Updated: Mar 19, 2020
An interesting fact about child brains is that 90% of it is already developed by the age of five! This implies that the preschool phase and the progression from birth to school, is the most important time of a kid's life. Presently, the preschool/child care market in India is growing at a CAGR of 23% which indicates a huge demand for such services. The rising need is primarily driven by the higher disposable income of parents and the expanding women participation in the workforce (also leading to dual income). Paucity of time between child and parents has also been instrumental in increasing the demand for such institutions.
Setting up a preschool is a fairly lucrative business because it requires only a one-time investment with high returns. If one opts for a franchise model, it becomes easier to break even faster since the goodwill and the brand name can be leveraged upon. Since the franchiser has already been successful in carving a name, the franchisee gains automatic visibility and students start enrolling without too much of a hassle. It is little surprise then that people prefer the franchising model since it mitigates some of the risk associated with starting a preschool from scratch. To a great extent, the costs involved in a self-owned playschool model are not very different from obtaining a franchise.
A general break-up of the costs involved in the playschool set-up would ideally include: Property Cost: Preferably an area of about 3000-5000 square feet in a well-connected and suitable location should serve the purpose. For landlords and property owners, it’s an added advantage since they don’t have to bear this cost additionally. If one looks to buy the property specifically for opening the playschool, then the cost incurred becomes the property cost. The other possibility is of renting/leasing out a property for opening the school. In this instance, the deposit and the monthly rent to be paid becomes the property cost.
Documentation expenses: The first type of expenses under documentation involves those that are needed to fulfill statutory requirements like clearances, approvals and permissions from the state governments. The second type of documentation, for a franchiser would be the costs that are incurred by way of obtaining the franchise. This cost need not be included in case of an independent set-up.
Salaries and other utility expenses: For the first couple of months, it is an outgo which needs to be borne by any entrepreneur setting up the playschool in both models. This will only start to get supplemented once the school commences its operations and reaches a break-even point. Another expense relevant for both individual entrepreneurs and franchise models would be the investment in training material, office records, files, computers, lessons and schedules.
Infrastructure cost: This category of expenses would include teaching and play equipment, stationery and furniture, interiors of classrooms, toilets, office, library, and play area. It is advisable to do an extensive research before making the purchase decision and evaluating costs so as to arrive at an effective product mix. Here’s where our team at Wonder Kid Zone can play a role in helping you identify exactly where the shoe pinches.
Apart from the aforementioned mandatory expenses, to reach a larger audience, one can capitalize on ad networks which can lead to additional yet optional marketing expenses. There might be additional overheads if one seeks professional help from consultancies or consults experts from education field. Keeping a buffer of 25% would allow the entrepreneur enough leeway to deal with any emergencies and unforeseen exigencies as and when required.