Scale and Sustainability for the ECE Industry:

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Scale and Sustainability for the ECE
Industry An Overview of Shared Services Louise
Stoney, Alliance for Early Childhood
Finance Smart Starts National Technical
Assistance Center Annual Conference May 6, 2009
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High-Quality ECE is an Investment with Real
Economic Returns
BENEFIT
COST
Dollars
Age
21
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Increased Focus on Quality, Accountability,
Results

• Higher Standards
• More accountability
• More complexity in service delivery and
  reporting
• Increased costs
• Achieving good results for kids isnt easy!

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Market Challenges

• Lack of effective demand from consumers for high
  quality services.
• Low profitability due to high labor
• expenses required by high staff/child ratios.
• No economies of scale in an industry composed of
  very small businesses.
• Insufficient product differentiation makes it
  difficult for consumers to obtain information on
  the quality of early care and education services.

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ECE is an Economically Fragile Industry

• Tuition is often the primary source of revenue
• Third-party funding is limited and often requires
  unwieldy accounting and reporting. 
• Revenues from all sources combined --
  frequently fail to cover costs
• Add the shrinking, recession economy and you have
  the makings of a perfect storm!

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The Answer Is Not Just Money Its a Paradigm
Shift

• Forge new alliances within the industry to
  gain economies of scale but keep the benefits
  of small sites
• Understand respond to consumers
• Build an infrastructure to maximize
  public/private investments in ECE
• Use private sector strategically (as venture
  capital to fuel change)

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Bottom-Line Issues for ECE Businesses

• Ensure full enrollment every day, in every
  classroom
• Collect tuition fees in full and on-time
• Maintain high quality services (comply with
  standards plus have fees or 3rd party revenue to
  cover cost)

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A Potential ECE Network
Administrative Services payroll, billing, fee
collection, etc.
Happy Acres Day Care
Research and Development
Tender Tots Pre-School
Green Hills Child Care Center
Network Hub (Shared Staff)
Employee Benefits health, retirement, UI, etc.
Shared Staff health, MH, SS, family support, etc.
The Newberry After School Program
Annies Nursery School
Marys Family Child Care Home
Wage Subsidies / Employment Tax Credits
Staff Recruitment Screening
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A Potential ECE Network
Happy Acres Day Care
Payroll, billing, fee collection, etc.
Tender Tots Pre-School
Green Hills Child Care Center
Shared Staff health, MH, SS, family support, etc.
Research Development
Network Hub
Employee Benefits Wage Subsidies / Employment
Tax Credits Staff Recruitment Screening
The Newberry After School Program
Pre-K Class at Lakewood Elementary
Marys Family Child Care Home
Annies Nursery School
Briarwood CCRR
QRIS Support
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New Business Models Administrative Structures

• ECE Program Alliance Independent ECE businesses
  contract with common administrative agency
  (Chattanooga, TN Columbus, OH Colorado ELAs)
• ECE Consortium Group of providers merge into
  single non-profit (Seattle, WA)
• ECE Provider Trust Group of providers form
  Trust, which contracts with administrative agency
  (Fairfax, VA)
• ECE Cooperative Jointly owned entity

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Potential Shared Costs Services

• Quality Support (QRIS, curriculum, child
  assessments, etc.)
• Management/Administration
• (e.g. team of directors/supervisors)
• Fiscal (Billing and Fee Collection
• Marketing
• Fundraising
• Human Resources Staffing
• Health/Mental Health/Family Support
• Food Services
• Purchasing goods services

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New Tools Expanded use of Information/Technology

• Fiscal and management tasks
• Better data collection to guide
  marketing/enrollment
• More effective on-line training, available 24-7
• Easy-to-adapt templates for brochures, flyers,
  newsletters and other communication
• More effective and up-to-date websites
• More effective communication with current
  prospective families, funders and others

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Reinventing the Industry New Approaches to
Staffing Budgeting
A Shared Service approach offers the opportunity
to re-think staffing and supervision, job
descriptions, roles, responsibilities,
etc. In ECE, staffing patterns have a
profound impact on the budget.
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Budget for Small Alliance Center 20 Full-Time
Children
Expenses
Revenues
Revenues for this center increased by 20,000 in
the first year, due to improved fiscal management
and full enrollment. Thus, a total of 62,000 is
now available to support shared administration
and/or to invest in quality improvements in the
center.
Savings to Center 42,000
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Staffing Changes in Small Center 20 Full-Time
Children
Director spends remaining 75 of time at central
office, on administrative tasks supporting ALL
sites in the Alliance, including this one.
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Budget for Larger Alliance Center 65 Full-Time
Children
Expenses
Revenues
Revenues for this center increased by 35,000 in
the first year, due to improved fiscal management
and full enrollment. Thus, a total of 153,000
is now available to support shared administration
and/or to invest in quality improvements in the
center.
Savings to Center 118,000
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Staffing Changes in Larger Center 65 Full-Time
Children
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Home-Based AllianceRevenues Provider Perspective

• Enrollment More likely to be full because
  Alliance central office recruits families
• Fee Collection Providers can count on a monthly
  check from the Alliance. The central office takes
  responsibility for collecting fees from parents
  and third party funders.
• Quality Alliance helps to improve quality
  (which helps increase access to new revenue
  sources.)

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ECE Home-Based Alliance Central Administration
Perspective (120 Providers, 400 Full-Time Slots)
Revenues
Expenses
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ECE Home-Based Alliance Staffing
120 Providers with 400 Full-Time Slots
10 Providers with 40-50 Full-Time Slots
Start-up budget for an alliance this size is
230,000
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Benefits of Shared Services

• Stronger Team of Professionals
• Better Cash Flow and Fiscal Stability
• Stronger Fundraising
• Better Working Conditions
• for Staff
• Better Quality Services

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Shared Services can Help Address Market Challenges

• Lack of demand for quality services
• (SS offers new/stronger focus on target
  markets.)
• Low profitability(SS offers opportunities to
  share staff overhead costs)
• No economies of scale(SS offers many new
  opportunities for scale)
• Insufficient product differentiation
• (SS is a branding opportunity)

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Growing Philanthropic Engagement
Annie E. Casey FoundationDavid and Laura Merage
FoundationWilliam Penn FoundationKellogg
FoundationMiriam and Peter Haas FundUnited Way
Agencies in CO, IA, NH, OH, TN, WA,Community
Development Agencies .and many others
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Potential Support from Policy Makers

• Alliances can be a win-win for State and City ECE
  Administrators. Several Alliances have tapped
  public funds, including
• Child Care and Development Block Grant and
• Head Start/Early Head Start
• PreK
• .and other sources
• The new Stimulus Funding is another opportunity

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Join the Movement for Change
Throughout Americas history, there have been
some years that simply rolled into the next
without much notice or fanfare. Then there are
the years that come along once in a generation
the kind that mark a clean break from a troubled
past, and set a new course for our nation. This
is one of those years.

President Barack Obama
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For More Information
www.earlylearningventures.org Check out the
Videos And the Shared Services Toolkit www.earlyc
hildhoodfinance.org