Question

Read and respond to the case study below.

Sophia began her small family child care business (licensed for up to 8 children) in 2004. Her business is located in a lower to middle-class, diverse neighborhood in San Francisco. Soon after Sophia opened her program she reached full capacity and after several months she began a waiting list. By 2007, she was averaging three calls per month for child care spaces that she didn't have available.

Sophia began to think about expanding because the demand for her child care services was clear, and because she knew that many of the low-income families were able to use state subsidies in the form of parent vouchers in order to pay for such services. Also, since Sophia already had a part-time teacher working for her she knew that by expanding she could promote that teacher to a full-time position and open up a new part-time position in her program.

Most of all, Sophia enjoyed the personal satisfaction of knowing that she helped mold the children in her care and that she helped their parents create a good life for their kids. As a professional, this is her highest reward, and she believed that through expanding her program, she would be able to succeed in helping even more children and families in the community.

What is the ultimate objective of the expansion?

Is there a clear market demand for the additional services?

What materials and equipment are needed to make the expansion a success?

What new costs or increased costs will the operating budget require? For example, how will staff salaries change, what additional food expenses will result, and what extra services might she offer for her new families?

How will she market her expanded services?

How should she finance the project in order to pay for the expansion costs?

After answering these questions, Sophia has decided to update her business plan and seek funding for the expansion. She has carefully calculated how much extra income the addition of 6 children would contribute to her program and compared that to her estimates of operating, construction, contingency, and staff expenses. Based on this information, Sophia knew the expansion would be cost-effective.

Sophia estimated that the entire project would run about $10,000. She used the following methods to finance this project:

Since she had bought her home, she was able to take out an equity line of credit that provided half of the money needed to meet the construction costs. When she was at full capacity, she would repay the line of credit, while still keeping it available for the other uses. This meant that she had $5,000 available.

She had $400 available in business savings.

She applied for a grant through the Low Income Investment Fund's Child Care Facilities Fund (CCFF) for the remaining $4600. After reviewing her grant request and income tax statements, interviewing her and visiting her program, CCFF approved her request, which enabled her to move forward with the project.

Do you think Sophia made the best choice in funding her expansion? What would you do differently? What other resources are available to Sophia?

Answer 1

#. The ultimate objective of the expansion is to provide her child care facility to more number of parents as she was having a waiting list of average 3 calls per month .

#. Yes, there a clear market demand for the additional services because she is getting average of three calls per months for which she was not able to provide her services due to space issues.

#. The materials and equipment needed include all the materials which are required in a child day care like furnitures, study materials ,toys , food , first aid etc

#. Ofcourse , there will be a change in the cost( increase ) as she is expanding her buisness so she would require more materials , more staffs , more money , more salary etc to provide her child care facility .