30 Hours - The reality of what it takes
Expectation : “We want you to deliver 30 hours free childcare ….off you go !”
…It sounds so easy yet I suspect many of us don’t fully appreciate the business consequences and what it will really mean for childcare providers to comply with this policy, so let me enlighten you….
What does the Government expect?
Understanding of the 30 hours policy
Acceptance of a local funding rate which will dominate annual provider income
A significant change to provider business delivery models
Sustainable childcare businesses
Now don’t get me wrong, this could be a very positive market change for parents and providers alike, but we feel the need to help people understand just what this takes strategically and operationally for the majority of childcare providers so that we can begin to help them succeed in a useful ways.
…..So let’s start with assumptions…shall we??
We have heard many assumptions which are not helpful in really supporting providers to make it happen, here are a few for you to contemplate…!!
Providers understand the policy and it's implications for their business
Providers have the strategic and business development skills to develop
It’s a good business opportunity so providers will just do it
If we truly want to develop a strong sector and meet parental expectations perhaps it’s time to take a step back and listen to what providers need. It’s important to know that businesses can be vulnerable at times of significant market change, and just because this recent change creates more demand, does not mean all will run smoothly for business profitability. Adapting to such changes can bring problems for businesses particularly as this policy puts pressure on capacity and finances simultaneously.
On the other hand, providers have been presented with an opportunity to develop their businesses to not just comply with the 30 hours policy, but to turn it into something which makes their situation much more sustainable and strengthens their business for the future. So we hope for one thing, that providers do their own due diligence and don't allow themselves to be caught up in, or be put off by, the agendas and opinions of others, work it out for yourselves !
Let’s take a look at some of the challenges providers face to make this happen and what skills they need to make effective decisions and remain sustainable…
Financial effects - “Can they afford to? …can they afford not to?”
Making a profit from a market where prices are fixed by the Government is not at all easy, but not impossible. Profitability depends on many factors, not just price or rate / hour, so providers need to change their delivery models to accommodate 30 hours free by exploring ways of working within their local market which enables them to make enough profit to continue to trade and grow.
Skills required: strategic business skills / operational management skills / financial skills / marketing and sales skills
Sales effects - “A massive shift in customer demographics”
All of a sudden most parents can access free 30 hours childcare, which results in provider “sales mix” changes, (i.e. sales of places across age ranges and re-distribution of capacity), which has significant knock on effects to costs per age range, staffing and ultimately profitability.
Skills required: market research skills / operational planning skills / change management skills / financial planning skills
Capacity / Occupancy Changes - “Doubling of capacity in 3 & 4 year old age range”
Whilst some providers will already be delivering 30 hours for some of their parents, this is now a parental right and so how will providers create space for this additional demand in one age range? Capital development perhaps?, delivering less of other childcare services? renting a second property?, moving to a new premises?’ delivering in partnership?…… Even if it is possible for providers to implement any of these business development options this is not easy or quick, and will significantly affect the staff ratio balance as this policy stacks demand into 3&4 year old age range meaning staffing models will almost certainly be affected.
Skills required: Business strategy planning / financial strategy planning / operational delivery skills / project management skills / capital finance skills / governance and partnership working skills
In summary - I could go on……. but there is enough material in here to show that providers will need support to sharpen their skills, and be prepared to change significantly, if they are to make this work for them financially. We have worked in the past year with many providers tasked with delivering 30 hours and like anything in life, some will make it work, others will not be able to. But some things are for sure...
CHANGE is the word, DETERMINATION a necessity and MAKING YOUR OWN business judgements is the only way to get what you want from the 30 hours policy.
If you would like to attend one of our workshops on "30 Hours Delivering Profitably" visit our TRAINING page or drop us a line email@example.com