Readers of Nursery Business browsing this year's Sunday Times 'Rich List'
may have chanced upon entry number 392. Name: Duncan Bannatyne. Interests: private day nurseries. Worth: 90m.
Mr Bannatyne's rise to multi-millionaire status came via ice-cream vans, care homes, gyms and the nursery chain, Just Learning, whose 21 nurseries he sold last December for 22m.
So how do ambitious nursery owners get from running one nursery to 21 - successfully? That question drew a quick and simple response from Busy Bees managing director John Woodward: 'The people' - and other chain operators echoed his view.
Own one nursery and you're an experienced childcarer and hands-on manager; own two settings and you're a businessman/woman, dependent on a good and trusted staff team, an able manager in charge of one nursery and good management procedures to keep the whole operation running smoothly.
'We had one nursery and now we have 45, and what made it work was the people,' says Mr Woodward. 'If you spread yourself too thinly, then you'll potentially have a problem.'
Jane Orme, owner of The Rocking Horse Nursery Group, Nottinghamshire, is hoping to build her eighth nursery in the grounds of Kingsway Primary School in Kirkby-in-Ashfield, under the Neighbourhood Nurseries Initiative (NNI), but recalls the 'absolutely phenomenal' adjustment she had to make on opening her second nursery.
'At first you think you can do it all, but you can't look after two sites in the same way at the same time,' she says. 'When I had one nursery, I did absolutely everything. I taught, I washed the floors, I did the books, I bought the food, and I knew all of the parents' first names. Then, suddenly, you have to work with another manager, you don't have the same contact with parents and people are saying, "I haven't seen you for weeks".
It's a big shock - your involvement in the business increases enormously but you don't have the same hands-on involvement as before.'
It is partly for this reason that Mr Woodward advises: 'Before you leap in, take a cold, hard look at your business and decide if expansion is really the right thing for you to do.'
'To be in a position to expand,' adds Kidsunlimited chairman Stewart Pickering, 'your company has to be well financed and well managed, with all the correct controls in place.'
Providers will be familiar with the rest of the expansion process - it's the same as starting any nursery: assess demand, draw up a business plan, raise the finance....
Second time around
What will be very different this time around will be the marketplace.
Nursery owners will probably have opened their doors to business with little or no competition. Now they may be competing with other providers, for customers and staff.
Nevertheless, chain operators agree that the demand for childcare is still there. 'Some areas are becoming saturated but it's still very much a growth market,' says Mr Pickering.
The NNI and New Opportunities Fund (NOF) (see boxes) are the largest pots of Government money that providers can access to expand their business, but they are far from the only ones.
Northumberland nursery owner Lorraine Walker, for example, hopes to expand her 20-place nursery in the tiny village of Lucker through a Countryside Agency grant of up to 25,000 because of the valuable service it provides to the local community.
'I am still at the negotiating stage but I am optimistic as the Countryside Agency has looked very favourably upon the application,' she says.
Others funds can be accessed indirectly. The NHS and further and higher education have childcare budgets over three years of some 70m and Pounds 20m, respectively, and from September schools will be able to provide community services, including childcare (see box, left).
However, providers seeking to expand will have to be particularly alert to the risks as well as the opportunities that such developments may hold.
Mr Woodward cautions against being 'seduced by capital grants' and warns against 'short termism', as such funding will run out, sooner or later.
NDNA chief executive Rosemary Murphy agrees. 'We are labouring the point that there are a lot of initiatives but that you have to make sure that your business will be sustainable after the money runs out,' she says.
There is also growing concern that these new initiatives will increase competition, exacerbate the already acute recruitment crisis and unleash a cycle of problems for providers.
'A small operator with one, two or three nurseries could be very vulnerable to rapidly rising staff costs which in turn will force fees up, and if their fees are higher, demand will reduce and their business is potentially at risk. It doesn't take big swings in percentages to change a low margin operation from profit into loss,' says Mr Pickering.
Add to that scenario growing uncertainty about the future of Government policy -and increasingly the economy and property prices. Child Base managing director Mike Thompson for one will be keeping a close eye on Government objectives, the future of the Working Families Tax Credit (WFTC) and the impact of childcare initiatives on other forms of provision before considering further expansion.
'There's a lot of uncertainty and a lot to study and watch over the next two years,' he says.
This uncertainty and the prospect of more competition strengthens the case for providers spreading their risk. Michael Ruaux, a nursery owner from Bolton (see box on page 5) advocates 'a site in a catchment area with a wide spectrum of parents' so cushioning your business from, say, changes in the WFTC, while Mr Pickering advocates 'a balanced portfolio' of nurseries.
As for staffing, it is essential that providers build into their business plan training costs to ensure a steady supply of 'home-grown' trained staff - or find the money to pay the best salaries in town to attract and retain staff.
It seems the problem with expansion is that the money and opportunities are there, but competition and uncertainty may be on the way and the key to long-term success - the people - may not be.
