Looking for a nursery school business plan? You're in the right place.
Opening a licensed preschool means answering questions a lender, a landlord or a licensing analyst will ask. How many children can the license hold, and how fast will the rooms fill? How many teachers does each room need, and what do they cost before the tuition arrives? What happens if the waitlist is shorter than you hoped? A blank template won't show what a sensible answer looks like.
In this article we'll walk through a complete sample business plan for a nursery school in Sunnyvale, California, section by section. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The executive summary: see how to put the center, its licensed capacity and its funding on one page, so a reader knows what you're asking for within a minute
- The license and the rooms: learn how licensed capacity caps revenue, so you size the building before you sign the lease
- Enrollment against capacity: see a year-by-year fill rate and waitlist, and check your own ramp against it
- Staffing by ratio: understand how teaching staff follow the rooms, and why a center staffs well inside the legal limit
- The start-up budget and the first year, month by month: spot the months that lose money before you reach them, and size a cash reserve to match
- Tuition against subsidy: see how voucher-funded places change margin, and how a plan shows both
- The downside case: have an answer ready for the "what if enrollment is 20% short?" question, along with the steps the owner takes in response
If you're setting up a child care center, read this before you write your own. The center is fictional, so take what fits and change the rest.
In this plan
If you need a nursery school business plan template for your own plan, start it in the Toolkit.
Little Sprouts at a Glance
Little Sprouts Academy is a licensed child care center for children aged two to five, opening in Sunnyvale, California on 1 January 2027. It runs a play-based daily program for working families from 7:30 a.m. to 6:00 p.m. on weekdays. Founder and director Marisol Ortega owns 100% of the business.
The center needs $770,000: $380,000 of Marisol's savings, a $300,000 bank term loan and a $90,000 tenant-improvement allowance from the landlord. Of that, $470,000 pays for the building conversion, design work, yard and equipment, $61,500 for licensing, permits, professional fees and the launch campaign, and $238,500 is held as a cash reserve.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $1,120,077 | $1,693,601 | $1,844,635 |
| Net income after start-up costs | ($196,533) | $58,509 | $119,470 |
| Closing cash | $119,355 | $194,814 | $338,204 |
The licensed capacity is 60 children. The center opens with 18 enrolled from its pre-opening list, reaches 48 by December 2027 and averages 52 in 2028, 87% of capacity. Year 1 loses money because a 3,600-square-foot building and several teachers are paid for while the rooms fill. Operating profit is negative until June 2027, edges positive in July, dips again in August when the oldest children leave, and holds from September to December. Year 2 is the first profitable year.
A center can earn no more than its license allows, so the plan tracks enrollment against the 60 places, sets staffing by room and ratio, and splits income between private tuition and voucher-funded places. Two stress cases are built in. If enrollment runs 20% below plan, or if half the places in the oldest room stay empty because families choose free transitional kindergarten, the owner slows hiring, takes a pay cut and pays no distributions, and the center still ends every year with cash in the bank.
The Center, Its Rooms and Its License
Legal name: Little Sprouts Academy, LLC, a California limited liability company. Owner: Marisol Ortega, 100%. Site: a 3,600-square-foot single-story building with a fenced yard of about 4,500 square feet, in Sunnyvale. Lease: ten years with two five-year options, 3% annual increases and a $90,000 tenant-improvement allowance, with a personal guarantee expected from Marisol. Opening: 1 January 2027, after licensing and fire clearance. Stage: pre-opening. The lease is in draft and the license application is in preparation. Eighteen families have signed enrollment forms for January, and their $400 registration fees are collected when the center opens.
Three rooms
| Room | Ages | Licensed places | Adults on the floor when full |
|---|---|---|---|
| Seedlings | 2 to 3 | 12 | 2 |
| Sprouts | 3 to 4 | 24 | 3 |
| Bloomers | 4 to 5 | 24 | 3 |
The center does not take children under two. Infant care has its own ratio and space rules in Title 22 and a different cost base, and the plan leaves it out.
What the license sets
California has licensed child care centers through the Department of Social Services, Community Care Licensing Division. A 2026 guide describes that arrangement, and the administration of licensing may change, so the center confirms the current licensing body when it applies. The license fixes the number of children the center may enroll, and that number comes from usable space. Title 22 section 101238.2 sets the outdoor minimum at 75 square feet per licensed child, and a 2015 legislative analysis describes the indoor minimum as 35 square feet of activity space per child. For 60 children that is 2,100 square feet indoors and 4,500 outdoors. The building and yard are sized to those figures.
Title 22 section 101216.3 sets the base ratio at one teacher visually supervising no more than 12 children in attendance. The same section allows a teacher-and-aide arrangement, lets the director count toward the ratio while teaching, and exempts child development programs funded by the Department of Education under Title 5. Justia publishes the regulation, current to the December 2024 register. The page could not be fetched directly, so this summary comes from search results and the current regulation governs. The center takes the calculation of its capacity, and how each ratio applies to each age group, to its licensing analyst before the lease is signed. It staffs well below the 1-to-12 limit, for reasons set out under Operating Plan.
Milestones to the end of Year 2
- 48 children by December 2027, up from 18 in January.
- An average of 52 children in 2028, 87% of licensed capacity, with a waitlist for the Seedlings and Sprouts rooms.
- A positive operating result in each month from September to December 2027, and a net profit for 2028.
- Interest-only payments for six months, then the loan repaid on schedule, with owner distributions beginning in 2030.
Income at a glance
| Income stream | How it is priced | Year 1 share of revenue |
|---|---|---|
| Private tuition | About $2,650 a month, full time | 84.9% |
| Voucher-funded places | $2,000 a month | 10.9% |
| Extended-day fees | $220 a month for the families who use it | 1.8% |
| Registration fees | $400 per new enrollment | 2.4% |
Preschool Demand in Santa Clara County
What the county's child care count shows
The 2023 California Child Care Portfolio, compiled by the California Child Care Resource & Referral Network, lists 617 licensed child care centers in Santa Clara County with 52,165 spaces, 40,051 of them for children aged two to five. It also counts 1,252 licensed family child care homes with 14,491 spaces. Licensed space was available for 36% of the county's children aged 0 to 12 with parents in the labor force in 2023, up from 33% in 2021. The report puts the median full-time cost of preschool care in a center at $1,777 a month, with toddler care at $1,615. Those costs come from the federal Women's Bureau database built on state market-rate surveys for 2019 to 2022, so they trail current fees.
Fewer young children each year
The same report shows the county's population of two-year-olds falling from 20,531 in 2021 to 18,570 in 2023, a 10% drop, with three-year-olds down 3% and four-year-olds down 6%. Little Sprouts' plan to average 52 to 56 children depends on winning a share of a smaller pool. The $2,650 blended tuition is 49% above the report's $1,777 median. The gap allows for the years of fee rises since the survey data and for the Sunnyvale location, and the center checks it against the published rates of nearby centers before signing the lease.
Transitional kindergarten
Under the California Department of Education's guidance, from 2025–26 every district must offer transitional kindergarten to children who turn four by 1 September, free of charge. Attendance is optional. The effect on a private center falls on the oldest room. Some four-year-olds will leave for TK, and the Bloomers room draws on four-year-olds with later birthdays and on families that prefer a full-day private program. The plan counts the oldest children leaving each August, 8 in Year 1, and refills from the waitlist. The downside section tests the case where half of Bloomers stays empty.
Who a family could choose instead
| Alternative | What it offers | Why a family picks it | How Little Sprouts differs by design |
|---|---|---|---|
| Chain and franchise preschool centers | Standard curriculum, long hours | Brand recognition and several sites | One director on site, three small rooms and fewer children per adult |
| Independent Montessori and play-based schools | Philosophy-led programs | A specific method | Full-day cover from 7:30 a.m. to 6:00 p.m. with a play-based program |
| Licensed family child care homes | Small groups in a home | Lower fees and a home setting | Teacher-led rooms with an assistant director and a backup teacher for illness |
| Public transitional kindergarten | Free program for children turning four by 1 September | No tuition | Younger children, and care outside school hours |
| State and federal preschool programs | Income-qualified places | Little or no fee | A voucher can pay for a place here |
| Nannies, nanny shares and relatives | Care at home | Flexibility | A fixed, licensed setting with background-checked staff |
The table describes what each category offers and does not rank them. Fees change often and are not quoted here, and individual centers are not named.
SWOT
| Strengths | Weaknesses |
|---|---|
| A director who has run a 70-place center | One site and one license: a closure stops all income |
| Staffing set well inside the legal ratio | Payroll runs at 58% to 63% of revenue, which leaves little margin |
| 18 families signed for January before opening | No local reputation on opening day |
| Opportunities | Threats |
|---|---|
| Employers near the site that want child care for staff | Fewer two- and three-year-olds in the county each year |
| A waitlist that lets the center refill places after each August | Free transitional kindergarten for four-year-olds |
| Voucher-funded places that keep rooms full | A senior teacher leaving mid-year |
Who Enrolls and Why They Stay
Two-income households within ten minutes of work
Most families have two working parents or a single working parent, in technology, health care, retail or the public sector, with children aged two to five. The plan expects about six families in seven to pay private fees without help and the rest to use a voucher.
What they use now, and what prompts a change
Families currently rely on family child care homes, nannies, relatives or other centers. A change usually follows a child turning two, a parent returning to work, a closure or a move.
What they ask of the center
Hours that match a commute, a named teacher who stays, a clean and safe building with a yard, meals included and a fee that does not change mid-year.
Why a family leaves
The main exit is age. The oldest children move to kindergarten each August, and the plan counts 8 of these in Year 1. Other leavers are families who move, lose a job or change a work pattern.
Tuition against subsidy
Voucher-funded children cost the same to teach as private ones but pay less, so their share changes margin. The plan keeps it at 14% to 16% of children.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Private tuition a month | $2,650 | $2,743 | $2,839 | $2,938 | $3,041 |
| Voucher payment a month | $2,000 | $2,050 | $2,101 | $2,154 | $2,208 |
| Voucher share of children | 14.5% | 14.0% | 15.0% | 16.0% | 16.0% |
| Private tuition, share of revenue | 84.9% | 86.9% | 86.3% | 85.7% | 85.8% |
| Voucher payments, share of revenue | 10.9% | 10.6% | 11.3% | 12.0% | 11.9% |
The voucher rate is the plan's figure. No reimbursement-rate table was retrieved, and the local voucher program sets what it pays.
From Tour to Enrollment
The path
An online inquiry or a call, a 30-minute tour with the director, a waitlist offer or an enrollment form, a $400 registration fee and a start date set against the age room. The director takes every tour in Year 1.
Year 1 pipeline
About 150 tours at a 44% close rate produce 66 new enrollments. The first 18 come from the pre-opening list before the doors open.
| Source | New enrollments in Year 1 | Share |
|---|---|---|
| Pre-opening list from open days | 18 | 27% |
| Google search and map listings | 14 | 21% |
| Referrals from current families | 12 | 18% |
| Online child care directories | 8 | 12% |
| Employer and community partners | 8 | 12% |
| Walk-ins from signage | 6 | 9% |
The waitlist
Families join a waitlist for a specific room, and a place that opens in Seedlings goes to the first family listed for that age. The plan sets year-end waitlists at 4, 9, 12, 12 and 12 families, a plan target and not a count from the market. Waitlisted families are not counted as revenue. The places left empty at 93% occupancy are in Bloomers, where the waitlist is shortest, and the waitlists for Seedlings and Sprouts supply each August refill.
Enrollment against licensed capacity
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Average children enrolled | 35 | 52 | 55 | 56 | 56 |
| Licensed capacity | 60 | 60 | 60 | 60 | 60 |
| Occupancy | 58% | 87% | 92% | 93% | 93% |
| Waitlist at year end | 4 | 9 | 12 | 12 | 12 |
Occupancy stops at 93% by design. Each August the oldest room turns over, and a center full in July sits well below capacity in August until the waitlist refills it.
Where Families Find Us
Marketing spend and what it buys
The Year 1 budget is $38,000: $12,000 of launch spend from start-up capital and $26,000 of running costs. Spread across 66 new enrollments, that is about $576 per enrolled child, under a quarter of one month's fee. Spend falls to $14,000 in Year 2 and $12,000 in Year 3 as referrals and the waitlist carry more of the work.
| Channel | Year 1 spend | What it does |
|---|---|---|
| Website, photography and branding (launch) | $6,000 | A site that shows the rooms, the yard, the daily schedule and the tour booking form |
| Signage and print (launch) | $2,500 | Frontage signage and a flyer for nearby employers |
| Open days (launch) | $3,500 | The events that build the pre-opening list of 18 |
| Google search and map listings | $8,000 | Searches such as "preschool Sunnyvale"; about 14 enrollments |
| Online child care directories | $4,000 | Listings that send inquiries; about 8 enrollments |
| Evening open houses | $3,000 | Tours for waitlisted and referred families outside working hours |
| Employer and community partnerships | $3,000 | Information sessions at nearby workplaces; about 8 enrollments |
| Family referral thank-yous | $2,500 | A small gift for each family that sends a friend; about 12 enrollments |
| Photography and social posts | $2,500 | Weekly posts of classroom activity |
| Signage upkeep | $1,500 | Seasonal banners; about 6 enrollments |
| Website upkeep and email | $1,500 | A monthly note to waitlisted families |
Marketing milestones
- January 2027: 18 children enrolled from the pre-opening list.
- April 2027: 32 children in the Seedlings and Sprouts rooms, which hold 36 between them.
- June 2027: 37 children and the Bloomers room opens.
- September 2027: the new school-year intake lifts enrollment from 32 to 40.
- December 2027: 48 children, 80% of capacity.
Running the Day: Rooms, Ratios, Kitchen
The building and the yard
The building is a 3,600-square-foot single-story unit with a fenced yard of about 4,500 square feet. The $300,000 conversion covers a sprinkler retrofit, child-height toilets and sinks, flooring, room partitions and fire and safety work, and $45,000 pays for an architect, engineering and accessibility (ADA) work. The $60,000 yard budget buys fencing, a shade structure, safety surfacing and play equipment. Together the building work comes to about $96 a square foot, and no cost data sits behind that figure, so contractor bids come before the lease is signed. Permits, plan-check fees and the license application are budgeted at $24,500, and a permit consultant and lawyer at $25,000. Rent is $233,000 in Year 1, about $5.40 a square foot a month including service charges.
Staffing set by room and ratio
Title 22 allows one teacher to 12 children. The plan staffs the Seedlings room at 1 adult to 6 children and the Sprouts and Bloomers rooms at 1 to 8 when full. A 10.5-hour day divided by an 8-hour shift means each adult on the floor needs 1.3 people on payroll. Breaks and sick days are covered by the floating teacher, the director and the assistant director, none of whom is counted in the table below. The director teaches part of the day and fills in where a room is short. At Year 3 occupancy the center has 10 teaching staff, 7.7 of them on the floor at any moment, and 55 children, or 7.2 children per adult.
| Year 1 (December) | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Children enrolled (Year 1: December; later years: average) | 48 | 52 | 55 | 56 | 56 |
| Teaching staff at year end, full-time equivalent | 9.5 | 9.5 | 10.0 | 10.0 | 10.0 |
| Adults on the floor at once (staff ÷ 1.3) | 7.3 | 7.3 | 7.7 | 7.7 | 7.7 |
| Children per adult on the floor | 6.6 | 7.1 | 7.2 | 7.3 | 7.3 |
| Title 22 base ratio | 12 | 12 | 12 | 12 | 12 |
Teaching staff means lead teachers, assistants, the floating teacher and the extended-day aides, with each part-time aide counted as half. The Seedlings and Sprouts rooms hold 36 children between them, so the third room and its lead open in June 2027, when enrollment reaches 37. The downside section shows which hires are delayed or dropped if enrollment falls short.
Wages
Wages are the plan's own figures: $68,000 for a lead teacher, $54,000 for an assistant and $105,000 for the director. The Bureau of Labor Statistics reports national medians of $37,120 for preschool teachers and $56,270 for preschool and child care center directors (May 2024). The plan sets Bay Area wages well above them and no local wage survey was found, so the figures are unverified. The Sunnyvale minimum wage is $19.50 an hour from January 2026, and every part-time role in the plan pays above it.
Daily schedule and meals
Doors open at 7:30 a.m. and close at 6:00 p.m. The core program runs in the middle of the day, and early and late care covers the hours either side. The cook prepares lunch and two snacks on site for every child. Food and consumables cost 7.5% of tuition and voucher income.
Licenses and safeguards
- A child care center license for 60 children, with fire clearance before it is issued.
- A City of Sunnyvale business license and any use permit the planning department requires for a child care use.
- Criminal-record clearance and immunization and health records for every adult who works at the center.
- Teachers who meet the education and experience requirements in Title 22, checked against transcripts before the first shift.
- General liability, abuse and molestation, property and cyber insurance and key-person cover on the director, budgeted at $28,000 in Year 1, plus workers' compensation inside the payroll cost.
- A parent handbook with fees, hours, illness and pick-up rules, signed at enrollment.
What the lender and the landlord will ask
The $300,000 loan is expected to be secured by a lien on the equipment and the leasehold improvements, with a personal guarantee from Marisol, and the lender may ask for more. The lease runs ten years with a $90,000 tenant-improvement allowance, and the landlord is also expected to ask for a personal guarantee. The 18 pre-opening enrollment forms are intentions: no fee is paid until the center opens, so a lender can treat them as evidence of demand and not as income.
A late license is the main timing risk. If the January 2027 opening slips by three months, rent, the director's salary and loan interest cost about $33,000 a month, or about $100,000 in all, before any tuition arrives. The lowest cash point in the base case is about $67,000 after receivables, which covers two months of delay. The plan sets out to link the start of rent to the date the license is issued, and until the landlord agrees to that, a delay beyond two months would need more equity.
Suppliers and advisers
A food supplier, a cleaning contractor, a software vendor for billing and attendance, and a payroll provider. A bookkeeper and an employment lawyer are on call.
The People Running It
Marisol Ortega, founder and director
Marisol has fourteen years in early education, the last six as director of a 70-place center in San Jose. She holds a bachelor's degree in child development and the units Community Care Licensing asks of a director, which her licensing analyst checks before the application is filed. The $380,000 she invests is savings. She is leaving to run a smaller center where she is present every day.
Where the team is thin
Marisol has not owned a center, negotiated a commercial lease or run payroll for a building she also leases. The plan covers this with a lease review by a lawyer, a payroll provider and a bookkeeper on call, and a part-time administrator from the first month.
If the director is out
Marisol is the only licensed director at launch and works part of the day as a teacher, so the center carries key-person life and disability cover on her. The assistant director and curriculum lead hired in month 13 holds the director qualifications too, so a second person can run the center. Until then, a former colleague at another center is on call for cover.
Outside help
A retired director of a Santa Clara County center reviews the first-year numbers every quarter. The Santa Clara County Office of Education runs the county's Childcare Resource and Referral program, which the 2023 Child Care Portfolio lists as the local contact, and Marisol uses it for local data.
Ownership and the bank
Marisol owns 100% of Little Sprouts Academy, LLC. The loan carries a covenant to deliver quarterly accounts.
The Numbers Behind Little Sprouts
Revenue starts from the number of children enrolled each month and the fee each family pays. Costs follow from the ratio: teachers join as rooms fill, and the building costs arrive on day one. Monthly detail covers the first year; Years 2 to 5 are annual.
Fit-out, licensing and funding
| Use of funds | Amount |
|---|---|
| Building conversion: sprinkler retrofit, child-height toilets and sinks, flooring, partitions, fire and safety work | $300,000 |
| Architect, engineering and accessibility (ADA) work | $45,000 |
| Yard: fencing, shade structure, safety surfacing, play equipment | $60,000 |
| Cots, furniture, kitchen, classroom and office equipment | $65,000 |
| License application, fire clearance, city permits and plan-check fees | $24,500 |
| Lease review, permit consultant and legal set-up | $25,000 |
| Launch: website, signage, open days, local campaign | $12,000 |
| Cash reserve for the enrollment ramp and a delayed opening | $238,500 |
| Total uses | $770,000 |
| Source of funds | Amount |
|---|---|
| Marisol Ortega's savings | $380,000 |
| Bank term loan | $300,000 |
| Landlord tenant-improvement allowance | $90,000 |
| Total sources | $770,000 |
The $770,000 comes from three places. Marisol Ortega puts in $380,000 of savings (49%), the bank lends $300,000 over ten years at 10.75%, interest-only for the first six months, and the landlord contributes a $90,000 tenant-improvement allowance, about $25 a square foot. The model books the allowance as capital. The bank is expected to take a personal guarantee and a lien on the equipment and the leasehold improvements, and the rate is the plan's own figure rather than a quoted one. The $238,500 reserve carries the Year 1 operating loss of $53,204 and is also the buffer for a late license, discussed under Operating Plan.
Operating figures behind the model
- The licensed capacity is 60 children in three rooms: Seedlings with 12 children aged two to three, Sprouts with 24 aged three to four and Bloomers with 24 aged four to five. At the space minimums in Title 22 (35 square feet indoors and 75 outdoors per licensed child) that needs 2,100 square feet of usable classroom space and a 4,500-square-foot yard. The leased building is 3,600 square feet.
- Enrollment opens at 18 children in January, from the pre-opening list, and ends December at 48, which is 80% of capacity. The Year 1 average is 35 (58% of capacity), then 52, 55, 56 and 56 across Years 2 to 5 (87%, 92%, 93% and 93%). Year 1 takes in 66 new children against 18 leavers, 8 of them in August when the oldest children move on to kindergarten. The empty places in later years are in the Bloomers room, the group with a free public alternative.
- Private tuition is about $2,650 a month for a full-time place in Year 1, blended from $2,950 in the Seedlings room and $2,550 in the other two, and rises 3.5% a year. That is 49% above the $1,777 county median in the 2023 Child Care Portfolio, which rests on 2019 to 2022 survey data; no current Sunnyvale rate list was found. Revenue per enrolled child is $2,667 a month in Year 1, including voucher-funded places and extras.
- Voucher-funded places are 61 of the 420 child-months in Year 1 (14.5%) and 14% to 16% of enrollment after that. Each pays $2,000 a month, 75% of private tuition, rising 2.5% a year. No reimbursement-rate source was retrieved. State ceilings differ by county and age group, so the local voucher program sets the real figure.
- About 22% of families pay $220 a month for early drop-off or late pick-up, and each new enrollment pays a $400 registration fee, collected in January for the first 18. The center is open from 7:30 a.m. to 6:00 p.m. on weekdays. The waitlist is not counted as revenue.
- Staffing follows the room, not the legal maximum. Title 22 sets the base ratio at one teacher to 12 children, and the plan runs the Seedlings room at 1 adult to 6 children and the other two at 1 to 8 when full. Each adult on the floor needs 1.3 people on payroll, the 10.5-hour day divided by an 8-hour shift. The floating teacher, the director and, from month 13, the assistant director cover breaks and sick days on top of that, and none of them is counted in the ratio table. The two part-time aides count as half a person each. Teaching payroll is 9.5 full-time equivalents from month 10, rising to 10 in month 28.
- Wages are $68,000 for a lead teacher, $54,000 for an assistant (about $26 an hour), $58,000 for a floating teacher and $105,000 for the director. These are the plan's own Bay Area figures. The BLS national medians are lower ($37,120 for preschool teachers and $56,270 for directors, May 2024) and no local survey was found. Part-time roles run at $21 to $26 an hour, above the $19.50 Sunnyvale minimum wage in force from January 2026. Payroll adds 27% for payroll taxes, health cover, workers' compensation and paid leave (15% for part-time staff), and pay raises of 3% a year are charged as a separate line from Year 2.
- Meals, snacks and consumables cost 7.5% of tuition and voucher income, about $199 a child a month at Year 1 fees. The cook is on payroll separately. Receivables average 8 days: tuition is collected by bank debit at the start of the month and voucher payments arrive in arrears.
- Rent is $233,000 in Year 1 for the 3,600-square-foot building and yard, about $5.40 a square foot a month including service charges, with 3% annual increases on a ten-year lease. The conversion budget is $300,000 (about $83 a square foot) plus $45,000 for design and accessibility work, $96 a square foot in all. No cost data sits behind it, and the center gets contractor bids before signing. Insurance of $28,000 covers general liability, abuse and molestation, property, cyber risk and key-person cover on the director, and rises to $36,000 by Year 5.
- Tax is charged at the 21% federal corporate rate and the 8.84% California corporation rate, with the Year 1 loss carried forward. An LLC taxed as a pass-through would keep more cash in the center. The California LLC annual tax of $800 and the $6,000 fee for gross receipts of $1 million to $4.99 million are in operating costs every year. Owner distributions of $40,000 and $60,000 are paid in Years 4 and 5 only from cash the model shows the center can spare.
Revenue by income stream
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Private tuition | $951,350 | $1,471,869 | $1,592,537 | $1,658,500 | $1,716,548 |
| Voucher-funded places | $122,000 | $179,088 | $208,024 | $231,575 | $237,364 |
| Extended-day fees | $20,327 | $31,108 | $33,889 | $35,541 | $36,607 |
| Registration fees | $26,400 | $11,536 | $10,185 | $10,053 | $10,355 |
| Total revenue | $1,120,077 | $1,693,601 | $1,844,635 | $1,935,669 | $2,000,874 |
| Growth on prior year | – | 51% | 9% | 5% | 3% |
Private tuition is 85% to 87% of revenue every year and voucher-funded places are 11% to 12%. Year 2 grows 51% because the Year 1 average is 35 children against 52 in Year 2, so the jump is a full year of the same rooms. Growth then slows to 9%, 5% and 3%, because the rooms are 92% to 93% full from Year 3 and price is the main lever left.
The first twelve months of enrollment
| Month | Private tuition | Voucher-funded places | Extended-day fees | Registration fees | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $42,400 | $4,000 | $871 | $7,200 | $54,471 | ($40,509) |
| Feb 2027 | $53,000 | $6,000 | $1,113 | $2,400 | $62,513 | ($33,045) |
| Mar 2027 | $63,600 | $8,000 | $1,355 | $2,400 | $75,355 | ($21,126) |
| Apr 2027 | $71,550 | $10,000 | $1,549 | $2,000 | $85,099 | ($12,082) |
| May 2027 | $79,500 | $10,000 | $1,694 | $1,600 | $92,794 | ($4,940) |
| Jun 2027 | $84,800 | $10,000 | $1,791 | $1,200 | $97,791 | ($302) |
| Jul 2027 | $87,450 | $10,000 | $1,839 | $800 | $100,089 | $1,830 |
| Aug 2027 | $74,200 | $8,000 | $1,549 | $800 | $84,549 | ($12,593) |
| Sep 2027 | $90,100 | $12,000 | $1,936 | $3,600 | $107,636 | $8,835 |
| Oct 2027 | $95,400 | $14,000 | $2,081 | $1,600 | $113,081 | $13,889 |
| Nov 2027 | $103,350 | $14,000 | $2,226 | $1,600 | $121,176 | $21,402 |
| Dec 2027 | $106,000 | $16,000 | $2,323 | $1,200 | $125,523 | $25,437 |
Operating profit is negative from January to June, edges positive in July at $1,830, and dips to a $12,593 loss in August as eight graduating children leave. It is positive in each month from September to December. The monthly cash path takes no account of receivables, so December ends at $143,905 on that basis against $119,355 in the annual statements, which hold back a receivables balance of $24,550. The lowest month-end cash after allowing for the 8 days of billing is $67,000 in Sep. Monthly detail stops at Year 1: the August dip repeats in later years, and August 2028 is likely to show a loss.
Classroom and office payroll
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and director | $105,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Lead teacher, Seedlings room (ages 2-3) | $68,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Lead teacher, Sprouts room (ages 3-4) | $68,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Assistant teacher 1 | $54,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Assistant teacher 2 | $54,000 | Month 2 | 1 | 1 | 1 | 1 | 1 |
| Lead teacher, Bloomers room (ages 4-5) | $68,000 | Month 6 | 1 | 1 | 1 | 1 | 1 |
| Assistant teacher 3 | $54,000 | Month 4 | 1 | 1 | 1 | 1 | 1 |
| Assistant teacher 4 | $54,000 | Month 6 | 1 | 1 | 1 | 1 | 1 |
| Floating teacher (breaks and sick cover) | $58,000 | Month 9 | 1 | 1 | 1 | 1 | 1 |
| Assistant teacher 5 | $54,000 | Month 10 | 1 | 1 | 1 | 1 | 1 |
| Extended-day aide (part time, 20 hours a week) | $22,000 | Month 10 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Assistant director and curriculum lead | $76,000 | Month 13 | – | 1 | 1 | 1 | 1 |
| Second extended-day aide (part time, 20 hours a week) | $22,000 | Month 28 | – | – | 0.5 | 0.5 | 0.5 |
| Office administrator (part time, 25 hours a week) | $34,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Cook (part time, 25 hours a week) | $31,500 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Total payroll incl. on-costs | $702,680 | $1,006,135 | $1,025,110 | $1,031,435 | $1,031,435 |
The director, two lead teachers and one assistant open the doors in January with 18 children in two rooms. Assistants join in months 2 and 4. Seedlings and Sprouts hold 36 children between them, so the Bloomers lead and a fourth assistant start in month 6, when enrollment reaches 37. A floating teacher follows in month 9, then a fifth assistant and a part-time extended-day aide in month 10. The assistant director and curriculum lead starts in month 13, and a second aide in month 28. The office administrator and cook are part time from the start. Marisol's $105,000 salary is already in the costs, so profit here is what remains after the director is paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $1,120,077 | $1,693,601 | $1,844,635 | $1,935,669 | $2,000,874 |
| Direct costs (meals, snacks and consumables) | ($80,501) | ($121,721) | ($132,576) | ($139,119) | ($143,805) |
| Gross profit | $1,039,576 | $1,571,880 | $1,712,059 | $1,796,550 | $1,857,069 |
| Payroll incl. on-costs | ($702,680) | ($1,006,135) | ($1,025,110) | ($1,031,435) | ($1,031,435) |
| Rent | ($233,000) | ($240,000) | ($247,200) | ($254,600) | ($262,200) |
| Utilities | ($30,000) | ($30,900) | ($31,800) | ($32,800) | ($33,800) |
| Marketing | ($26,000) | ($14,000) | ($12,000) | ($12,000) | ($12,500) |
| Insurance | ($28,000) | ($30,000) | ($32,000) | ($34,000) | ($36,000) |
| Professional fees | ($12,000) | ($12,500) | ($13,000) | ($13,500) | ($14,000) |
| Software subscriptions | ($8,000) | ($8,400) | ($8,800) | ($9,200) | ($9,600) |
| License renewals, fire inspection, background checks and staff training | ($5,500) | ($6,000) | ($6,500) | ($7,000) | ($7,500) |
| Classroom supplies and curriculum | ($11,000) | ($9,500) | ($10,000) | ($10,500) | ($11,000) |
| Cleaning, repairs and yard upkeep | ($22,000) | ($23,000) | ($24,000) | ($25,000) | ($26,000) |
| Phones, internet and security | ($4,800) | ($4,900) | ($5,000) | ($5,100) | ($5,200) |
| Equipment replacement | $0 | ($6,000) | ($8,000) | ($10,000) | ($12,000) |
| California LLC annual tax and fee | ($6,800) | ($6,800) | ($6,800) | ($6,800) | ($6,800) |
| Bad debt allowance | ($3,000) | ($5,000) | ($5,500) | ($5,500) | ($5,500) |
| Annual pay raises (3% a year) | $0 | ($30,184) | ($62,429) | ($95,642) | ($129,454) |
| EBITDA | ($53,204) | $138,561 | $213,920 | $243,473 | $254,080 |
| Depreciation | ($49,786) | ($49,786) | ($49,786) | ($49,786) | ($49,786) |
| Interest | ($32,043) | ($30,266) | ($27,977) | ($25,429) | ($22,593) |
| Income tax | $0 | $0 | ($16,688) | ($47,085) | ($50,846) |
| Net income before start-up costs | ($135,033) | $58,509 | $119,470 | $121,174 | $130,854 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($61,500) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($196,533) | $58,509 | $119,470 | $121,174 | $130,854 |
Year 1 loses $53,204 at EBITDA and $196,533 after interest, depreciation and $61,500 of start-up costs. Year 2 turns profitable, with EBITDA of $138,561 and net income of $58,509, and pays no tax because the Year 1 loss is carried forward. EBITDA margin reaches 11.6% in Year 3 and 12.7% by Year 5. Payroll, including pay raises, falls from 63% of revenue in Year 1 to 59% in Year 3 as the rooms fill, and it is the line that decides the result.
Cash through the ramp
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($171,297) | $95,725 | $165,945 | $168,964 | $179,211 |
| Building conversion, yard and equipment | ($470,000) | $0 | $0 | $0 | $0 |
| Funding received | $770,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | ($9,348) | ($20,266) | ($22,555) | ($25,103) | ($27,938) |
| Owner distributions | $0 | $0 | $0 | ($40,000) | ($60,000) |
| Net change in cash | $119,355 | $75,459 | $143,390 | $103,862 | $91,273 |
| Closing cash | $119,355 | $194,814 | $338,204 | $442,066 | $533,339 |
Closing cash stays positive in every year and rises from $119,355 at the end of Year 1 to $533,339 by Year 5, after the loan principal and the Year 4 and Year 5 distributions. The lowest year-end figure is Year 1.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $119,355 | $194,814 | $338,204 | $442,066 | $533,339 |
| Accounts receivable | $24,550 | $37,120 | $40,430 | $42,426 | $43,855 |
| Building conversion, yard and equipment (net) | $420,214 | $370,429 | $320,643 | $270,857 | $221,071 |
| Total assets | $564,119 | $602,363 | $699,278 | $755,349 | $798,265 |
| Bank term loan | $290,652 | $270,386 | $247,831 | $222,729 | $194,790 |
| Paid-in capital | $470,000 | $470,000 | $470,000 | $470,000 | $470,000 |
| Retained earnings | ($196,533) | ($138,023) | ($18,554) | $62,620 | $133,474 |
| Total liabilities and equity | $564,119 | $602,363 | $699,278 | $755,349 | $798,265 |
Margins, break-even and loan cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -4.8% | 8.2% | 11.6% | 12.6% | 12.7% |
| Net margin (before start-up costs) | -12.1% | 3.5% | 6.5% | 6.3% | 6.5% |
| Payroll incl. pay raises as share of revenue | 63% | 61% | 59% | 58% | 58% |
| Revenue per full-time equivalent at year end | $97,398 | $135,488 | $141,895 | $148,898 | $153,913 |
| Average monthly revenue | $93,340 | $141,133 | $153,720 | $161,306 | $166,740 |
| Monthly revenue needed to cover operating costs | $98,117 | $128,693 | $134,512 | $139,445 | $143,927 |
| Debt service cover (EBITDA / interest + principal) | -1.3x | 2.7x | 4.2x | 4.8x | 5.0x |
Year 1 averages $93,340 a month against $98,117 needed to cover operating costs, so it runs at a loss. Year 2 averages $141,133 against $128,693 needed. Loan cover is negative in Year 1 because operating profit is, then 2.7x in Year 2 and above 4x from Year 3.
If enrollment runs a fifth short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $896,062 | $1,354,881 | $1,475,708 | $1,548,535 | $1,600,699 |
| Net income before start-up costs | ($228,250) | ($18,254) | ($19,027) | ($12,045) | ($5,375) |
| Net income after start-up costs | ($289,750) | ($18,254) | ($19,027) | ($12,045) | ($5,375) |
| Closing cash | $31,048 | $32,258 | $37,813 | $48,855 | $64,184 |
This case cuts every revenue line by 20% in every year, which is an average of about 44 children in Year 3 against 55. The response follows the ratio: assistant teachers 4 and 5 are never hired, the floating teacher and the first extended-day aide start six months later, every hire from month 13 starts six months later, Marisol takes a 20% pay cut and no distributions are paid. Marketing is kept at the base-case level, because empty places are the problem. On those terms the center loses $18,254 in Year 2, stays near break-even at the net line after that and ends every year with cash in the bank, never below $31,048. Inside Year 1 the lowest month-end cash, after allowing for receivables, is $14,825 in October. Debt service cover is 1.2x in Year 2 and 1.3x by Year 4. Equity ends Year 1 at $180,250, which includes the $90,000 allowance booked as capital, and the center would raise any net-worth covenant with the bank early. Without the response, the same shortfall leaves the center without cash from August of Year 1.
The flat 20% case spreads the loss across all three rooms. A second case concentrates it. Bloomers, the four-to-five room, holds 24 of the 60 places and is the age group with a free public alternative in transitional kindergarten. If half of its places stay empty, the center loses the same 20% of revenue, but a half-empty room still needs two adults, so staffing flexes less. The response here merges Bloomers into Sprouts as a mixed-age room: the Bloomers lead and assistant teacher 5 are not hired, every hire from month 13 starts six months later, Marisol takes the pay cut and no distributions are paid.
| Transitional kindergarten case | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Net income after start-up costs | ($310,256) | ($19,101) | ($164) | $7,399 | $14,690 |
| Closing cash | $10,542 | $10,905 | $35,323 | $65,808 | $101,202 |
| Debt service cover | -4.0x | 1.2x | 1.5x | 1.6x | 1.7x |
Cash survives only just: the lowest month-end after allowing for receivables is about ($2,000) in October of Year 1, so the center would need a bank overdraft line or a short extension of the interest-only period in that quarter. Without the merger, the same case runs out of cash in Year 1 and ends Year 2 at ($128,423). The plan therefore treats the Bloomers room as the most exposed part of the model.
Sources
- California Child Care Resource & Referral Network, 2023 California Child Care Portfolio, Santa Clara County. Includes costs from the Women's Bureau National Database of Childcare Prices, 2019 to 2022, and lists the county's Childcare Resource and Referral contact.
- California Code of Regulations, Title 22, Division 12, Chapter 1: section 101216.3, teacher-child ratio and section 101238.2, outdoor activity space, reproduced by Justia and current to the December 2024 register. The pages could not be fetched directly and the text was read from search results, so the current regulation governs.
- Indoor space minimum of 35 square feet per child: California Senate Bill 401 analysis, 2015, which describes the existing rule. Confirm against the current Title 22.
- Child care licensing by the Department of Social Services, Community Care Licensing Division: Brightwheel California licensing guide, a third-party summary last verified in March 2026. It is not an official page, and the center confirms the current licensing body.
- California Department of Education, Universal PreKindergarten FAQ, transitional kindergarten eligibility from 2025–26.
- Bureau of Labor Statistics, Preschool teachers (median $37,120, May 2024) and Preschool and childcare center directors (median $56,270, May 2024).
- City of Sunnyvale, Minimum wage: $19.50 an hour from 1 January 2026, adjusted annually.
- California Franchise Tax Board, Business tax rates (8.84% corporation tax rate) and Limited liability company ($800 annual tax and the $6,000 fee for California income of $1,000,000 to $4,999,999).
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