Parents "take over" of failing nursery - any experience?

[FamilyTree2010]

Hi
My son's nursery is currently local authority run and benefits from Sure Start grant funding.

The council have effectively said that unless the parents want to take over the nursery it is likely to close. If the parents do decide to take it over the council will provide some transitional assistance and administrative help during the first year or so as they do not want to see the nursery close but claim that they cannot fund it any longer.

I'm torn - this nursery is the best in the area and my son (who is nearly three) has been there for two and a half years and is very settled and happy, BUT do the parents really want to take on responsibility for a nursery? We have no idea where to even start with such a project!

Can anyone with any experience in owning/running a nursery offer any advice please?

Thanks in advance.

I think that you have to be very careful . If the nursery is closing and reopening you may be fine. If you take it over directly then the staff will be tuped. La staff are generally on more generous pay and working conditions than the wider pvi.

You also need to be clear about who picks up the bill for staff redundancy etc as it will be very expensive for tuped staff.

The la couldn't run it at a break even. What will you do that is, different?

Have they advertised for a private provider to take it over? If they did and had no interest that says a lot.

Thanks for your reply.

These are exactly the type of issues that concern me. The staff are well paid (compared to private nurseries) and benefit from good t&c's. I can't imagine that we could afford to maintain those t&c's under a TUPE take over and yet we would need to retain the experience and staff support (rather a catch 22 it seems to me).

We could let the council make the staff redundant (at their expense) and then re-employ them with new t&c's but this seems rather a crass way to treat the really fantasic nursery staff and managers.

The council have not tried to sell it. It exists in a building which is not self contained and is shared with the Family Info Service so selling would be difficult. They are offering the building to us with no rent payable.

The main problem is falling occupancy. There are a number of reasons for this including the council's Sure Start grant funding which means that they are trying to attract children from certain socio-economic demographics and not from others which is limiting.

Basically we would have to be more ruthless - fees up, overheads down, harsher staff contracts and aggressive promotion. We also wouldn't be able to take over the free places that the council offer to some children based on their, or their families, special needs.

It doesn't sit well with my fundamental socialist leanings as you can imagine

Hi. They don't sell them they put them out for tender. A business expresses an interest in running it for a fixed period of time. They may pay the la or it may be on a peppercorn basis (as with you).

If it is viable a local provider ( day nursery or chain) would be willing to take it on on the same terms offered to you. I would look at that route.

Hi

I don't believe it has ever been put out to tender. I don't think it would even be considered - the two options on the table are parent take over or closure.

My gut instinct is that they just want shot of it with as little come back on themselves as possible. If the council are willing to foot any losses in the transition period (say 12 months) to allow a decent time to adjust to the new policies I would consider it a more reasonable proposal.

Another plan we are considering is approaching a large business in the area who we think may be looking for a workplace nursery and offering them our nursery as a going concern. I'm almost convinced the council would go for this.

May I ask if you think it would be worth the parents taking on this type of business?

Sorry I should have read that back before posting. I mean, if there is no interest from a private company or nursery chain would you think it worthwhile for the parents to take on the nursery? Thanks.

Usually they would put an advert in a local paper or in their early years news letter inviting expressions of interest.

It is Interesting because by just offering it to parents they may be going against the own las tendering processes as it could be seen to be anti competitive.

How do they suggest that you run it? As a voluntary management committee or through a limited company.

Do you know how much it loses? How many staff would need to go etc? Does your la have a single funding formula in place- and if not what impact ( pos or neg) will that have?

How big is it? How many 0-2, 2-3 and 3-4 year old places ( on occupancy) . Does it run after school?

I've no idea about the anti-competitive nature of the offer I'm afraid I haven't got enough information. We've been loathe to show that we are even entertaining the idea as our plan A is to have the council continue to run it but as a more vaiable financial concern.

It would be as a non-profit making limited company I would assume, but again, I would need to do my research on what would be best. I am also thinking of whether it would be worth trying to achieve charitable status.

It doesn't lose anything at the moment but only because it is propped up by Sure Start funding. Without this funding it would need occupancy levels of around 70-75% to break even. The current occupancy rate is less than 40%. I think it would be losing around £7000 pm if not for the grants. It has a single funding formua in place.

Total occupancy 56, broken down as 12 babies (ratio 1:3), 12 toddlers (ratio 1:4) and 32 pre-schoolers (ratio 1:8)

It does not run after school and can only take children up to age 5. It is open 51 weeks per year from 8am until 6pm.

p.s. thanks for your help and apologies for the spelling mistakes my toddler is "helping" me type

Ok. You lose money on every baby place. The aim is to have as few baby places as possible ( but you need enough to feed through).

Generally 2-3 are break even and you make money on 3-4 year olds. Usually a nursery will have less babies than 2-3 year olds.

I think you best bet would be to try and find a company to take it on (ask the la to advertise). If you get no interest the feedback from those who request details but don't submit a bid will give you a clear idea of the reasons that they don't think it is viable.

The council will probably not be able to run it after 31st march if it is loss making. Has your council announced general cut backs?

Roughly where in the country are you? Is there a demand for childcare in the area? How much are the fees? Are they competitive? You need to be really clear why it is not making money given that it probably already pays little or no rent.

If you do take it on you need to insist that all restructuring and redundancies are done 1st. Remember if you don't the council will be footing the bill for these anyway.

Parents change every few years. Most voluntary groups struggle with this. Depending on the route you chose you may take personal financial liability. If you go for a company - how will it be financed? You will need credit facilities etc.

There are very few babies under 1 year old and the nursery do currently charge more for under 3 year olds (even before the 15 hours free are taken into account).

Good point. We have a meeting with the Council officers next week so I shall ask them if they have advertised or if they will consider advertising for a private nursery to take it on.

The entire early years department is curently undergoing a consultation and review which will end in January. The council have (privately) advised that even if the decision is to close then it will not be before the end of the academic year.

As part of the consultation the council have worked out that there are enough places in the borough (child minders and nurseries) for all of the children currently at our nursery, so this suggests there is a surfeit of places. Certainly other local nurseries are advertising places.

We're in Berkshire. The fees are competitive as the council have kept them deliberately low in order to try and attract children whose parents may otherwise not been able to afford private nursery fees. Market rents however are high and it's an expensive area to live in.

All good points and ones I'm thinking about over and over. If we can change the business plan, the focus and reduce the outgoings whilst increasing the occupancy we could have a going concern but there are so many "ifs" surrounding it all.

My inclination is to take your advice and ask the council to advertise for a company to take it over and then consider further based on the response to this tender offer.

Thanks for your advice Simbacat, you have helped me come up with a list of questions and a positive direction.

This is a very interesting thread as I am wondering about exactly the same things, ahead of time, following the spending cuts announcement this week. My DS attends a Surestart/Children's Centre too.

Although my local authority is not as far forward as yours FamilyTree, there will need to be a review, which I imagine will lead eventually lead to some closures and some changes to arrangements, be that private providers running the show, or parent committees or whatever.

I've been in contact with the councillor who leads on this in my area and am going to see her this morning, in fact.

I can't say I want to run a nursery. But neither do I want the nursery to close, or a private provider to come in and standards to fall (and fees to rise so that lower-income parents are locked out).

Anyway, I'd be interested in talking some more about this and looking at the models open (eg private provider, social enterprise, parent co-op etc) for Children's Centres going forward.

MrsBaldwin, I'm fairly resigned to the fact that my son's nursery is likely to close. The losses it makes are unsustainable. I hope your children's centre is in a better position and that you can rescue it whilst retaining the overall philosophy of centre.

I can deal with the practical aspects of a parent takeover (with advice to push me in the right direction) but what I can't help feeling is that if the parents do take over the nursery and make it financially viable we will effectively not be saving the nursery we all love and that is so great for our children, but just creating a new souless, private nursery, albeit a non-profit making one. Employee buy in to a parental take over is going to be critical.

The nagging sensation in the back of my head is saying - just because you can save it (by changing it), doesn't mean you should

This is a very interesting thread and, I suspect, demonstrates the vague concept of 'big society' - the assumption that interested parties can just take over the activities the council no longer wish to deliver/be responsible for/can afford.

I am a trustee of a charity and whilst we don't currently run a nursery, we deliver daycare services for adults with learning disabilities. This element of our services came about in a similar fashion when we took over this service from the Local authority.

It's hard work and it requires commitment and dedication on the part of the trustees - who are all volunteers. Despite having a great manager, who we are hugely reliant on as he does all the day to day management, we seem to be permanently mired in staffing issues, building issues like upgrading toilets or dealing with damp, desperately trying to raise funding or cash flow issues arising from non payment of fees (by the LA for whom we deliver the majority of our services) as well as wider governance and business management issues.

That's not to say it's not hugely rewarding, a fabulous experience or good fun, but follow your instincts - is this something you want and have the time to get involved in - and I would be asking myself what I can bring to the table to make it work? Especially as it seems the council can't, when it's likely to be heavily subsidised.

Keep us posted on how you get on

The regulatory burden on nurseries is pretty significant. Can you make contact with an independent non-chain nursery to find out exactly what this looks like on a day-to-day basis? This will help inform you about what management overhead you would need, plus level of specialist support (accountants, lawyers etc).

Just to update following our meeting earlier this week with the Head of Service at the Council: it did not go well. The Council Officer simply repeats that the only two options being given to the Council Members are to close the nursery or allow if to remain in it's current form (i.e losing money hand over fist).

I cannot imagine that in the current economic climate the nursery would be allowed to continue to make a loss.

Quite honestly, dealing with the council is like pulling teeth - they are obtuse and vague. They do not follow through with the information they say they will provide and they do not answer a straight question with a straight answer.

The parent committee do have another meeting with the Chair of the Early Years & Childrens committee, who is also on the Executive, as apparently he was impressed by everything that the parent's had managed to do in the past few weeks so I think the best we can possibly hope for is a stay of execution. We have asked for it to be made very clear in the submission to the executive that we are asking for 12 months extension to turn the nursery around and in that time the parents will work with the council to rectify the issues and try and raise occupancy and at least get it to a position where they could tender it.

I asked the officer why they had not considered putting the nursery out to tender as part of this consultation. The reply was "because it's making a loss and no-one would take on a loss-making nursery and staff under TUPE". Not much one can say to that!

I'm very sad that we have such a fantastic nursery and it's going to be closed because of council incompetance and neglect over the past 6 years

FamilyTree - I am still reading. I went to see my council's lead councillor on Early Years last week. So interested to hear what your chair of early years ctte says, given that a politician may well say something different to a middle-ranking official.

I think a business would consider taking on the nursery (as with any other concern) if the books and a study of the options showed it could be turned around. I can tell you there are big private outsourcing firms champing at the bit to take over ostensibly failing parts of central Govt where they think a profit could be made by doing it quicker/better etc.

So it's all about the business plan and the financing, IMO.

hi just reading through the messages and i find this really interesting

me and my partner were looking at buying/starting a nursery and im wondering how this nursery is losing money

if it has 56 kids in it and charging say £140 per week (if thats what they are charging) thats just under £8000 per week and about £400,000 per year in income

if there is 11 staff on about £15,000 per year thats £165,000 per year so there should be a difference of about £230,000 per year, what other costs are involved?

surley insurance and food etc cant cost more than £20,000 per year and say £10,000 for paper pens, gas electricity etc. makes it look like its making £200,000 per year

could you let me know what some of the bigger outgoings are please

Have they considered a workers co-operative?

There are some really good business plans out there about these

Pensions, ni,business rates, lots more than a few pencils!!!!

With 56 children need more than 11 staff to cover 8-6 then holiday cover etc. You will open for 50 hours minimum- they will work 40 max.

Cook cleaner. Accountant/ business manager to do finance and grants. Mortgage or rent.

Unlikely to have 56 all week et etc etc. 56 children will need feeding, nappies, milk etc. Work out the cost of 3 or 4 meals per child per day. Toys, books, cpd for staff.

£15k isn't enough salary with on costs- need managers paid more etc

I thought that you were joking when you asked. Unless you have experience of managing a successful nursery ( in which case you wouldn't be asking) I would be very cautious going into this business at this time. The golden years are ending very very quickly.

LA funding is reducing ( additional grants and cpd et etc) not going to be a good few next years in ey businesses.

You haven't allowed for employer's NICs, nor costs if running and making statutory contributions to a staff pension scheme (shortly to be compulsory), so the staff costs are too low.

Have you factored in things like rent, maintenance and general management costs? Then there's the replacing of toys and other equipment, and the provision of play "consumables" - art materials and the like.

And have you over-estimated occupancy?

I agree Simbacatlives, I did a lot of work on this a few years ago & NFP is the only way to go as the overheads are just too large, & employing (& keeping) good staff is a nightmare

thanks guys, my partner runs a property business, so he knows how to run a business.

we have a bit of money behind us and since our children were born we wanted to do something like this, we were actualy going to be teachers so for the last few years we have both been doing a ba in childhood and youth studies (i think thats what you need to be a manager)

sorry to steal the discussion but is there anyone on here who has ran a nursery or still owns one?

thanks

Me

I am afraid that you can't usually be a manager with just qualifications you need experience as well. Teachers are usually up in arms when they get turned down by ofsted to be the suitable person and/or manager. Usually 6 months but I have known them insist on 12.

Even if ofsted accept you as manager you may not meet the criteria for la education funding.

You need a l3 or above accepted qualification in ey and childcare and relevant experience.

You lose money on every 0-2 year old. They are loss leaders.

If the rate where you are is £140 that is very low which suggests over supply in the market.

Amiandcharliesmummy, you seem to have a rather naive idea of how any business runs for someone whose partner apparently already runs a company. You can't just pluck figures for utilities and insurance out of the air as you seem to have done. Simbacatlives has given you some very good ideas of additional costs which you haven't considered. I would also add additional areas which you don't seem to have thought about:

• training for the staff, never-ending as regulations change, courses like First Aid have to be renewed, staff leave which means you don't have enough staff trained in a particular area, etc. And while your staff are out training, you need to have agency staff to cover
• marketing costs, you can't rely on filling the nursery by word-of-mouth, you will need to place ads in newspapers, magazines, have a website, newsletter, brochure for prospective parents
• maintenance costs are high, not just repairing things but e.g. fulfilling your requirements to have your fire extinguishers checked annually
• you seem to have based your income on having a permanently full nursery, almost impossible

and lots of other things.