Child care center profitability and payback
Illustrative case · Private preschool for ages 3–5: four rooms, assumed licensed capacity of 48; no infant care · California, United States · illustrative private preschool under a Title 22 staffing assumption
Explore this business · Profitability and payback
The base case produces $647,900 in first-year sales and $24,121 in EBITDA after the paid owner allowance. Year 1 cash changes by −$12,720 after working capital and scheduled debt. First-year EBITDA is positive in this case, but it is not spendable owner cash. Debt principal and working-capital investment still have to be funded; the closing-cash rows show their effect.
Build sales from the operating unit
Sales equal enrolled children multiplied by the assumed monthly tuition. Enrollment is rounded down to whole children after the ramp and scenario factors. The case assumes those places are paying for the full month; it does not model daily drop-ins, different schedules, sibling discounts or subsidized reimbursement timing.
Track signed start dates and age groups rather than one undifferentiated waiting list. A family asking about next year is not current paying enrollment. Likewise, a child whose schedule requires a separate staffing arrangement cannot always be added at the same incremental cost.
| Input | Case assumption |
|---|---|
| Assumed approved places; must be verified for an actual site | 48 |
| Children per qualified teacher in the selected staffing route | 12 |
| Open hours per classroom / week | 50.0 |
| Additional qualified float/relief hours / week | 40.0 |
| Mature share of licensed places requested | 92.0% |
| Monthly full-time tuition assumption | $1,550 |
| Food cost per enrolled child-month | $110 |
| Other supplies per enrolled child-month | $35 |
| Payment processing / sales | 3.0% |
| Input | Assumption |
|---|---|
| Average collection days | 3.0 |
| Material inventory days | 14.0 |
| Opening demand / mature neutral-month demand | 60.0% |
| Months to complete the demand ramp | 12 |
From revenue to operating profit
Food, supplies and payment fees vary with enrollment. Qualified classroom-teacher hours rise in whole groups, with a standing float/relief allowance and a separately paid director. The director is not used to fill classroom ratios in the forecast. Premises and administrative costs remain payable across all enrollment levels.
This produces more than one local break-even interval. The first positive enrollment point is not a guarantee that every larger enrollment is profitable: the next teacher step can push monthly cash below zero again. The staffing-step table is therefore more useful than one headline break-even number.
| Cost | Monthly amount |
|---|---|
| Primary employee compensation, loaded | $29,302 |
| Support compensation, loaded | $0 |
| Owner compensation, loaded | $6,670 |
| Premises rent | $8,000 |
| Utilities | $1,100 |
| Insurance | $1,200 |
| Software and subscriptions | $400 |
| Marketing | $600 |
| Cleaning | $700 |
| Routine maintenance | $500 |
| Other operating allowance | $400 |
| Mature monthly fixed operating cost | $48,872 |
| Metric | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Sales | $647,900 | $818,400 | $818,400 |
| Variable operating costs | $80,047 | $101,112 | $101,112 |
| Paid roster and fixed overhead | $543,732 | $586,464 | $586,464 |
| EBITDA, after owner compensation | $24,121 | $130,824 | $130,824 |
| Profit after depreciation and interest | −$13,599 | $94,453 | $95,943 |
| Increase in inventory and receivables | $3,539 | $0 | $0 |
| Principal + interest | $33,302 | $33,302 | $33,302 |
| Cash change after debt | −$12,720 | $97,522 | $97,522 |
| Closing cash | $97,280 | $194,802 | $292,324 |
EBITDA excludes depreciation, interest and income taxes. Profit before tax includes depreciation and interest; it excludes debt principal. Cash also reflects inventory, receivables and principal repayments. The model assumes no supplier credit or customer deposits.
What happens when demand changes
The lower and higher cases vary whole-child enrollment and respect licensed capacity. They recalculate classroom staffing at every monthly enrollment level. The lower case can sometimes save an entire classroom roster, so its margin does not move in a straight line with sales. The table reports the actual cash result rather than assuming a fixed profit percentage.
The lower case uses 80.0% of base demand and the higher case 115.0%. These are sensitivity cases, not probability estimates. A negative cash balance is an unfunded requirement and would require intervention; the model does not assume access to an overdraft.
| Case | Year 1 sales | Year 1 EBITDA | Year 1 closing cash | 60-month minimum cash |
|---|---|---|---|---|
| Lower demand | $514,600 | −$37,769 | $36,933 | $35,270 |
| Base demand | $647,900 | $24,121 | $97,280 | $79,145 |
| Higher demand | $740,900 | $87,317 | $159,791 | $101,659 |
When the opening investment is recovered
The first modeled recovery of opening project funding occurs in month 42. This is project recovery before financing, not an equity distribution schedule.
The recovery horizon includes the premises investment and enrollment ramp, with no assumed sale of the business or recovery of fit-out from the landlord. It is before income taxes and major replacement spending. A profitable mature enrollment level does not make a licensing delay harmless; the opening cash commitment still comes first.
Owner pay and remaining business cash
The owner-director’s monthly compensation is already included. It pays for management and the director role assumed here, not for an extra full-time classroom position. If the director also teaches, the timetable and applicable rules must establish when that person can actually count toward supervision; do not count the same hour twice.
Owner base compensation is $5,800 per month; the budget also includes the employer-burden allowance. Additional owner distributions are zero. The mature monthly cash surplus after scheduled debt, before taxes and incremental working capital, is $8,127. This mature point is different from the opening-year result.
Read the result before adopting the forecast
The base first-year operating result (EBITDA) is $24,121. The lowest modeled cash balance is $79,145, compared with the opening reserve of $110,000. The difference, $30,854.58, shows reserve consumed by the lowest point in the modeled horizon; it is not an additional equipment expense or a loan repayment estimate.
Compare the retained-childcare scope with a building requiring new approvals and outdoor works. Delay and additional compliant staffing can consume the opening reserve before enrollment starts.
Owner compensation is included. The same opening funding applies across the published demand scenarios. A higher installed procurement cost needs more funding or less opening cash and a rerun of the forecast. Compare the monthly cash exhibit and scenario period rather than inferring opening-year affordability from a mature-month margin.
See the opening cash trough
View the monthly cash figures
| Month | Lower demand | Base | Higher demand |
|---|---|---|---|
| 1 | $99,493 | $99,324 | $104,072 |
| 2 | $89,770 | $91,477 | $101,659 |
| 3 | $81,406 | $85,159 | $101,963 |
| 4 | $74,401 | $81,387 | $103,797 |
| 5 | $63,837 | $79,145 | $102,071 |
| 6 | $54,802 | $79,449 | $103,063 |
| 7 | $47,126 | $82,470 | $106,772 |
| 8 | $41,996 | $80,916 | $113,197 |
| 9 | $38,396 | $81,908 | $122,340 |
| 10 | $36,154 | $84,429 | $133,012 |
| 11 | $35,270 | $89,496 | $146,231 |
| 12 | $36,933 | $97,280 | $159,791 |
Sources and scope
- Operating-case methodology · Checked 2026-10-01 · Authored illustrative assumptions and a 60-month model. Budget allowances, prices charged, demand, payroll, rent and financing are not observed local averages.
- BLS — childcare workers · Checked 2026-10-01 · May 2025 national employee wage benchmark. US occupational median, not a California qualified-preschool-teacher rate. The case assumes a higher hourly rate and separately includes relief coverage and owner/director compensation.