CHILD CARE BUSINESSES
or ZONED COMMERCIAL PROPERTY
I recommend that you develop a clear understanding of what zoning means and how to get the proper zoning for your Child Care business and/or property. You can call the Municipality and speak to the Zoning Department for information or See http://en.wikipedia.org/wiki/Zoning
IN SHORT: Whether you decide to build or purchase your new Child Care Centre, the zoning will need to meet with the “use” your business falls under. Each zoned property has a list of types of businesses that are allowed in the premises and those types of businesses that are not allowed. Just because the existing zoning is Commercial doesn’t mean your Child Care use will meet the Zoning By-law. Should the zoning of the property not meet the “use” of your Child Care business, you will need to apply to the Municipality to have the property rezoned to accommodate your Child Care use. There are costs that you will incur and there is no guarantee the re-zoning will be granted
Whether you are borrowing from a lender or not, you should have an approved Business Plan. ( Email me for a Recommended Accountant that will develop a Business Plan at an inexpensive cost ). The Business Plan acts like a roadmap for the success of your business. It describes how you will make and spend your money and show how you will pay your debtors. The Business Plan will show your business on paper and can act like a budget for Income and Expense spending..
Existing Property and Business
Subject to your finances and your ability to borrow from a Lender, the preference is to purchase a property with a Child Care business operating in it thereby bypassing the need to rezone a property. The fact that the Child Care business is already meeting the Ministry of Education’s criteria and the property meets the Municipality’s criteria gives you a much smoother transition into your own business. Given the Child Care business is in operation, it would come equipped with employees, registered children, materials, equipment, furniture etc.
Existing Business in Leased Premises
Second choice and least expensive, would be to purchase an existing Daycare/Private School in leased premises and again, the business would already meet the criteria of the Ministry of Education and the Municipality given the business is in operation, it would come equipped with employees, registered children, materials, equipment, furniture, toys etc.
General Child Care Facts
- 20 to 25 new Child Care Centres get listed for sale every year in Ontario
- Maybe one or possibly two Child Care Centres will become available for sale in the general area you desire in any 3 year period
Leasing Space for Child Care Renovation
- Zoned Child Care space is rare and hard to find in Ontario and zoning is very specific. Very few commercial spaces have the zoning required for child care. If you did find space available it would have to meet your criteria of size and location.
- Tenant needs to enter into a Lease with a Landlord
- Landlord has to agree to give you green space for a playground area
- Tenant needs to hire an Architect to provide an architectural floor plan which needs to be approved after you have applied for your Ministry License.
- Tenant would need to renovate that space and playground area to meet the guidelines and criteria of the Ministry of Education. (Landlord may cooperate by paying for some of the renovations or doing some of the renovations for for you and adding the costs to you monthly rent.)
- Tenant needs to hire a Contractor/Renovator to do the renovation. The cost to do so would be in the $75 - $100 per square foot range. A 3,000 sq ft centre would cost $225,000 - $300,000 to renovate into a approved child care centre
- Tenant needs to attend the space/location every day to make sure the Contractor/Renovator shows up to do the work and do the work correctly
- The construction period will likely be about 3 – 6 months
- While the construction is in process the Tenant would have to apply for a NEW Ministry License.
- The Ministry License could take up to 12 months to be approved
- The centre will need furniture, equipment, Playground equipment, materials and toys at a cost of $50,000 - $100,000
- Tenant can begin advertising, marketing and branding their business.
- Tenant can pre-register for the date your centre is licensed however you cannot accept any money/funds for pre-registration until you actually have the Ministry License
- Tenant can have up to 5 children in child care until you receive your Ministry License. you can also provide other temporary services as a way to introduce your centre to the community by hosting children's birthday parties, providing tutoring services and any other child friendly service the space can support.
Benefits of Purchasing a Child Care Business
- The child care centre already exists and meets the criteria of the Ministry of Education and is Licensed for "X" number of children
- Providing the sale is a Share Sale, the Sale can transfer in 30 - 60 days and therefore the Buyer can begin registering children once the sale closes
- Buyer generally receives a reasonable 5 year lease with a 5 year option
- The sale of the child care centre includes all the furniture, equipment, Playground equipment, materials and toys
- Buyer may want to do small repairs and/or painting of the centre
- The child care centre is known and has a history and good will in the community
- Buyer would get the existing phone number that is known in the community
- The child care centre may be local to where you live for easy winter commute
What You Shouldn't Do
You shouldn't buy a property to have rezoned for the purpose of renovating the building into a Child Care business for the following reasons
- You should buy the property conditional upon rezoning. However. a Seller is not likely to consider your Offer due to the fact that he would have to wait for possibly up to a year, depending on the Municipality, before you could finally get an answer as to whether they will allow the rezoning of the property for your Child Care business. Essentially the Sellers property is off the market while you try to rezone it and it is not likely the Seller would agree to those terms.
- Should you be able to find a location and a Seller cooperating with you to get it rezoned for a Child Care business; You could pay $10,000 fee or more depending on the town/city to have the Committee of Adjustments even consider your proposal to change the zoning to accommodate Daycare Use and the money is usually non refundable. There is no guarantee that the rezoning would be approved. In other words. Likely would be a waste of time, money and effort.
- See above Leasing Space for Child Care Renovation (See point 6)
- Once finished, the Advisor from the Ministry of Education would have to come to the new premises and qualify the centre to make sure it meets all their criteria.
- Once licensed you are now open for business and you will realize that you don’t have any children (income) to pay the expenses of the Child Care business. Check your Business Plan to determine the amount of money you need to pay all your expenses to break even every month. Figure that you will need enough registered children to pay your employee wages, mortgage/lease, utilities, food etc, etc.
- At this stage you have invested up to $300,000 plus HST to build your centre, thousands on lawyers to close the transaction for you and more thousands to your accountant to help you manage your money and pay your expenses. You will also lose money every month you are open for business until you do break even. Those losses could be up to $15,000 per month. All as mentioned and you haven't collected a pay cheque yet.
- It could take 6 - 12 months of premarketing and advertising the centre in order to attract enough children just to break even?
- Lastly, you can’t start paying yourself until your centre starts making profit This can take 8 - 18 months before you can draw a paycheque for yourself
How to Purchase You’re New Centre
- Buying an existing Child Care business, be it a property or leased premises; you are immediately in business upon the closing date. The Child Care business already has the employees and the registered children in place and presumably the centre is at break even or making profit. The Child Care centre meets all the criteria of the Ministry of Education and the Municipality. Also, you should be able to collect a pay cheque right away
- As the new Owner, you are the stranger in the business. My advice is to take the first 3 months of ownership and carefully observe your new business. Don’t make any changes. Take notes on employee behavior, rules and policies of the centre, ways to improve the centre, parents comments etc. etc. This will help you develop a feel for your new business. After the prescribed period of time, begin to make minor changes so not to upset your employees or parents and tweak the business model to make it your own.
- If you have questions about the operation of the centre or in dealing with the employees or parents, apart from the Ministry of Education. You can also visit various websites to do with your business like The Association of Daycare Operators: (ADCO) at http://www.adco-o.on.ca/ or for Montessori Operators go to Canadian Council of Montessori Administrators:"CCMA" at http://www.ccma.ca/ There are plenty of other sources on the Internet that you can find answers to questions. Also, join in seminars and educational programs offered by various groups, Get involved in your business and the benefits will be aplenty,
- I will help direct you and you will have easy access to me by phone or e-mail
Steps To Starting a Licensed Child Care Program
Determine whether you want to start a new licensed child care program from scratch, or whether you'd prefer to buy an existing licensed centre.
Choose a prospective location and survey the area to be certain there is a need for your service.
Check with the Zoning Department in your municipality to make sure that the area is zoned for "daycare" use.
Apply for a child care license within the Ministry of Education's online system (CCLS) and pay the required fee. (This allows a Ministry Program Advisor to be assigned to you.)
Concerning the floor plans of your Child Care centre follow the instructions on the CCLS (Child Care Licensing System)
Under the direction of the Program Advisor, you must arrange to have your premises inspected by the Building, Fire and Health Departments in your municipality. Follow CCLS instructions as it is not the same for each Municipality.
Before your Child Care centre can be licensed, the following procedures must be completed:
Joseph Ward Broker RE/MAX Realty Enterprises Inc. Brokerage
Cell: 647 284-8885 905 855-2200