How to Start / Open A Daycare Business in Kenya

Daycare Business Plan (Kenya)

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This survey focuses on standard, as opposed to extremely high end, daycares, largely handling kids of between 6 months and 3 years. Nowadays almost all kindergartens admit kids of 3 years, and at that age parents prefer to take a child to school rather than keep them at a daycare.

Before we get into the survey proper, here is sample revenue from a Daycare:

 

Location

 

About 5 kilometers from Kiambu town. A

 

 

 

 

two bedroom house costs between Kshs.12,

 

 

 

 

000 and Kshs.20, 000. About 55 % of flats

 

 

 

 

have come up within the last 4 years. Within

 

 

 

 

the same area are one roomed houses made

 

 

 

 

of wood, whose rent averages Kshs.1000.

 

 

 

 

There are also people living on their own

 

 

 

 

pieces of land practicing subsistence

 

 

 

 

 

farming. Most of those living in the flats

 

 

 

 

work in Nairobi, with a few working in

 

 

 

 

Kiambu town.

 

 

 

 

 

 

 

 

 

 

 

Year Opened:

 

2012

 

 

 

 

 

 

 

 

 

 

 

Charges

 

Kshs.100 per child per day

 

 

 

 

 

 

 

 

 

 

No of children on a Thursday in February

11

 

 

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Average No of children in a day

 

13

 

 

 

 

 

 

 

 

 

 

 

Opening hours

 

8am to 6pm. It operates from Monday to

 

 

 

 

Saturday.

 

 

 

 

 

 

 

 

 

 

 

Rent

 

(Ksh. 14,000.) The owner operates the

 

 

 

 

 

Daycare from the sitting room of her 2

 

 

 

 

 

bedroom house. When calculating her costs,

 

 

 

 

she allocates Kshs.7000 as the rent for the

 

 

 

 

space used for the daycare.

 

 

 

 

 

-The landlord owner has allowed her to

 

 

 

 

paint the outside of the building, which has

 

 

 

 

a balcony facing the road.

 

 

 

 

 

 

 

 

 

 

Competition

 

4 daycares in the region. With 2 being

 

 

 

 

 

Daycares/ kindergarten

 

 

 

Children Category –

 

1 to 5 years. Children above 3 years mostly

 

 

 

 

attend on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No of employees

1 attendant/caregiver. She has only done

 

some computer courses, and a first aid

 

course she took while in high school.

 

 

Salary

Kshs.8000

 

 

Revenue in February

Kshs.31800

 

 

Expenses (Rent, Salary, Electricity,

Kshs.21, 000

Miscellaneous)

 

 

 

(Read a Scenario 2 under Revenue)

Overall demand for Daycare services is driven by:

A significant increase in the number of women working and pursuing career goals

Frustrations with House helps - This is by househelps leaving after a short while in search of greener pastures, feeling that they are overworked or other personal reasons.

Sometimes there is unavailability of househelps. Partially this is driven by a bigger percentage of girls getting and completing school due to the free primary education and also because there are increasingly more opportunities for self employment. For instance one can start hawking eggs and smokies with as low as Kshs.5000.

Negative stories about househelps – The mainstream media has carried quite a number of stories touching on carelessness, brutality and naivety of house helps. On social media, particularly on Facebook there are groups focused on mothers, and some of the most discussed topics have to do with disappointments brought about by househelps. This has made some parents and especially new parents hesitant to hire househelps.

Government regulations – the government has been pushing for stricter regulation of the informal workers, house helps included. Among the suspended regulations was to ensure the house helps are paid the minimum statutory wage in addition to the employer making NSSF contributions on their behalf. These regulations, though suspended for now, have made some parents hesitant to hire house helps considering the extra financial obligations they will incur.

 

 

 

 

Why Women Take Their Children to Daycare

The major reason is because they want to have the best of both worlds: To pursue their economic and social lives while still ensuring their babies are taken care of in the best way possible considering the circumstances.

This means that among the major considerations are:

a) Trust

Parents and particularly mothers want the assurance that their children will be taken good care of. This means they have to trust the Daycare caregiver to feed the child, maintain a decent level of hygiene, change the diapers, use the correct language with him or her and in case of a sudden sickness be able to take the correct measures. (See more on trust below.)

b) Affordability

Although parents want the best for their kids, they want it at very affordable fees. For mothers the base of what they are ready to pay a daycare is usually the equivalent price they would pay a house help. If a mother would pay her house help Ksh.3000 then she will be uncomfortable paying more than that for the day care or at least 20 % more. The casual reasoning is that in addition to taking care of the baby the house help can do much more like cooking and washing clothes.

Affordability plays a big influence in the success or failure of a daycare. For instance putting up a relatively high end daycare charging Kshs.250 in an environment where mothers don’t pay househelps more than Kshs.3000, then they will be reluctant to pay the amount which could ideally amount to Kshs. 7,500 per month. This is irrespective of the facilities the daycare has or the income of the parents.

If in the same neighborhood there is another daycare with average facilities, but with good and trusted caregivers then mothers will prefer it to the relatively more expensive.

Affordability is a balance between facilities and pricing. A common refrain among many of those running daycares in middle class neighborhoods is that as much as parents demand quality services for their children they are reluctant to pay for it.

 

 

 

 

Licenses

1.County authority license business permit – This is a business permit issued by the county authority to anyone conducting business within the county. The price and terms depends on the county. Generally these are relatively easy to acquire. Council official could come inspect your premises and insists on you having clearance from the local public health officials. In some areas the license can be issued without inspecting the premises.

License range from Kshs.4000 to Kshs. 15,000 depending on the locations within the county and size of the premises. Specific information can be acquired from the local council offices.

2.Public Health License – The purpose of this is to ensure the environment is fit for children. Thus things like walls, toilets, kitchen and the general environment are considered. Public health officers are usually situated within the local public government hospital (E.g. Machakos Level 5 hospital, Mbagathi hospital) or within the county offices. The charges for this license average about Kshs.3000.

3.Individual Health Certificate – This is to ensure the attendant or caregiver is of good health and not at risk to spread any diseases to the children. A health certificate averages Kshs. 1500. Most Daycares will request the employee to with the health certificate when seeking employment.

Though there are many Daycares who operate without the above two health certificates either because they consider them an unnecessary expense or due to the laxity of authorities in a location it’s a big plus to have them. Such licenses go a long way in reassuring parents. And when hiring a caregiver it’s good for the long term reputation of the daycare to ensure they don’t have any communicable diseases which could put the children at risk.

4.Education License – This is optional and comes in handy if you wish to grow the daycare to a school say kindergarten or primary school. In addition to checking whether the school has the necessary facilities like a play area, is safe in terms of security and health, education officials insist on the presence of at least a member with the right professional qualifications like ECDE training. Again there are many daycares that operate without this license, but as a way of validation and with possibilities of future growth it does not harm to have it. The license can be acquired from county education offices. Prices for kindergarten licenses average Kshs.9000

 

 

 

 

There seems to be no clear regulations on how to treat Daycares. In some counties education officials insists that Daycares should have a license to operate from the education department while in others they say it’s alright to operate without any form of certification from the education officials. In Nairobi for instance pure Daycares don’t require a license from the education office. However since regulations keep changing a visit to the local/county education before starting is important just to be on the safe side.

Classes of Daycares

Daycares can generally be classified into 3:

a)High end Daycares – They are high end by virtue of the locations they operate in and also the amount they charge. For instance daycares which operate in places like Lavington, Nyari, parts of Muthaiga and other such estates. They charge above Kshs.500 per day and even extreme amounts of Kshs.2000. The differentiating thing is the extras they offer and the income and socialization of the clients they are serving. Among the extras in the daycares include specially trained caregivers, insurance, and an on call vehicle in case children fall sick, higher quality and variety of toys.

b)Mid level Daycares – These can be found in some high and mid level estates they charge between Kshs.200 and Kshs.500. The differences in pricing depend on the competition, lifestyle of residents, and facilities and the extras they offer.

c)Lower end / Standard Daycares – These charge between Kshs. 20 and Kshs.200. They can be found in low income and mid level estates. The range in prices is by virtue of location since most tend to have basic facilities. The lower the price the less emphasis on aesthetics and more on handling the baby for convenience purposes. As long as the baby feeds and has someone to keep a good eye on her the customer is okay.

Important Considerations

It’s vital to understand the social economic dynamics of an area before you decide on the kind of Daycare to set up. It’s not simply about the income of residents but also whether they are willing to pay a certain amount. A mid level daycare set in an environment where people can afford to pay but think a charge above Kshs.100 per day is too much to pay for a the service will fail. One way to get an idea of how much people are willing to pay is find out the amount people are paying house helps. In every location there is an unofficial standard going rate. This should give a proper idea of how you can go. Alternatively is to compare the charges and quality standards of entry level schools in the area.

 

 

 

 

Though there may be room to cut a niche in terms of facilities and hence pricing it’s important to consider whether the niche is big enough to sustain the business. If the target niche market is not big enough but growing, consider, in terms of financial implications, how long you are willing to wait before the market is big enough for you to break even. Also ponder the possibilities of competitors coming up in the future, and whether the market will be big enough for all of you.

Trust takes time to build, and even where trust exists people don’t automatically change habits. They won’t start ditching househelps and bringing children to your day care immediately even when yours is the only daycare in the area. It will be a gradual process. So it’s vital to do a break even analysis, to get an idea of how many children you need to cover your costs. Then look at your market to see whether you can hit that no, and within what time. Do you have enough capital to sustain until that level? What can you do to get to the break even point faster?

 

 

 

 

Competition and Survival

Average No of Daycares in an Estate

5

No that have opened in the last 1 year

37%

No that have closed in the last 1 year –

1 in every 5

1 in 5 is also considering closing

2 in 5 are considering upgrading to kindergarten as soon as they can

Reasons For Closing Down

Losses - 23%

Insufficient Capital -26%

Transforming Kindegaten - 17%

Staff -12%

Other -22%

As seen the major reasons for closing down is lack of enough capital to sustain until the break even point. For others its ultimate losses, this could be a result of increased competition in an area without enough numbers to sustain all the entrants. Again it could be a result of a negative reputation which can see the sudden withdrawal of a high number of kids, or minimal enrollment.

 

 

 

 

Status of Competition

Competition in the business is increasing at a fast rate. Partially this is driven by the existing hype about the business. There is so much talk in social circles, mainstream and social media about Daycares. The general portrayal is that it’s a business where chances of success are high, what with all the disappointing tales of househelps. The reality of course is different and success depends on local conditions.

At the very basic the barriers to entry in the business are minimal. There are many daycares which operate without any form of licenses or with the county license only. In numerous cases people start running daycares from their own homes, meaning they don’t incur any extra expenses in terms of rent, thus reducing to a large extent the start up costs.

Away from the informal Daycares there are many who have started in a very basic way using the lowest capital possible; Rent for a one room, potties, simple toys, a vinyl carpet and two mattresses. Other than rent the cost of the rest of the items could be as low as Kshs.5000.

For the formal, higher end Daycares the plan is usually to outdo what presently exists within a locality. And since there is so much room to improve on things to do with the children, the reasoning is that any positive improvement will win parents over, and make the business a success. This motivates anyone with an idea for improvement join the business thinking that they will almost be assured of success. Again as noted success will depend on local conditions.

As more entrepreneurs join and leave the business the hype will ease, and there will be more practical information on what works and does not work in the business. Entrepreneurs will take a more cautionary approach and the rate of growth competition will decrease.

Generally opportunities exist in the business. Still specifics locations have different conditions and to analyze the viability of the locations one has to consider:

Lifestyle of the residents. Do they need a Daycare? Or do they prefer the alternatives? What is their attitude to alternatives such as house helps?

Are there numbers enough to profitably sustain an extra daycare? Are the numbers growing to buffer against any future conditions?

Are mothers in the area willing to pay the amount you wish to charge?

Is there a dominant player in the region? How will you outdo them?

How long are you ready to wait before the breakeven point? Do you have the capital to sustain the business until the break point?

 

 

 

 

Competition in the business is based on:

Trust

Mothers want the confidence and peace of mind that whoever they leave their kids with will take care good of them. The very basic of taking care of the baby is to ensure that she feeds well, she gets changed when wet, she is protected from any dangers or accidents, she is not bullied, and she gets to play. She does not get infected with diseases, if she falls sick the necessary measures are taken and all in all she enjoys her stay.

To gain an edge some of the daycare owners put quite some effort in portraying this trust. A common method is for the owner the Daycare to personally run the daycare at least in the initial days. This gives them a chance to interact with parents. During such interactions the owner can give verbal assurances. From conversation a parent is able to form an impression of the caregiver or owner. Does she understand children? Is she passionate about children? Does she maintain some level of standards?

Owners with relevant qualifications tout them “I am a trained teacher” “I am a trained nurse” “I am a mother of four” “I have first aid training”.

Some owners display their professional certificates, licenses, and place first aid boxes and kits where they can be easily seen by anyone visiting the daycare. Others will hire older women reasoning that mothers are likely to trust older women with kids than relatively younger ladies.

Trust is not tied to facilities per se, for in the market there are Daycares with above average facilities but not trusted by parents, the vice versa also applies. Rather trust is largely based on the personality of the owner or members of staff.

Depending on the location factors like personal grooming and environment of the daycare will have an influence on how easily trust is built.

In some areas, especially in low income areas or those with low competition convenience and charges rather than trust come first.

At the end of the day, after the initial impressions, long term trust will be built by how the baby is practically taken care of, and consistently so. If parents trust you in the long term, and believe your trust is not cosmetic, then it will help the business grow and also cushion against competition.

It’s important to note trust take times to build. Thus in areas where trust is crucial you must be in for the long term and maintain consistent standards. You must also have the capital to run the

 

 

 

business until the point you have enough mothers trusting your daycare to the point of breaking even.

Location

Mothers leaving children in daycares want the daycare to fit in their lifestyles. If they are going to work they would prefer if the Daycare is located along the path they use to and from work, if not so within a short radius. Same if they are going to shop or any other activity. Thus choosing a location convenient to as many mothers as possible is one way to enter the market and compete. Accessibility is a big factor when purchasing Daycare services.

Location is also in terms of competition in the area. No matter the levels of differentiation there will be challenges in establishing in a highly competitive environment especially a place with a dominant player. The advantage of establishing in an area with some existing daycares is that you are sure that mothers in the area have already established a culture of leaving children in a daycare, and you won’t have the challenge of selling the idea from scratch. There are locations where people mistrust daycares or consider them expensive even when they are not.

Again location can be considered in the sense of having a number of mothers big enough to use the daycare and sustain it. Like mentioned you have to consider this in terms of social, cultural economic habits of the area. In places where it’s easy to get house helps, and trusted house helps for that matter then you will take longer to break even.

For instance in Embu town there are relatively few Daycares as compared to the population. Partially this is because it’s relatively easy to get house helps. Related to this is the long term sustainability of the business. Are there enough of child bearing career mothers who will ensure that there is a continuous supply of children to use the daycare?

Facilities

As competition increases there is more pressure to look different. A common differentiation method is to try having better facilities than the competition. These range from the basics to the more specialized. For instance, having a thick fluffy carpet instead of a thin vinyl paper carpet. Having thick mattresses and many in number so as that each child sleeps on her own, or shares with only one other child. In some Daycares a thin mattress is shared by up to five children

Having quality bed sheets and blankets instead of light ones or none at all. Having a variety of toys and a quantity big enough so that each child plays with her own toy. Having a professional child friendly artwork instead of poorly done predictable painting. Having uniformed staff instead of casually dressed non uniformed staff. Having a flat screen TV, connected to a children

 

 

 

channel instead of no TV at all. Locating in a gated compound where children have room to play with swings, slides or bouncing castles.

There is a whole array of facilities that Daycares use to differentiate.

Differentiation in terms of facilities is also used to brand, either portraying the Daycare as the best fit for children or as a class above the rest. Branding of this manner is also used as the basis of charging above average prices. However like mentioned above before charging more supposedly to equate with the extra facilities it’s important to understand whether the residents are ready to pay a higher amount for the facilities. There are many areas where people will appreciate the extra facilities but are not willing to pay an equal amount for them.

Flexibility

The main 3 methods of charging are on an hourly basis, daily and monthly. Some of the Daycares use either of the two methods; daily or monthly. Others however try to compete by being extremely flexible in the way they charge. If a mother wants to leave the child for just an hour, they charge for that hour rather than the whole day as some daycares do. There are also mothers who want to use the daycare on a need be basis. Such will seek a daycare which charges a daily fee rather than a fixed monthly fee. On the other hand there are those seeking to pay monthly so as to plan their finances better.

An increasing number of daycares are using flexibility in payment to compete. Announcing the flexibility attracts more customers keeping everything constant.

Charges

In places with competition there are Daycares who use pricing to beat rivals. The most common method is go undercharge. Or have some sort of brand then charge more. Specific conditions in a location will determine the success of either. As a rule of the thumb undercharging does not necessarily lead to more customers, unless customers feel they are getting a bargain for what is offered. Charging above the average works if customers feel the extras are really important and worth the extra money, otherwise they will be reluctant to pay more. (See Revenue for more on this)

Opening & Closing Hours

On average most Daycares open at 7am and close at 6.30pm. Other common opening times are 7am to 5pm. A number of Daycares charge a penalty if the parent comes for the kid after the said hours. Sometimes the penalty can be as high as the day’s charge while for others it’s a fraction.

There are daycares using opening times to compete. Some are opening at 6am to cater for those who have to go to work early. There are others who close at 9pm to cater for those parents

 

 

 

who maybe late to come from work. Some Daycares will not charge for early opening hours but charge an extra amount if the kid is kicked after 7pm. There are also more 24 hour Daycares coming up.

Opening hours are a good and increasingly common to compete. But you have to consider them in terms of the extra manpower or expenses that could arise.

Extras Services

A number of Daycares who are competing by offering related services, at a fee or free of charge. Such services include barber and hair plaiting services. Birthday parties and free medical check ups. Others partner with different organizations to push products such as insurance and children savings account. This at a commission or as a value added service to the parents.

Staff

Commonly Daycare owners employ anyone who seems good enough to take care of children. These do not need to have any special education qualification or skill. However to have an edge some Daycares are insisting on specialist professional qualifications for their members of staff.

Such qualifications range from the basic such as first aid training, “clean and passionate” about kids to the more advanced ECD, social work, teacher training, qualifications.

Higher qualified staff help make potential customers trust you, and also feel they are getting more of the same price.

Niches

Many Daycares cater for general clients, mostly taking kids of between 6 months and 3 years. However there are now experiments with specialization. For instance a few Daycares are specializing in children of between 4 months and 1 year. These require a sort of special treatment; some parents fear if the younger children mix up with the older kids they could contract ailments, or the caregiver might not give them the extra attention they need. Because of this age limit is emerging to be a growing niche.

The challenge with niches is having enough numbers to sustain the business. The younger the children so will the parents demand higher standards, they will also need to trust you more. This means a higher capital investment and possibly a longer time to break even. There could also be challenges in consistently finding enough numbers.

 

 

 

Some Few Things to Think About

Food

There are three methods commonly used by daycares regarding food; one is where the children come with their own packed food. Secondly is where the daycare prepares the food. And thirdly is a combination of the above two.

From the onset it’s important to decide what method to use. Some daycares give parents the option to choose. Parents with children of 6 months or so often prefer to choose what their children feed on. Other daycare will insist that all children come with meals, and then prepare snacks like porridge.

If you decide to prepare the food, it’s important to do a cost analysis. In most Daycares charging below Kshs.150 Parents will be reluctant to pay extra for food, so it works best if you include the food as part of your fee. Most of these will prepare porridge only, which they serve twice a day. The cost of the porridge averages Kshs.8 per baby. In other daycares meals are only prepared to those paying monthly in advance rather than a daily.

Space will also determine whether you are able to cook or not. Most of the daycares operating in one room without a proper kitchen setting are reluctant to start preparing meals of whatever kind.

In higher end Daycares they charge extra for food or use part of the higher fees in food. The charges for food range from Kshs. 50 to Kshs.100 per day .Here the focus is on hygiene, quality and nutrition of food.

Having the option of food, even something as basic as porridge adds to the appeal of the Daycare.

Emergency

In low and standard daycares parents often don’t ask what will happen in case of an emergency such as a fire or sickness. But even if they don’t ask it’s important to have an emergency policy of sorts which should be passed to all working in the Daycare.

As a rule when a child falls sick in these daycares the first thing is to call the parent. Buts it’s not always clear what happens next if the parent is unreachable or far away. Even if the parents haven’t asked about it, it’s good to be proactive and discuss possible scenarios with parents.

In other Daycares parents will demand to know what you will do in different emergency scenarios. Is there a fire escape say for a daycare located on a floor in a storied building? Is there a fire extinguisher? Do you have contacts to police? Hospitals?

 

 

 

For safety a Fire extinguisher could be necessary. Some Daycares also install smoke detectors.

As a marketing tactic it’s also good to say or show what you would do in case of an emergency.

Rules of Engagement

Though most daycares operate on the basis of casual agreement, where the parent drops the kid and picks her up in the evening, it’s important to insist, at least verbally and in a friendly manner what is expected of each. This helps erase any ambiguity that might arise. For instance it should be absolutely clear who picks the kid. Or what happens if the falls sick. Who role is it to bring the food?

Setting

The setting will depend on your location and how you wish to brand the Daycare. There are many Daycares which operate in a single room within a shopping center while others will run from a 2 or 3 bed roomed house with a wall and gate. In all settings among the things to consider are a safe section to cook from, and presence of toilet facilities. Even if the babies are too young and using diapers or nappies it’s important to have a place to dispose them safely.

Size of the room will depend on your budget but also on the capacity you envisage. A crowded daycare will impact negatively on getting new customers.

When using rented premises some landlords may be reluctant to let you decorate the building to give it a child friendly look. In such cases some Daycares use wall papers, while others will hang chats and stickers of cartoon characters like Tom & Jerry. In premises where an owner has the freedom to modify, bright but calm colors are preferred by many daycares. Use professional artists who are creative and give a unique feel both on the inside and outside.

With a creative mind you can use affordable items to make the Daycare look funky and child friendly, while still pocket friendly to the parents. For instance there are simple multi colored carpet with drawings found in some supermarkets, and which some daycares are using. Also wall stickers are affordable. There are also many daycares now going to market places like Gikomba to look for toys, portable swings, play mats and other unique items that enhance the appearance of the daycare.

The room may also need to be modified so as to enhance safety. Such modifications could include, door stoppers, socket and sharp edges covers.

A Note On Marketing

Marketing and advertising efforts affect the success of a Daycare. This is especially more so for new day cares. Many daycares set up, paint the walls and put up a board advertising their

 

 

 

presence. A few however go a step ahead to say what makes them different; quality, timing, facilities etc. This is more effective in terms of attracting customers. The design of the boards, positioning and the ease at which they can be read matters.

More aggressive marketing involves distributing leaflets door to door within an area or estate. There has also been one week and one day free offer to experience the daycare. Other marketing efforts have been by use of open days at the Daycare.

There are Daycares which give incentives to existing customers to introduce customers. Such include subsided rates if one introduces a new parent.

Despite the location and how successful a daycare presently, is consistent marketing helps buffer against competition, grow and expand the business. In areas where there is considerable movement with new tenant, there will always be parents looking for daycares. Before the new resident networks with the area mothers she will respond favorably to marketing efforts.

Nowadays there are Daycares which have set up websites and Facebook pages for marketing purposes. The effectiveness of a web presence depends on the location and target market. Whether the customers are using the Web to search and gather information A website or Facebook page is a good additional to the marketing efforts. It can be used to showcase facilities and staff.

 

 

 

Revenue

(The following are figures for Daycares only, and does not include those that have a Kindergarten section. Unless otherwise stated the figures are for standard and low end Daycares.)

Lowest No of Children Recorded (in a

1

day)

 

Highest No of children Recorded (in a

56

day)

 

 

 

Average No of children

10

 

 

Lowest Revenue Recorded ( Daily)

Kshs.70

(Started in 2014)

 

 

 

Highest Revenue Recorded

Kshs. 7200

(Excludes High end Daycares. Started in

 

2012)

 

 

 

Average Revenue Recorded

Kshs. 1200

Average Daily Charge

Kshs. 100

Lowest Daily Charge

Kshs.30

Highest Daily Charge ( Inclusive of high

Kshs.2000

end day cares )

 

Other Price Points Recorded

Kshs.30, Kshs.50, Ksh.60, Kshs.70,

 

Kshs.100, Ksh120, Ksh.150, Kshs.200,

 

Kshs.250, Ksh.300, Kshs. 500, Kshs.800,

 

Kshs. 1000,

 

 

Lowest Monthly Charge

Kshs.2000 (Daily charge in this Daycare

 

is Kshs.100)

 

 

Highest Monthly Charge

Kshs.18,000

Other Monthly Charge Price Points for

Kshs.2500, Kshs.3000, Kshs.3500,

Daycares charging a daily fee of between

Kshs.4000, Kshs.4500

Kshs.100, Kshs.250)

Kshs.5000. Kshs.6000, Kshs.10, 000

 

 

 

 

 

NB:

The Revenue averages are for Daycares charging between Kshs. 70 and Ksh.250 located in Nairobi, Machakos, Kiambu, Kakamega, and Embu. Outside Nairobi the highest price recorded is Kshs.300. The lowest price of Kshs. 30 was in Nairobi.

2nd Actual Data from a Daycare

Location

Kikuyu/ Kabete . Rent for a one bedroomed

 

house ranges from Kshs.7000 to

 

Kshs.18,000. About 65% of flats have come

 

up in the last 4 years.

Year Opened:

2013

 

 

Charges

Kshs.200 per child per day

 

 

No of children on a Wednesday in December

5

2013

 

 

 

Average No of children in a day

3

 

 

Opening hours

8am to 6pm. It operates from Monday to

 

Saturday.

 

 

Rent

Kshs. 17,000

Competition

Zero (0) when she started in 2013. Three in

 

February 2014. Other daycares charge

 

Kshs.100 & Kshs.150

Children Category –

4 months to 3 years. The facilities are high

 

end.. Thick mattresses, clean sheets and

 

environment, very child friendly décor.

No of employees

2 caregivers.

Salary

Kshs.8000 x 2 = Kshs.16,000

 

 

Revenue in February

Kshs.17,200

 

 

Expenses (Rent, Salary, Electricity,

Kshs.36,000

Miscellaneous)

 

 

 

Update: The Daycare closed in February 2014

 

 

 

Pricing

There is no clear pricing formula; rather the price is based on what owners think parents in the location are willing to pay, the competition, facilities and branding.

Perceptions are based on the income of the residents, and the quality in terms of facilities relative to other Daycares in the area. Some Daycares will charge more if they have better facilities compared to the competition. Facilities could include higher standards of hygiene, higher quality toys, a bigger compound and professional décor.

Other daycares offer comparatively better facilities and charge same prices as the competition. This is used as a market entry strategy or to gain an edge over the competition.

Where competition is intense Daycares charge the average price, or undercut to get a share of the market.

Branding and Revenue

In mid levels estates there are many efforts to try brand daycares. Such branding is based on efforts aimed at looking more professional, more child friendly, cleaner and fun for kids. Such Daycares charge more. This affects revenue positively if the higher charges are not 40% above the local average. And also if the extras are clear and of value to the kids.

Foot Traffic

Revenue is largely influenced by foot traffic. In a given location Daycares which charge but with no clear value addition, receive fewer customers and record lower revenues.

Foot traffic led to increased revenue because it validated the daycare in a big way; a sort of “all those parents can’t be wrong.” Because mothers talk a lot about their children, if the service is good it means word of mouth will spread faster and wider. Still if the increased numbers don’t go hand in hand with expansion of facilities then it will turn out to be crowded and the tide will turn and the positive reputation will be lost. Maintaining a number equal to capacity of facilities, space and staff members is important as the daycare becomes more popular.

Revenue & Flexibility

Revenue is positively influenced by a flexible rather than a fixed payment scheme. Flexibility means having different methods of charging to fit the lifestyles and wants of the parents. These include, paying per hour if the parent does not wish to leave the kid in the daycare for more than a few hours, paying daily, paying weekly and also monthly.

A couple of Daycares offered a discount if the parent paid a monthly fee. This committed the parent to the daycare for a whole month. Daily uninterrupted attendance is a big challenge for

 

 

 

daycare owners. Irregular attendance makes it difficult to plan for the long term, and reduces revenue. The irregular attendance is because some parents cannot afford the daily fee, use the daycare as a temporary haven before acquiring a househelp, are not comfortable with the treatment of their kids in the daycare and used it as a last option.

Still it’s rewarding to have a wide range of charges to fit the different lifestyles of parents, including stay at home mothers who want to leave their kids in the daycare as they run a one hour or two hours errand. For most new daycares the first aim was to reach the daily children target in order to break even, and whether this is though regular or irregular parents attendance matter.

Pricing & Revenue

Charging below or far above the local average or mode (the amount most of the daycares in the area are charging) has a negative impact on revenue, unless in highly densely populated areas like slums. In such there is a variety of customers ready to pay a wide range of fees. In less populated areas a price 40 % below or above the local mode reduced the long term attraction of customers. Despite the facilities higher prices seemed like exploitation while lower price hinted at poor standards.

Daycares operating as a monopoly in mid class areas, and with higher quality facilities and standards, but which charged above average amounts compared to daycares in similar locations didn’t attract customers. Parents grudgingly use such daycares for short term purposes and put extra effort in getting an alternative, the first being looking for a house help and in extreme cases shifting to a an estate with more variety of daycares.

If a competitor opens in the same neighborhood, offers standard facilities and level of trust then it will outperform the higher end, higher charging daycare. Overturning a reputation of higher charges takes time. It’s worse if the higher charges are not accompanied by equivalent levels of service.

Other factors influencing Revenue include:

Location

Opening hours

Extra Services

Marketing

Kindly check competition & survival for more on these.

 

 

 

Break Even Point

It’s crucial to have a proper idea of your break even point; basically the position where revenue will be able to meet business costs. If you know the break even point you can then focus towards getting a certain number of children everyday or monthly to be able to make a profit.

Here are some sample figures to picture the break even point:

Rent – Kshs.10, 000

Staff – Ksh.12, 000

Miscellaneous – Kshs.5000

Total expenses – Kshs.27, 000

If you are charging Kshs.100 per day per child then you need: Kshs. 27,000 ÷ 100 = 270 children in a month to cover expenses. If you daycare operates 25 days in a month, excluding Sundays then you need an average of 11 children to break even.

Say you get an average of 7 children in a day then every month you have to dig in your pocket and contribute Kshs.6000 to the business.

To make a profit you need more than 11 children in a day to break even. Of course the attendance will not be the same every day, but you should try meet the break even target at least every week.

The average breakeven point of a daycare is 7 months.

 

 

 

Consumer Behavior

94% of Daycare customers are mothers. And even where fathers are involved there is a female influence either through family or friends. Purchase decisions are influenced largely by own discovery and recommendation.

Own discovery is usually a response to some marketing effort largely a board, a painted wall along the path they normally use. In absence of recommendation, and where several daycares are conveniently located first impressions will partially influence the decision to make an enquiry and perhaps make a purchase. Such impressions include design and content of the advertising board if it exists, and also the outside appearance and environment.

Alternatively some parents will move around shopping for the best fit for their children and pockets.

Recommendations are a more powerful factor in decision making. The recommendations can be either through direct questioning or overhearing others talk. Negative review, even of the slightest nature, from even a single person is enough to make a mother form a permanent impression of the Daycare. Positive reviews have an impact, but not as strong as that of the negative. A positive review will lead to the kind of reaction “I will check that out among others” while a negative review leads “I am not even going there”

The exception is when the choice is between the supposedly negative factor and convenience. When the negative is something parents can live with and which they believe the daycare can improve on, consumers will opt for convenience but make sure to air their misgivings, hoping the daycare attendants will be more keen. “And don’t forget to change my kid; I don’t want her getting rushes”

If the negative factor persists consumers will forego convenience and either seek a househelp or rearrange their schedule to fit the effort of taking the kid to a daycare not conveniently located.

Major complaints among mothers include:

Poor feeding

Not changing the baby when wet

Others include:

Contracting diseases

Bullying and mistreatment either by other children or staff

Careless handling of the baby

Loss of items like shoes, toys

 

 

 

Constant calls to say the baby is crying instead of trying to find a solution

Deteriorating hygiene

Going and leaving the kids on their own

Generally parents looking for a Daycare largely consider the following factors:

Trust

Convenience in location and timing

Fair price

Safety and security

Flexibility

Hygiene

A level of comfort and fun

All these matter in different measures depending on the location and target market. Convenience is key, and so is trust. In the lower income areas convenience and fair price comes first, then a basic level of trust.

In relatively higher income areas trust, convenience, hygiene and comfort are important. Like mentioned a big complaint among the Daycares having more facilities and operating in growing and middle class areas is that customers are not always ready to pay for what they want. They demand more than they are ready to pay for.

Outside middle class areas of Nairobi and highly cosmopolitan towns like Mombasa customers are more reluctant to pay above average prices even when facilities are more. It’s the same case in peri urban areas of Nairobi like Kiambu, Uthiru, Ruiru, Ruai, Kabete and others like those. Even if such estates are growing and having more of the middle class, there is a rural element to it all that makes them feel shortchanged if they have to pay above average, even if they can afford it.

Trust is built first at the level of initial impression and recommendation, then at the level of experience. So no reason to panic if parents are skeptical initially, if you do the right thing they will eventually trust you fully.

To insist it’s highly important to find out if parents are willing to pay for the extras they demand. Would a mother rather pay Kshs.250 a day to a daycare or risk with a house help who shill will pay between Kshs.4500 and Kshs. 6000?

 

 

 

 

Manpower

 

 

 

Average No of employees

 

2

Average Salary

 

Kshs.7000

 

 

 

Most Daycare owners hire staff on the basis of the ability to take care of children. Some don’t really care about the education level of the staff, only the ability to take care of children. Some will test the ability just by asking, while others will assess the employees practically by having them stay with the babies for a day or two then observing how they handle them.

As more ECD colleges come up there is an increasing number of people with professional child caring skills and seeking work as Daycare care givers. However such are more attracted to daycares with a kindergarten section, or higher end daycares. Otherwise if employed in mid level daycares they stick for a short time, and move to where they believe better career prospects exist.

In many daycares outside Nairobi there are instances where care givers are people with no special skill or shown passion for children. Their only qualification being that they are mature and so presumed to have the ability to take care of the kid.

Some daycare owners insist on passion for children as the main qualification for hiring attendants. Through conversation the owners are able to gauge the level of passion a prospective employee has.

Daycare attendants play an important role in forming instant impressions among potential customers. Passion is easily noted, and so their level of hygiene. Even without passion parents can see how the attendant is handling children decision immediately.

 

 

 

Workers surveyed quoted a good salary and working conditions as the most important considerations when deciding whether to take up a job, and if so how long to stay. Good working conditions are first to do with the number of children that the attendant is taking care of. The optimal number is 6. Between 10 and 15 children and the workers said, it could be hectic though manageable. Above 15 the workers felt overworked. The highest ratio recorded was one worker for 27 kids. The preferred working hours were 8pm to 6pm. The unwritten rule seems that the worker should stay until all the children are picked that is if the owner is not present.

A good salary will depend on the location, and qualifications of the worker. Low paid workers are demoralized and this reflects in the way they handle the children. Some displaced frustrations of low pay t children the. For instance by not feeding the children well or changing them as often as need be. There are also reports of Daycare attendants who when left on their own have abandoned children. Though owners don’t admit it’s often because the workers are overworked and lowly paid.

The common reward methods are salary and a daily wage. To manage their costs some Daycares paid staff on a sort of commission. Thus the owner pays the staff member based on the number of children present that day. For instance if the parent of each baby left at the daycare is paying Kshs.100, the owner could decide to pay the worker say Kshs.20.

This usually ranges between Ksh.10 and Ksh.30. The disadvantage of commission and wage based reward systems is that workers don’t commit themselves for a longer duration, there is always likelihood that after receiving their wages, and they get a better deal the following day they will not turn up. A fair salary to correspond with work and responsibilities helped maintain and motivate workers.

To try and build trust some Daycares employed older women as compared to younger, out of school or college ladies. The older ladies it’s presumed are more responsible. Still too old women, just like too young were not the preferred choice. Mature middle aged women in their late 20s or 30s were the most preferred; inculcating a touch of experience and modernity.

Labor turnover in the Daycare only average 2 months, with daycares accepting children below 8 months having a higher rate. Workers quoted low pay and ‘tough’ as the major reasons for quitting. A high turnover affected the business negatively because children tend to get used to certain people. If the labor turnover is a high turnover children get irritated and take time to settle down. This could affect the mood of the children at the end of the day. This could make parents disturbed and reluctant to take their to the daycare the following day.

 

 

 

Capital & Equipment

Equipment

Here are some of the major equipments that commonly used in a daycare: Mattresses – Kshs.1000 to Kshs.4000 depending on size

Toys – Kshs.50 to Kshs.500. Cars, Stuffed Toys, Dolls, Blocks, Lego sets, noise producing toys Utensils - Kshs.10 to Kshs.1000. Spoons, plates, sufurias, basins,

Gas cooker – if you are preparing food you can get a gas cooker. A meko averages Kshs.7000.

Potties – Kshs.100 to Kshs.2000 depending on design. It’s recommended to have several of these so that all children don’t share one.

Swings – Optional if you have space. Basic is about Kshs.1500

TV – Kshs.9000 to Kshs.30, 000 (Depending on size. The range is from TVs of the daycare sampled)

Tables – Average Kshs.1000

Chairs – Average Kshs.500

Assorted items- Charts, Drawing books, stickers

Fire Extinguisher

 

 

 

Suppliers

Suppliers range from supermarkets, shops along Biashara Street, Plastic and toys shop in Kamukunji and even second hand dealers in Gikomba and other markets. The price differences depend on the location and also quality of items.

Capital

Capital range from Kshs.20, 000 to Kshs.1 million depending on location, and hence cost of rent, and also the facilities one wishes to invest in.

Among the Daycares surveyed the least capitalized was Kshs.9000 in Kangemi.

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