. Programs designated as preschool are not analyzed as they are not licensed to provide child care for more than 4 hours a day and would not be in direct competition with the full-day services of Headstart Daycare & Learning Centre.

Figure 12 – Competitor Analysis – Full Day Child care Centres

Child care Centre

Type Location Hours Base Fees (Monthly)

Max Capacity

Services

Jellybean Park Group

0 yrs - 12 yrs

63rd Ave & 196th St.

7:00am – 6:00pm

$858 - $1,058

94 Interactive Play

Kids World Group

0 yrs - 12 yrs

69th Ave & 202B St.

6:30am – 6:00pm

$975 - $1,175

151 Interactive Play

Loving Family Montessori

Multi-age Group

63rd Ave & 175A St.

8:00am – 5:30pm

$900 8 Montessori Education

Cloverdale Discovery Centre

0yrs - 5yrs

58th Ave & 176 St.

7:00am – 6:00pm

$850 - $1,000

The Child Care Centre in Cloverdale

0yrs – 12yrs

59th Ave & 176th St.

7:00am – 6:00pm

$675 - $850 60 Parent provides daily meals/diapers

Willowbrook Montessori Child Care

0yrs -12 yrs

67th Ave & 203rd St.

7:00am – 6:00pm

$810 - $1,020

82 Montessori Education

Langley Montessori Children’s Centre

Group 30mths -12 yrs

55A Ave & 197th St.

7:30am – 5:30pm

$820 - $1,090

100 Montessori Education

From the analysis of other competitors, it is evident that child care centres that provide services, such as meals and an educational teaching component, to the child tend to charge significantly higher fees. Headstart Daycare & Learning Centre will provide nutritious meals and diaper changing services to children.

Many of the group daycare centres in the nearby neighbourhoods are licensed to host a high maximum capacity of children in their facility at one time. This is due to the fact that they have a group child care license to also care for school-age children from the ages of five (5) to twelve (12). The staff requirement ratio of educators to school age children is much less restrictive than that for children under five years of age. One responsible adult is able to care for up to fifteen (15) school-age children (Province of British Columbia: Community Care Licensing Branch, 2007). Headstart Daycare & Learning Centre will not offer

child care services to school-age children. Some families with older siblings may choose other daycare options that offer school-age children before and after-school care, so that their whole family is at one place. This will cause lost revenues for Headstart Daycare & Learning Centre. The amount of facilities and active free space to care for school-age children is quite large due to the fact that these children are much more fully developed and functional. The revenue fees paid per school age-child is substantially less than that of an infant or toddler as they only require before and after-school care for a few hours at a time. The large gym equipment facilities and common rooms would not be used by school-age participants during the day as they are attending other classrooms. Operationally, staffing before and after-school programs also requires educators to work split shifts. Having this type of staffing schedule makes it difficult to recruit full-time educators for these positions. Headstart Daycare & Learning Centre has calculated that the revenues generated and benefits of hosting school-age children do not outweigh the costs to facilitate them from a business perspective. Therefore, our Centre will focus on the care and educational philosophies for children from infant to pre-kindergarten age.

There are a number of centres that have either a Montessori or Interactive free play teaching philosophy to their daycare. The Montessori education philosophy is considered to be self-directed learning based on the child’s inner natural guidance, with the teacher only there as guidance to observe over the surroundings (Montessori method – Wikipedia, 2010). Interactive free play centres allow the child to explore on their own with physical materials and at their own pace. Headstart Daycare & Learning Centre will differ from other daycares in terms of their educational component as educators will be engaging students in some structured sessions based on prescribed learning outcomes. Prescribed learning outcomes are set by the Ministry of Education for British Columbia certified teachers to follow for the Kindergarten to Grade 12 level. The Centre’s learning outcomes and goals for the child are based on the same subject areas of social responsibility, English language arts, numeracy, and physical education, but brought down to the specific age group. In turn, this educational standard will assist in giving children a head start to their education and facilitate a smooth transition towards school when they enter kindergarten.

Figure 13 below shows all the registered family and group neighbourhood child care facilities that are close to where Headstart Daycare & Learning Centre will be located. Not shown in the figure are the registered providers who are registered with a Child Care Resource and Referral Program (CCRC), but are not required to have a license to practice. These are considered registered providers who may care for a maximum of two additional children who are not part of the provider’s family. Registered providers are minor competition to Headstart Daycare & Learning Centre and do not pose a big threat as they can only care for a small amount of children, and it is not certain that the adult is a certified early childhood educator with sufficient qualifications and experience.

Figure 13 – Locations of Licensed Child Care Facilities in Surrey/Langley area surrounding Clayton Heights

# on Map Child care Centre Type

1. Loving Family Montessori Group

2. Little Learning Steps Family Child Care Family

3. Nature’s Playground Daycare Group

4. The Child Care Centre in Cloverdale Group

5. Cloverdale Discovery Centre Group

6. Little Bear Daycare Family

7. Willowbrook Montessori Child Care Group

8. Magic Patch Daycare Family

9. Lisa’s Daycare Family

10. Making Memories Family Child care Family

11. Playful Learning Centre Family

12. Pooh Corner Family Daycare Family

13. Heartland Daycare Family

14. Jellybean Park Group

15. T.L.C. Darby Family Daycare Family

16. Langley Montessori Children’s Centre Group

17. Lilyput Family Daycare Family

18. Brenda’s Daycare Family

19. Love-It Care Group

20. Kids World Group

From analysis of the locations of licensed child care facilities in the Surrey/Langley area surrounding Clayton Heights, it is evident that there are no large group daycare centres within the direct Clayton Heights community of the proposed Headstart Daycare & Learning Centre. Thus, there is demand for this kind of child care centre in the area for the community. There are a few family type facilities nearby, but these would only be able to care for no more than seven (7) children at a time.

6.6 MARKET RESEARCH

Market research was conducted through a variety of methods to access the demand of a child care facility in the area of Clayton Heights. Teachers employed by School District No. 36 (Surrey) who are teaching at the elementary schools in the area were contacted to collect socio-demographic information about the general make-up of the student population in the area, parental involvement and attitudes, and average developmental abilities of learners. Registered and licensed child care providers in the area were compiled through contact with the Child Care Resource and Referral Program Services offices allocated to serving Surrey and Langley. Licensed child care centres were contacted to inquire about waitlist situations and educational philosophies if any. Employees of competitor daycare facilities also shared their experiences working in their group daycare centres on a daily basis.

Through our market research, it is in consideration that there is a need for a group daycare facility in the community of Clayton Heights. Some of the group daycare facilities have substantial waitlists to get into their programs, especially at the infant and toddler age groups. Also, there appears to be community parent buy-in for an early education learning environment where stimulating activities for the child will develop him in great strides physically, socially, emotionally, and intellectually.

6.6 MARKETING STRATEGY

One of the Centre’s short-term goals is to gain recognition in the Clayton Heights community as a daycare that provides an educational and stimulating environment. Achieving this acknowledgment will allow our

full-day child care facility to increase operating capacity through word-of-mouth and testimonials from current participant parents.

The director will be responsible for the organization and outlay of many of the marketing strategy programs. Initial promotion will be in the form of flyer distribution and community outreach programs. Advertisement cards will be circulated to nearby residential developments to target the new residents into the community. Please refer to Figure 10 for our sample marketing flyer. Clayton Heights is a community with many of its new residents comprising of young couples and families. Community outreach programs include the director promoting the Centre through delivery of knowledge and information to pre-natal and parenting classes in the neighbourhood community centres.

Parents are welcomed to set-up meetings with the director or the manager of the Centre to discuss the philosophies of the program as well as take a tour of the facilities with their children. Parents can also inquire about the specific certifications and qualification experiences from our educators. Ensuring that the parents have comfort in their children’s care is essential to obtain their trust, so that they will choose our facility for their child.

Registration of our available services will be through the local Child Care Resource and Referral Centre (CCRC). The CCRC assists parents in finding suitable registered child care in their community. A short description of our Centre’s child care philosophies including maximum child allotment levels will also be submitted to the CCRC for Surrey to be posted on their website for access to our target market.

6.7 MARKETING EXPENSES

A breakdown of marketing expenses of the first five years of operations is outlined below in Figure 14. There is an estimated 3% increase in marketing expenses due to inflation. Year 1 has forecasted the highest amount of marketing expenses due to making our Daycare & Learning Centre known to families of the Clayton Heights Community.

Figure 14 – Marketing Expense Breakdown

Year 1 Year 2 Year 3 Year 4 Year 5

Flyer Distribution 4,500 1,250 1,288 1,326 1,366

Community Outreach 2,500 2,575 2,652 2,732 2,814

Website 2,100 600 618 637 656

Open Houses 2,000

Total 11,100 4,425 4,558 4,694 4,835

Flyer Distribution – Flyers will be distributed to residential houses and town-homes in the nearby community of Clayton Heights in Year 1. An increased number of flyers will be distributed in Year 1 in order to give knowledge of Headstart Daycare & Learning Centre’s daycare services in the community. In Years 2 – 5, flyers distributed will be estimated at $1,250 per year.

Community Outreach Programs – Our facility will attempt to partner our advertising with specific programs in the community. These estimated costs of $2,000 per year are to appeal to those who are in parenting courses and pre-natal classes in the neighbourhood.

Website Costs – Costs in Year 1 include the initial generation of the daycare website’s design and development costing $2,000, and approximately $100 in staff time to register with the local Child Care Resource & Referral Centre website. Further maintenance costs to keep the website current and marketing will be approximately $600 per year.

Open House Events – Headstart Daycare & Learning Centre will host a few ‘open house’ events so that parents and children are able to tour the facilities, meet some of the educators, as well as learn about the educational methodologies of the Centre. Costs related to open houses will be for early childhood educators to give speeches promoting the Centre, decorations, and mini snacks. These open house marketing costs will only be seen in Year 1 when the child care centre is establishing a reputation in the community.

6.8 SWOT ANALYSIS

6.8.1 Strengths

Educational ComponentHeadstart Daycare & Learning Centre offers full-day child care with an enhanced educational integrative program. Studies have shown that early childhood education programs are associated with better transitions to the regular school environment in kindergarten, improved numeracy and language arts skills, and benefits on a child’s long-term social and emotional development (British Columbia: Ministry of Education, 2009; Barnett,2002). Combining an educational element into a child’s day will assist children in growing to their full physical, social, emotional, and intellectual potential.

Large Group FacilityWith a group daycare facility, there is an increased opportunity for children to socialize and interact with peers their own age as there are usually a greater number of participants in the program. This is in comparison to a smaller family daycare setting or having an in-house nanny. Having the ability to have groups within a small age range allows the early childhood educators to implement learning outcomes that are more age-appropriate, which would increase development for a child.

Certified Early Childhood Educators (ECE)Each classroom of children under school age will have a certified early childhood educator present to implement their program within the specified educator to child age ratios as required by the provincial government. Certification as an early childhood educator demonstrates that each educator has both the experience and knowledge to care for children, in which the Ministry of Children and Family Development has acknowledged.

Value-Added ServicesHeadstart Daycare & Learning Centre will provide nutritious meals and snacks to participants throughout the day, as well as certain supplies, such as diapers, for the child’s comfort. This will relieve the parents from some of the daily duties of ensuring the child’s health and well-being.

Central Community LocationHeadstart Daycare & Learning Centre is conveniently situated and surrounded by many elementary schools and new residential property. The community is expanding as seen by the new Adam’s Road Elementary School which is opening in September 2010. New residential developments are being purchased by young professionals and families with young children.

6.8.2 Weaknesses

Higher Child care FeesHeadstart Daycare & Learning Centre grants children with the necessary tools and skills to develop into their full potential. Because of these additional quality services, our child care facility fees are considered to be on the higher-end of child care in the area.

New Name in CommunityThe Centre is new to the community and parents will need to research about our facilities and teaching methodologies in order to feel comfortable about leaving their child in our care. Headstart Daycare & Learning Centre does not have the buy-in of families in the community, as there is no prior knowledge of our program.

High Turnover of Early Childhood EducatorsEarly childhood educators obtain their certification through sufficient experience with young children and acceptable post-secondary education outlined by the Ministry of Children & Family Development. In a survey of early childhood educators in British Columbia, nearly half (48.9%) of respondents earn $15 an hour or less (Early Childhood Educators of British Columbia; 2008). This is a difficult wage to support an entire family with. Thus, many early childhood educators move into other careers, such as teaching, and results in a high turnover of educators at child care facilities. Having high turnover of staff is not best for the child’s learning as there can be too many disruptions to a child’s daily schedule for them to accommodate to at all times.

6.8.3 Opportunities

Clayton Heights CommunityThere are currently no large group daycare facilities in the Clayton Heights community. Full-day group child care would be a driving distance (5 – 7 minutes) to Cloverdale in Surrey or Willowbrook area in Langley. Offering parents a closer alternative in the community is a great opportunity for Headstart Daycare & Learning Centre. The Clayton Heights community shows a great opportunity for a child care centre as it holds some of the highest populated elementary schools – Don Christian (497 students), Hillcrest (572 students), and Hazelgrove (580 students) – in the Surrey School District nearby, showing that this area has a high number of children (School District No. 36 (Surrey); 2010).

Child Care Demand / Current WaitlistsMarket research conducted through employees of competitor group daycare centres and Child Care Resource & Referral Centres show that there is a demand for child care in the Surrey/Langley area that Headstart Daycare & Learning Centre will be situated, especially in the infant and toddler ages. Jellybean Park and Kids World, comparable daycare facilities in Langley, both have waiting lists for these age groups.

Children with Special NeedsThere are not that many child care facilities in the area that are equipped to accept children with special needs. Young children with special needs usually obtain provincial government funding for special worker aides to assist them in daily duties. There is an opportunity for Headstart Daycare & Learning Centre to earn higher profits per child with special needs if we can accommodate. Currently, our floor plan has the Centre situated on one floor in order to possibly host a child with certain special needs. Competitor daycares, Jellybean Park and Kids World, are both in facilities that encompass two floors.

6.8.4 Threats

New Child care EntrantsChild care can come in many forms, some that may suit an individual better than others. There are not many capitalized costs for a parent to offer child care in their own home as a registered provider to help increase their household earnings while caring for their own child. Small child care entrants in the area can also take away from the market share of children that need care in the Clayton Heights community.

Child care Licensing Regulation ChangesSignificant changes to the child care regulations set by the provincial government can impact how child care is put into practice. Educator to child ratio changes for an age-group and licensed areas by square footage can influence operations of the learning centre and the capacity limits at Headstart Daycare & Learning Centre.

Full-Day KindergartenThe Ministry of Education in British Columbia has announced that by September 2011, British Columbia schools will offer full-day kindergarten to all five-year olds. Implication on the child care industry is that these five-year olds will not require full-day child care in the future, decreasing the market size.

Family Structure/Aging of CommunityClayton Heights is a relatively new growing community comprising of a lot of young families. In the future, the families in the community will age and the family structure can differ significantly in the newer generation. The market for child care may decrease if there are trends in the community comprised of smaller families (eg. only one child), increased percentage of stay-at-home parents, or the community is aging and is not being replaced by young families in the area.

7.0 FINANCIAL PLAN

7.1 INTRODUCTION

Cash flows and returns are prime variables that investors consider in making an investment decision. As such, we have prepared 10-year projected financial statements for Headstart Daycare & Learning Centre. An assessment of the financial health of the Centre has been completed through the analysis of various ratios to ensure the returns and values created are reasonable.

7.2 START UP COSTS

A listing of initial start-up costs is shown in Appendix I: Start-Up Costs. Capital investments in leasehold improvements, furniture improvements and outdoor playground structure are needed in order for the Centre to commence business. In addition to the capital start up costs, we have budgeted $11.100 for advertising costs. Promotional items include flyer distribution, community outreach initiatives, start up of the company’s website and grand opening events.

7.3 CAPITAL STRUCTURE

The capital structure of the business will be 75% equity and 25% debt. The owner and 3 other venturers will each contribute $37,500 for a total of $150,000. A debt of $50,000, with an interest rate of 8%, will be taken out. The loan will be repaid over 10 years.

7.4 WORKING CAPITAL

Working capital will only consist of accounts payable due to the nature of operations and the fact that customers are required to prepay on a monthly basis, eliminating the need for an accounts receivable balance, as it is the industry norm. There is minimal food inventory on hand as food is purchased twice a week and any spoiled food is discarded on a weekly basis. As such, the Centre will maintain a negative working capital operating balance.

Aside from salaries, which will be paid on a semi-monthly basis, suppliers will be paid primarily on a cash basis when the goods are purchased.

7.5 PROJECTED FINANCIAL RESULTS

7.5.1 – General Assumptions and Explanations

Inflation Rate – Revenues and expenses are forecasted to grow at an inflation rate of 3%.

Corporate Income Taxes – Headstart Daycare & Learning Centre is a private, incorporated enterprise in Canada and majority of its investors are Canadian residents. As such, it is assumed that we will qualify for the Small Business Deduction for a reduced tax rate. This Small Business Deduction is acceptable for the first $500,000 of taxable income, in which Headstart does not exceed in the base case scenario. Combined corporate federal and provincial tax rate in British Columbia for our business has been assumed to be 15%.

7.5.2 Projected Balance Sheet

A balance sheet forecast for 10 years has been compiled and can be seen in Appendix II: Projected Balance Sheet. Current assets will only comprise of cash and prepaid expenses. Cash is required to cover day-to-day operating expenses, such as repairs, as well as keep a positive retained earnings balance year over year to ensure our bank debt financing. The Company will have no accounts receivable balance as parents prepay their fees on a monthly basis.

Property, Plant, & Equipment – The balance and associated accumulated amortization amounts are based upon the capital organizational structure. Please refer to the Section 4.8 Capital Budgeting in the Operations Plan for discussion.

Trade Payable, Income Taxes Payable, Bank Debt Balance – Trades payable are based on certain monthly operating expenses while income taxes payable is derived from the portion owing to the Canada Revenue Agency each year. Please refer to Section 4.8 Capital Budgeting under Operations Plan for the assumptions on the bank debt balance.

Prepaid Expense – Closing balance of prepaid expenses is assumed to be the prepaid rent and insurance associated for one month. These expenses are prepaid on a monthly basis.

Trades Payable – It is assumed that the majority of Headstart’s creditors billed on a monthly basis will offer terms of payment on average of 30 days. Amounts are projected to be identical to one’s month worth of janitorial services, utilities, and repairs & maintenance costs.

Bank Debt – $50,000 bank debt at the beginning of Year 1 requires monthly repayment of $7,191 for ten years.

7.5.3 Projected Income Statement

The projected income statement from Year 1 to Year 10 is shown in Appendix III: Projected Income Statement. The appendix demonstrates that there will be a net loss in the first year, and a positive net income in the subsequent years. The critical assumptions related to the revenues and expenses are discussed below.

Revenues

Child Care – Parent Fees – Revenues are the prepaid monthly amounts received from parents for our services. It is projected that we will achieve approximately a 30% occupancy rate in Year 1, and then will subsequently obtain a 59% - 65% occupancy rate in later years.

Child Care Subsidy – Government – This pertains to the funds that the provincial government provides to subsidize parents for the cost of child care. These funds are directly rewarded to the registered child care, once a parent is approved from assessment of their income and family situation. The Centre will reduce the amount that the parent needs to pay for child care fees from the approved government subsidy that they are able to claim. As Clayton Heights is a community of young working professionals with above average household incomes, it is assumed that this stream of revenue will make up only 25% of total parents’ fees on average.

Operating Fund – Government – This revenue is offered by the government to registered child care providers in British Columbia, as subsidy for the costs of managing a daycare. Current funding daily rates are $12 for each child under 36 months of age and $5.48 per child 3 years old to kindergarten age, if the child is in the care of the registered provider for more than 4 hours each day.

Application Fees – This consists of the fees charged when a child registers at our daycare centre. This fee covers the administrative paperwork required when a child enrols and begins services. It is set to begin at $50 per child and is assumed to grow at the inflation rate of 3%, which is comparable to other group daycare facilities in the area. The Centre will waive this application fee to parents in the first few months of operations in order to attempt to attract more participants. Thus, no revenues are recognized

in the first year of operations. In the second year and beyond, it is forecasted that there will be on average at least six (6) of these application fees charged to parents.

Expenses

Salaries & Wages – Costs relate to salary expenses for all employees. Salary and wages expense is adjusted based on the number of staff needed to provide adequate care at the average daycare capacity for the year. For more information regarding the composition of the staff and the wages paid, please refer to the human resources plan.

Professional Development – Expenses relate to the cost of training employees and for the cost of the professional development courses offered to our employees throughout the year.

Food/Snacks – This balance includes the cost of supplying the food for breakfast, morning snack, lunch and afternoon snack to the children in the daycare. It is assumed that a cost of $5 per child will be incurred each day.

Janitorial Services and Supplies – Janitorial services and supplies consists of the service costs paid to Janitopia Utmost Janitorial Service. The price reflects the annual cost of cleaning services for a location that is of similar size as our proposed daycare centre.

Office Supplies – Costs include costs for pens, pencils and other miscellaneous costs for the manager on site.

Accounting and Legal – Accounting and legal costs include costs for an off-the-shelve accounting program to be utilized by the manager along with minor legal fees amounting to $5,000 each year.

Advertising and Promotion – Costs relate to promotion of Headstart Daycare & Learning Centre in the community. Examples of promotional activities include flyer distribution, community outreach initiatives, maintenance of the company’s website and the grand opening open house.

Rent – Headstart Daycare & Learning Center will be operated out of a rented location. It is assumed that rent will cost $5,000 per month.

Utilities – Utilities include costs for telephone, water, gas and electricity. Based on the space occupied by the daycare, it is estimated that the utilities will cost approximately $600 per month.

Insurance – Insurance costs include insurance for accidents that occur on our premises and for personal injury and property damage resulting from the daycare operation. Costs are projected at $400 per month.

Repairs & Maintenance – Expenses include costs such as minor repair and maintenance of leasehold

improvements and other kitchen appliances. Repairs & maintenance are projected at $1,000 per month.

7.5.4 Cash Flow Projections

The projected cash flow statement for each year is shown in Appendix IV: Projected Cash Flow Statement.

The Centre will try to pay out dividends beginning in the third year of operations, in order for equity investors to obtain their investment back and commence earning a return. In our base case scenario, dividends to be paid out will amount to $75,000 in Year 3 and Year 4, sufficiently returning the initial

equity investments. Subsequent dividend payout policies will continue to be $75,000 in remaining years. Dividends will be distributed to investors based on their controlling interest in the enterprise. As well, dividends can only be paid in years where enough cash exists. Thus, our worst case scenario shows zero dividend payouts as the business has not recruited enough participants into the Centre to generate sustained profits, resulting in business failure.

Appendix III shows that we will have negative operating cash flows in Year 1, but we will have positive operating cash flows for each of the subsequent years. Overall, we will have sufficient cash flow to sustain our operations.

7.5.5 Ratio Analysis

Key financial ratios related to liquidity, investment utilization, solvency, and profitability are shown in Appendix V: Ratio Analysis. Although most ratios show a poor financial position in Year 1, it should be noted that the financial position improves from Year 2 onwards. The poor financial position in Year 1 is due to the initial capital investment outlays that are required and the fact that Headstart Daycare & Learning Centre is only opened partway through the year. As such, the cash outflow is greater than the cash inflow, resulting in a weaker financial position in comparison to the other years.

Salaries and professional development costs as a percentage of total operating expenses is approximately 70% each projected year. This is in-line with industry standards for childcare facilities in British Columbia. The percentage cost of food and snack to total operating expenses is calculated at approximately 11% - 12% for the projected years.

7.6 INVESTMENT ANALYSIS

We have performed an analysis on the viability of the investment for an investor using net present value, internal rate of return and external rate of return. We have analyzed the indicators using 3 scenarios, our base scenario and the best and worst case scenario.

7.6.1 Net Present Value (NPV)

Net present value measures the business’ ability to generate a return for investors on a given rate of return. For our analysis, we have used a required rate of return of 20%, as the business is a relatively safe investment and small private enterprise. As shown in Appendix VI: Net Present Value, IRR, & ERR, the NPV of the Centre is calculated to be $26,049. We have also performed a scenario risk analysis. NPV under the best case scenario of an average occupancy rate of 76% is calculated to be $234,698, while under the worst-case scenario of an occupancy rate of 43% - 49%, the NPV is $(468,370).7.6.2 Internal Rate of Return (IRR)

IRR measures the return on investment from the business’ perspective. The IRR under the base case scenario is 22%, as shown in Appendix VI. Since the IRR is above the rate used in the NPV, this means that the business is an investment which will provide the investor with a favourable rate of return. Under the best case scenario, the IRR is 43%. Under the worst case scenario, there is no IRR, as the business is unable to generate a positive free cash flow.

7.6.3 External Rate of Return (ERR)

The external rate of return measures the rate of return for investors based on the amount of dividends that are subsequently paid out. Under the base case scenario, the ERR is 26%. The ERR is 44% under the best case scenario. Lastly, there is no ERR under the worst case scenario, as the business is unable to generate a profit to pay dividends to investors.

7.6.4 Payback Period

The payback period measures the time, in years, it takes a business to pay back the invested capital to its investors. Under the dividend payment schedule in the base case scenario, the payback period is 4 years, while under the best-case scenario; the payback period is 2 years. Under the worst case scenario, the business is unable to distribute dividends to its investors.

7.6.5 Step Costs –Break-Even

Due to the nature of the regulations of the daycare industry, the profitability of the business highly depends on the number of children that are enrolled in each age group at the Centre. This is due to the restriction on the number of children that each educator is able to take care of. As shown in Appendix VII: Step Cost Analysis, one educator is only able to take care of 8 early tykes, 8 late tykes, 4 toddler or 4 infants. An analysis has been performed to show the total contribution margin of the number of children in each group. It is important to note that the Centre will only earn a positive contribution margin with a minimum of 3 children in a specific age group. Given that our competitors have waitlists filled with our potential customers, we are confident that we will be able to fully utilize each educator that will be hired, mitigating the risk of a negative contribution margin from the hiring an additional educator to take care of only 1 or 2 children.

7.6.6 Risk Analysis

The critical variable in assessing the risk of the business is the number of children that the business is able to obtain. Sensitivity analyses of the financial impact of the number of children that enrol at the Centre were analyzed. In the best-case scenario, it is estimated at the operating capacity will reach 76% after the first year. This results in a ERR of 44%. This is contrasted with the worst-case scenario, in which there will be no return on the investment made by shareholders. This is based on a 43% operating capacity after the first year. However, the worst-case scenario will most likely not occur, given that our competitors have full waitlists, signifying that there is a shortage of daycare facilities in the Clayton Heights neighbourhood.

8.0 APPENDICES

Appendix I: Start-Up Costs

Description CostOutdoor Playground Structure $5,000Chairs $300Tables $300Rugs $100Lighting Fixtures $400Shelving $400Stove $1,500Cookware $800Fridge $1,600Office Supplies $400Office Computer $800Leasehold Improvements $100,000

Books/Charts $50 per child

Stationary $25 per childToys $50 per child

Appendix II: Projected Balance Sheet

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Current Assets Cash 20,200 117,473 113,081 121,646 120,298 137,170 198,015 270,914 335,353 420,516 Prepaid expenses 5,400 5,562 5,729 5,901 6,078 6,260 6,448 6,641 6,841 7,046

25,600 123,035 118,810 127,546 126,376 143,430 204,463 277,555 342,194 427,562

Non-Current Assets Property, plant, & equipment 114,350 114,350 123,350 123,350 137,350 137,350 151,350 151,350 165,850 165,850

Accumulated Depreciation (11,200) (23,280) (34,944) (46,275) (57,340) (68,192) (78,874) (89,419) (99,855) (110,204)

Total Assets 128,750 214,105 207,216 204,621 206,386 212,588 276,939 339,486 408,189 483,208

Current Liabilities Trades payable 2,260 2,328 2,398 2,470 2,544 2,620 2,699 2,780 2,863 2,949 Income taxes payable (10,509) 11,776 12,576 13,389 14,216 15,062 23,972 25,103 26,267 27,465 Current portion of long-term debt 3,728 4,026 4,348 4,696 5,071 5,477 5,915 6,388 6,900 -

(4,521) 18,130 19,322 20,554 21,831 23,159 32,586 34,271 36,029 30,414

Non-Current Liabilities Long-term debt 42,821 38,795 34,447 29,752 24,680 19,203 13,288 6,900 0 0 Total Liabilities 38,300 56,925 53,769 50,305 46,511 42,362 45,874 41,170 36,029 30,414

Equity Share Capital 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 Retained Earnings (59,550) 7,181 3,447 4,316 9,874 20,226 81,066 148,316 222,160 302,794 Total Equity 90,450 157,181 153,447 154,316 159,874 170,226 231,066 298,316 372,160 452,794

Total Liabilities & Equity 128,750 214,105 207,216 204,621 206,386 212,588 276,939 339,486 408,189 483,208

Appendix III: Projected Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Revenues

Child Care - Parent Fees 96,975 399,537 411,523 423,869 436,585 449,682 502,935 518,023 533,564 549,570 Child Care Subsidy - Government 32,325 133,179 137,174 141,290 145,528 149,894 167,645 172,674 177,855 183,190 Operating Funding - Government 22,799 93,932 96,750 99,653 102,642 105,721 115,803 119,277 122,855 126,541 Application Fees - 309 318 328 338 348 358 369 380 391 Total Revenues 152,099 626,957 645,766 665,139 685,093 705,646 786,741 810,343 834,653 859,693

Operating Expenses

Salaries & Wages 126,038 364,657 375,597 386,865 398,471 410,425 422,738 435,420 448,483 461,937 Professional Development 600 1,854 1,910 1,967 2,026 2,087 2,149 2,214 2,280 2,349 Food / Snacks 14,520 59,822 61,617 63,466 65,370 67,331 75,655 77,925 80,263 82,670 Janitorial Services & Supplies 3,960 8,158 8,402 8,654 8,914 9,181 9,457 9,741 10,033 10,334 Office Supplies 4,000 4,120 4,244 4,371 4,502 4,637 4,776 4,919 5,067 5,219 Accounting & Legal 5,000 5,150 5,305 5,464 5,628 5,796 5,970 6,149 6,334 6,524 Advertising & promotion 11,100 4,425 4,558 4,694 4,835 4,980 5,130 5,284 5,442 5,605 Rent 30,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 Utilities 3,600 7,416 7,638 7,868 8,104 8,347 8,597 8,855 9,121 9,394 Insurance 2,400 4,944 5,092 5,245 5,402 5,565 5,731 5,903 6,080 6,263 Repairs & maintenance 6,000 12,360 12,731 13,113 13,506 13,911 14,329 14,758 15,201 15,657 Total Operating Expenses 207,218 532,906 547,094 561,706 576,758 592,260 614,533 631,169 648,304 665,953

EBITDA (55,119) 94,051 98,672 103,432 108,335 113,385 172,208 179,174 186,350 193,740 Amortization 11,200 12,080 11,664 11,331 11,065 10,852 10,682 10,545 10,436 10,349 EBIT (66,319) 81,971 87,008 92,101 97,270 102,533 161,527 168,629 175,913 183,391 Interest 3,740 3,464 3,166 2,844 2,496 2,120 1,714 1,276 803 292 Net Income before Taxes (70,059) 78,507 83,843 89,258 94,775 100,413 159,812 167,353 175,110 183,099 Income Taxes (10,509) 11,776 12,576 13,389 14,216 15,062 23,972 25,103 26,267 27,465 Net Income (Loss) (59,550) 66,731 71,266 75,869 80,558 85,351 135,840 142,250 148,844 155,634

Opening Retained Earnings - (59,550) 7,181 3,447 4,316 9,874 20,226 81,066 148,316 222,160 Add: Net Income (59,550) 66,731 71,266 75,869 80,558 85,351 135,840 142,250 148,844 155,634 Deduct: Dividends - - 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 Ending Retained Earnings (59,550) 7,181 3,447 4,316 9,874 20,226 81,066 148,316 222,160 302,794

Appendix IV: Projected Cash Flow Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Cash Flow from Operations:

Net Income: (59,550) 66,731 71,266 75,869 80,558 85,351 135,840 142,250 148,844 155,634 Add: Amortization expense 11,200 12,080 11,664 11,331 11,065 10,852 10,682 10,545 10,436 10,349 Change in Working Capital Accounts: Prepaid expenses (5,400) (162) (167) (172) (177) (182) (188) (193) (199) (205) Trades payable 2,260 68 70 72 74 76 79 81 83 86 Taxes payable (10,509) 22,285 800 812 828 846 8,910 1,131 1,164 1,198 Cash provided (used) in operations: (61,999) 101,001 83,634 87,912 92,348 96,943 155,323 153,814 160,328 167,062

Cash Flow from Investing:Capital Acquisitions (114,350) (9,000) (14,000) (14,000) (14,500) Cash provided (used) in investing: (114,350) - (9,000) - (14,000) - (14,000) - (14,500) -

Cash Flow from Financing:Equity Investment 150,000 Bank debt 50,000 Repayment of Principle (3,451) (3,728) (4,026) (4,348) (4,696) (5,071) (5,477) (5,915) (6,388) (6,900) Dividends paid (75,000) (75,000) (75,000) (75,000) (75,000) (75,000) (75,000) (75,000) Cash provided (used) in financing: 196,549 (3,728) (79,026) (79,348) (79,696) (80,071) (80,477) (80,915) (81,388) (81,900)

Cash provided (used) 20,200 97,274 (4,392) 8,565 (1,348) 16,872 60,845 72,899 64,439 85,163 Cash, beginning of period - 20,200 117,473 113,081 121,646 120,298 137,170 198,015 270,914 335,353 Cash, end of period 20,200 117,473 113,081 121,646 120,298 137,170 198,015 270,914 335,353 420,516

Appendix V: Ratio Analysis

Liquidity Ratio Current ratio (5.66) 6.79 6.15 6.21 5.79 6.19 6.27 8.10 9.50 14.06

Investment Utilization Ratios Asset turnover 1.18 2.93 3.12 3.25 3.32 3.32 2.84 2.39 2.04 1.78 Fixed asset turnover 1.47 6.88 7.30 8.63 8.56 10.20 10.86 13.08 12.65 15.45

Solvency Ratios Debt ratio 0.36 0.20 0.19 0.17 0.14 0.12 0.07 0.04 0.02 0.00 Debt to equity 0.51 0.27 0.25 0.22 0.19 0.14 0.08 0.04 0.02 0.00 EBITDA to liabilities (1.44) 1.65 1.84 2.06 2.33 2.68 3.75 4.35 5.17 6.37 Interest coverage (17.73) 23.66 27.49 32.39 38.97 48.36 94.22 132.13 219.07 628.18

Profitability Ratios Net profit margin (0.39) 0.11 0.11 0.11 0.12 0.12 0.17 0.18 0.18 0.18 Return on assets (0.46) 0.31 0.34 0.37 0.39 0.40 0.49 0.42 0.36 0.32 Return on equity (0.66) 0.42 0.46 0.49 0.50 0.50 0.59 0.48 0.40 0.34

Expense Ratios Salaries & Pro-D to Expenses 61.11% 68.78% 69.00% 69.22% 69.44% 69.65% 69.14% 69.34% 69.53% 69.72% Food & Snacks to Expenses 7.01% 11.23% 11.26% 11.30% 11.33% 11.37% 12.31% 12.35% 12.38% 12.41%

Appendix VI: Net Present Value, IRR, & ERR

Equity Investment (150,000) Bank Debt (50,000) Required Return on Equity 20%

Net Income Before Taxes (70,059) 78,507 83,843 89,258 94,775 100,413 159,812 167,353 175,110 183,099 Add: Amortization 11,200 12,080 11,664 11,331 11,065 10,852 10,682 10,545 10,436 10,349 Less: Capital Acquisitions (114,350) - (9,000) - (14,000) - (14,000) - (14,500) - Less: Debt Repayment (3,451) (3,728) (4,026) (4,348) (4,696) (5,071) (5,477) (5,915) (6,388) (6,900) Less: Taxes 10,509 (11,776) (12,576) (13,389) (14,216) (15,062) (23,972) (25,103) (26,267) (27,465) Free Cash Flow (150,000) (166,152) 75,083 69,904 82,852 72,928 91,132 127,045 146,880 138,392 159,084

Net Present Value on Equity 26,049 IRR on Equity 22%

External Equity Cash Flows (150,000) - - 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 ERR 26%

External Payback Period 4 years

Appendix VII: Step Cost Analysis

Revenues 1 2 3 4 5 6 7 8Infant (9mths - 18mths) 16,368 32,736 49,104 65,472 n/a n/a n/a n/aToddler (18mths - 35mths) 15,768 31,536 47,304 63,072 n/a n/a n/a n/aEarly Tykes (3yrs) 12,547 25,093 37,640 50,187 62,734 75,280 87,827 100,374 Late Tykes (4yrs) 12,547 25,093 37,640 50,187 62,734 75,280 87,827 100,374

Variable CostsEducator

Infant/Toddler 34,195 34,195 34,195 34,195 n/a n/a n/a n/aTykes 30,901 30,901 30,901 30,901 30,901 30,901 30,901 30,901

Food 1,320 2,640 3,960 5,280 6,600 7,920 9,240 10,560 Educational Material 63 125 188 250 313 375 438 500

Contribution MarginInfant (9mths - 18mths) (19,210) (4,224) 10,761 25,747 n/a n/a n/a n/aToddler (18mths - 35mths) (19,810) (5,424) 8,961 23,347 n/a n/a n/a n/aEarly Tykes (3yrs) (19,737) (8,572) 2,592 13,756 24,920 36,085 47,249 58,413 Late Tykes (4yrs) (19,737) (8,572) 2,592 13,756 24,920 36,085 47,249 58,413

** Note that the maximum number of children in a group with 1 educator is as follows:Infant: 4Toddler :4Early Tykes:8Late Tykes:8

Number of Children**

9.0 REFERENCES

Barnett, W. S. (2002). Early Childhood Education. In A. Molnar (Ed.), School reform proposals: the

research evidence (pp. 1 - 26). United States: Information Age Publishing Inc.

British Coumbia: Ministry of Children and Family Development. (2010). Approved Training Institutions

Offering Early Childhood Education Programs. Retrieved July 2, 2010, from

http://www.mcf.gov.bc.ca/childcare/ece/pdfs/training_institutes.pdf

British Columbia: Ministry of Children and Family Development. (2010). Child Care Operating Funding

Program Rates. Retrieved July 2, 2010, from http://www.mcf.gov.bc.ca/child

care/pdfs/ccof_rates.pdf

British Columbia: Ministry of Education. (2009). Full School Day Kindergarten – Early Learning Initiatives.

Retrieved July 2, 2010, from http://www.bced.gov.bc.ca/early_learning/fdk/

British Columbia: Ministry of Education. (2009). Full School Day Kindergarten Questions and Answers –

Early Learning Initiatives. Retrieved July 2, 2010, from

http://www.bced.gov.bc.ca/early_learning/fdk/parent/pamphlet.htm

British Columbia Statistics. (2009). Local Health Area Total Fertility Rates.

Retrieved July 9, 2010, from http://www.bcstats.gov.bc.ca/data/pop/vital/lha_tfr.asp

Early Childhood Educators of BC (2008). Survey Outcomes: Early Learning and Care a Strong Start

Centre Research. Retrieved July 2, 2010, from

http://www.ecebc.ca/resources/pdf/ecebc_survey_mar09.pdf

Fraser Valley Real Estate Board (2010). Monthly Statistics Package May 2010. Retrieved July 2, 2010,

from http://www.fvreb.bc.ca/statistics/Package%20201005.pdf

McClure, R. (2010). Top 12 Trends in Child Care. Retrieved July 4, 2010, from

http://child care.about.com/od/evaluations/tp/trends.htm

Montessori method – Wikipedia, the free encyclopedia. (2010). Retrieved July 2, 2010 from

http://en.wikipedia.org/wiki/Montessori_method

Province of British Columbia: Community Care Licensing Branch – Ministry of Healthy Living and Sport

(2007). Child Care Licensing Regulation. Retrieved July 2, 2010, from

http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/12_332_2007

School District No. 36 (Surrey) (2010). School District No. 36 (Surrey) - School List. Retrieved July 2,

2010, from http://www.sd36.bc.ca/directory/schoollist.asp?type=e&type2=t

Statistics Canada (2010). Statistics Canada –Selected Trend Data-Surrey. Retrieved July2, 2010 from

http://www12.statcan.gc.ca/census-recensement/2006/dp-pd/92-596/P1-2.cfm?

Lang=eng&T=CSD&PRCODE=59&GeoCode=15004&GEOLVL=CSD&TID=0

Waldorf education – Wikipedia, the free encyclopedia. (2010). Retrieved July 2, 2010 from

http://en.wikipedia.org/wiki/Waldorf_education

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