Business Plan - Daycare Term Paper

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Daycare Business Plan

NJ Daycare Inc. is a small provider of daycare services, organized as a sole proprietorship. The industry is large, but highly fragmented, and most businesses have only 1 or 2 employees, and revenues of around $54,000 annually. This daycare will be similar to the ones already existing in the industry, but catering to evenings and extended hours, a subset of the overall daycare market. The state has many different licensing requirements, and it is believed that our daycare will meet all of these requirements for obtaining a license.

Mission Statement

NJ Daycare Inc. aims to provide the highest quality daycare service, combining a stimulation, education-forward environment with convenience and low cost for parents, in its mission to be the best daycare in northern New Jersey.

Industry

The daycare industry is large but highly fragmented. The market research company IBIS World (2014) estimates the size of the market at $46 billion, but without any dominant market player. Indeed, not one company has market share of note, making daycare one of the most heavily-fragmented industries in the country. The daycare industry is believed to be positively correlated with a healthy economy, which means that it should be growing at present. This is because parents who were not working re-enter the workforce during economic boom times, and working parents have more discretionary income, both factors that contribute to demand growth in the industry (IBIS World, 2013). There are 887,745 daycare businesses, meaning that the average daycare in the U.S. earns annual revenue of $54,114. The industry is indeed heavily fragmented, as this tiny revenue per business indicates that most are likely part-time businesses or run by just one or two people. There are around 1.7 million people employed in the industry, again around 2 per business.
Thus, daycares are small, and usually not very profitable (IBIS World, 2013).

Another factor that drives demand for daycare businesses is demographic. Daycare is dependent on the number of young children in an area. There is preschool age daycare, and then there is school-age daycare, but in either case these are dependent on the number of working families in the region to drive demand. Northern New Jersey is either within or adjacent to the New York metropolitan area, and housing prices are lower than in the city, making the area a draw for working families. The percentage of population under the age of 18 is slightly lower than the U.S. average for most northern New Jersey counties (22% in Bergen County, for example, versus 27% nationwide), and the general trend is that the teenaged cohorts are larger than the ones under the age of 10, indicating that the birth rate is slowing (U.S. Census Bureau, 2010).

However, the shrinking market is not necessarily a problem. First, the industry has few barriers to entry and exit, which means that it tends to contract and expand based on demand -- there is constant turnover of providers. Second, it is highly localized, so demographic considerations at the local level are more important. Third, the businesses are small, so capturing just a small percentage of the market is enough to success as a new daycare business. Thus, while demographics are not in favor, this does not necessarily pose a problem for a new entrant into the industry.

Form of Business

There are many different forms of business organization. A sole proprietorship is a simple form of business organization that has the benefits of being easy, low cost, and allows for taxation flow-through.....

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