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Finances & business planning

Financial viability of your project

It is important to be realistic about costs and to be aware of the cost implications of caring for different age groups. Babies and toddlers require more space, more facilities and a much higher staff ratio than older children. You will need to consider the following costs:

  • purchase and lease of premises
  • legal fees, architect’s fees etc
  • conversion costs
  • equipment
  • registration and insurance
  • on-going running costs
  • staff costs.

Most new early years and childcare businesses take time to get established, this may result in a loss or just breaking even for a number of months. It is good practice to complete a cash flow forecast for at least 3 years for the new business to ensure that all costs have been considered.

Sources of funding

When you have worked out how much your project will cost you need to determine how you will finance it. Funding can be obtained through a bank loan or you may wish to look at other funding streams. Setting up as a charitable organisation may give access to other sources of funding. Any funding application will require the development of a business plan.

Business Plan

A business plan should cover all aspects of your proposal and will generally include the following:

  • Executive summary.
    The executive summary is usually contained on a single sheet of paper at the front of your business plan, it should summarise what you intend to do, plus why, when and how.
  • Aims and objectives.
    This section should set out your overall aims and more detailed objectives.
  • Background.
    This section should set the scene for the business plan, describing what your project/business is now, who you are, what your experience is and why you want to do what you are proposing.
  • Legal structure.
    Your business must have a legal structure, for example, a sole trader or a private limited company (with shares or guarantee). For more information on Legal Structures see or Charities Commission websites (see details below).
  • Management structure.
    A chart showing the proposed staffing structure.
  • Market research.
    In this section of the business plan you need to demonstrate the demand for your service.
  • Strengths, weaknesses, opportunities and threats.
    A 'SWOT' analysis will demonstrate the strengths and weaknesses of your project and the opportunities and threats you should bear in mind.
  • Operational plan.
    This should include timelines indicating what is going to happen, when, and who will be responsible for the action.
  • Financial information.
    Details of the finances related to the proposal, including set up costs, must be given in full. This will be used by possible lenders to assess the viability of the proposal. As a minimum you should try to have budgeted figures for:
    • Income: includes fees, funding, fundraising and any other possible sources such as bank loans or donations and grants.
    • Expenditure: the regular costs of operating the business such as wages, national insurance, premises, utilities (bills), insurance, as well as expenditure on training, stationery and consumables.
  • Appendices (additional information).
    Any additional information to support the proposal can be included as an appendix to the main document.

Further Guidance

Government advice on starting a business

Charities Commission

If you have decided that your business is to be not for profit basis and a voluntary committee has been elected to take responsibility for the organisation as the management team, there is information on the Charities Commission website on setting up and the requirements that you will need to meet.