About seven years ago I was a partner in a business that managed five daycare centers. It was an excellent learning experience, but one lesson continues to rise above the rest:
The concept of “break points” in enrollment.
Daycares have very strict rules regarding student-teacher ratios by age. For example, for five year olds students, the ratio is 1:8. Practically speaking this means there can only be eight students in the care of one teacher. Financially speaking this means that enrolling eight five year olds is very profitable for daycares because they have maximized their income opportunity for the hour of paying the teacher.
And this leads to the concept of a “break point”.
If enrolling eight students in a day care is optimal, enrolling nine students destroys profitability because the daycare center will have to open an additional classroom and hire an additional teacher for just ONE student.
It simply doesn’t make sense for a daycare center to add that additional expense for just one student. So they manage their risk by closing enrollment until their waiting list builds to 5 or 6 names before committing to open another classroom and hire another teacher.
The lesson of the “breakpoint” caused me to look at my “always enrolling” philosophy at the studio a little closer. I found that although our enrollment was “bigger than ever” our bottom line wasn’t reflecting that growth. Digging a little deeper, I found we were running several classes with a small number of students that would’ve been better served to be combined into fewer, but more fully utilized, classes.
Have you ever felt like you were working harder, serving more students, yet making less profit? If so, now might be a good time to take a closer look at your enrollment distribution as you start planning classes for next year. Just remember the lesson I learned from my time in daycare management: Be careful about crossing breakpoints. Fewer, fuller classes is better for the bottom line.
