QUESTION ON Attracting Investors for a Daycare Business
I would like to know how to find investors, sponsors and donations for a daycare, which will only be open Saturday and Sunday from 2pm to 12am. This daycare will be for the second shift parents that work and will accept only children under 10 years old. What are the chances that a business like these can attract investors? –
– Charlene
ANSWER
Dear Charlene,
It sounds to me like you will have difficulty attracting traditional investors. A daycare is simply not a business that typically attracts formal investors. Venture capitalists do not invest in a daycare business, and you may also be hard pressed to find angel investors willing and interested to fund your business — unless you have a compelling twist to the traditional business model of daycare.
Before making an investment most investors carefully examine their bottom line profits. Venture capitalists, for example, typically look for an average of 30-40% return per year by the time they cash out from the venture. It sounds to me like a business that will only be open two days a week will not net enough to cover it’s expenses, much less provide the investors with the kind of returns they are looking for.
Read the articles Funding Your Home Business – What Investors Want and Why Investors Say “No”
That said, (if you are serious you will need to prove it) I would begin by creating a business plan. If you are really intent on pursuing investors, they will require a formal business plan with solid financial projections.
But if you will not pursue investors, then you can put together an informal business plan to help you determine your target market who would use the service, how you will reach them and the price they would be willing to pay (this is your revenue section). Then you need to find out what it will cost to pay rent, staff, liability insurance and other expenses or start-up costs such as toys, etc.). If you see that you will not be profitable (and still want to pursue the dream) you may want to consider applying for a small business loan or contacting local churches, synagogues or YMCA’s for help.
The best approach, however, is to start the business only when you have saved enough money as capital. With the current economy, it is not easy to get business loans from banks; more so for a daycare business. One option that you can try is to raise funds via crowd funding sites. Read our article Using Crowd Funding Sites to Raise Money for Your Small Business.
Hope this helps. Good luck!
Lisa Segal (With revisions by Isabel Isidro)
Recommended Resources on How To Attract Investors
- Attracting Investors: A Marketing Approach to Finding Funds for Your Business
- Attracting Equity Investors: Positioning, Preparing, and Presenting the Business Plan (Entrepreneurship & the Management of Growing Enterprises)
- Raising Venture Capital for the Serious Entrepreneur
- Attracting Capital From Angels: How Their Money – and Their Experience – Can Help You Build a Successful Company
Article originally published in March 2001. Updated April 11, 2012
