Preschool Business Plan
Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their preschool companies. We have the experience, resources, and knowledge to help you create a great business plan.
In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a preschool business plan step-by-step so you can create your plan today.
What Is a Business Plan?
A business plan provides a snapshot of your preschool business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.
Why You Need a Business Plan
If you’re looking to start a preschool business or grow your existing preschool company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your preschool business to improve your chances of success. Your preschool business plan is a living document that should be updated annually as your company grows and changes.
Sources of Funding for Preschool Businesses
With regard to funding, the main sources of funding for a preschool business are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for preschool companies.
How to Write a Business Plan for a Preschool Business
If you want to start a preschool business or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your preschool business plan.
Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your executive summary is to quickly engage the reader. Explain to them the kind of preschool business you are running and the status. For example, are you a startup, do you have a preschool business that you would like to grow, or are you operating a chain of preschool businesses?
Next, provide an overview of each of the subsequent sections of your plan.
- Give a brief overview of the preschool industry.
- Discuss the type of preschool business you are operating.
- Detail your direct competitors. Give an overview of your target customers.
- Provide a snapshot of your marketing strategy. Identify the key members of your team.
- Offer an overview of your financial plan.
In your company overview, you will detail the type of preschool business you are operating.
For example, you might specialize in one of the following types of preschool businesses:
- Parent co-op preschool: Preschools that offer lower-cost enrollment in exchange for the volunteer work of a parent on a regular (typically weekly) basis. This type of preschool employs a teacher and an aide, but also includes parents, which reduces the payroll costs considerably.
- Academic/play-based preschool: Preschools that stress learning via a number of experiences in academic introductions. Play-based learning is also introduced in math and pre-reading games and other forms of learning-while-you-play interactions.
- Religious preschool: Preschools that adhere to the religious practices and beliefs of the parents in teaching, while including academic and play-based experiences for preschoolers.
- Learning system preschool: Systems of specific teaching theories, such as Waldorf and Montessori, are offered at this type of preschool. These preschools are based on proven structures for learning.
- Development-interaction preschool: Preschools that offer a holistic approach to preschool, focusing on the emotional, intellectual, social and physical growth of each preschool child.
In addition to explaining the type of preschool business you will operate, the company overview needs to provide background on the business.
Include answers to questions such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include the number of programs offered, the number of preschool graduates, reaching X number of preschool locations, etc.
- Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
In your industry or market analysis, you need to provide an overview of the preschool industry. While this may seem unnecessary, it serves multiple purposes.
First, researching the preschool industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.
The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your preschool business plan:
- How big is the preschool industry (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential target market for your preschool business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.
The customer analysis section of your preschool business plan must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: parents, grandparents, children, and churches, and schools.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of preschool business you operate. Clearly, parents would respond to different marketing promotions than churches, for example.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.
Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.
Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other preschool businesses.
Indirect competitors are other options that customers have to choose for their preschoolers that aren’t directly competing with your service. This includes private tutors, public schools, nannies and babysitters. You need to mention direct competition, as well.
For each direct competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as
- What types of families do they serve?
- What type of preschool business are they?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide options for translation services?
- Will you offer family-discounts that your competition doesn’t?
- Will you provide better playgrounds and amenities?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a preschool business plan, your marketing strategy should include the following:
Product: In the product section, you should reiterate the type of preschool company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide developmental, religious, academic or play-based learning systems?
Price: Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the services you offer and their prices.
Place: Place refers to the site(s) of your preschool(s). Document where your company is situated and mention how the sites will impact your success. For example, is your preschool business located in a new, master-planned community, near a business district, or in a standalone building? Discuss how your site might be the ideal location for your customers.
Promotions: The final part of your preschool marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:
- Advertise in local papers, radio stations and/or magazines
- Reach out to websites
- Distribute flyers
- Engage in email marketing
- Advertise on social media platforms
- Improve the SEO (search engine optimization) on your website for targeted keywords
While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the tasks involved in running your preschool business, including answering calls, placing preschoolers into programs, meeting with parents, planning and providing teaching sessions, billing and collecting revenue, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to open your fifth preschool, or when you hope to reach $X in revenue. It could also be when you expect to expand your preschool business to a new community in your city.
To demonstrate your preschool business’ potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally, you and/or your team members have direct experience in managing preschool businesses. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a preschool business or successfully leading as a principal of a public elementary school.
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.
An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you open a new preschool every two years, or offer summer school and daycare sessions? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your preschool business, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement
Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.
When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a preschool business:
- Cost of classroom furniture, equipment and office supplies
- Payroll or salaries paid to staff
- Business insurance
- Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your list of parents who have enrolled their children on contract for the next two years, or the waitlist of parents who want their children to attend your preschool.
Writing a business plan for your preschool business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the preschool industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful preschool business.
Preschool Business Plan FAQs
Growthink's Ultimate Business Plan Template allows you to quickly and easily write your preschool business plan.
Starting a Preschool business is easy with these 14 steps:
- Choose the Name for Your Preschool Business
- Create Your Preschool Business Plan
- Choose the Legal Structure for Your Preschool Business
- Secure Startup Funding for Your Preschool Business (If Needed)
- Secure a Location for Your Business
- Register Your Preschool Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Preschool Business
- Buy or Lease the Right Preschool Business Equipment
- Develop Your Preschool Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Preschool Business
- Open for Business
Click here to download the pdf version of our basic business plan template.
Our free business plan template pdf allows you to see the key sections to complete in your plan and the key questions that each must answer. The business plan pdf will definitely get you started in the right direction.
We do offer a premium version of our business plan template. Click here to learn more about it. The premium version includes numerous features allowing you to quickly and easily create a professional business plan. Its most touted feature is its financial projections template which allows you to simply enter your estimated sales and growth rates, and it automatically calculates your complete five-year financial projections including income statements, balance sheets, and cash flow statements. Here’s the link to our Ultimate Business Plan Template.
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