The focus for today is reverse engineering and backward planning.
Today’s topic is a continuation again in our multi-part series on marketing business from scratch. We’ve really come a long way, really come a long way.
If you look back at all the different things that we’ve tackled over the last several days, we’ve done competitive research. On the various competitors in the childcare space, and again, if you’re just tuning into this episode, we’re using opening a childcare center as an example. So, we’ve done competitive research and learned about what the competitors look at. We have built out your ideal personas. We’ve talked about naming your childcare center, building a painted picture, and a core story. In the last episode, we talked about branding, assets, logos, colors, typography, and all that good stuff.
Failure Rate
So with this one, it’s a really interesting topic because one of the things that I’ve done over the years is I’ve studied why small businesses failed. Sadly, the failure rate for small businesses is absolutely dismal.
Absolutely dismal to 90% failure rate within five years. One out of 10 businesses will not survive in five years—really, really bad. I mean that if you were to look at those numbers that probably would talk you out of starting a business in general. And then studying why these businesses have gone under and went under, either they closed or they went bankrupt.
Really were the two main reasons so not selling to someone else or anything like that was having to close or literally going bankrupt where the businesses were insolvent. There were a lot of variations among answers. And a lot of these were pretty specific like there was a certain straw that broke the camel’s back type of issue or type of situation.
However, there also were a lot of similarities. Cash flow obviously being a similarity, not having enough marketing being a similarity. Among the biggest, if not the biggest, was the lack of planning and preparation before the business was opened.
Building A New Location From Scratch
So if I were opening up a childcare center, first off, I would be planning out my marketing at a minimum, six months in advance, if not up to a year in advance. So if you think about the child care industry, in particular, there’s going to be some differences if you’re building a new location from scratch, or if you’re taking over a business, for example.
There are obviously a lot of variances, but in these examples, we’ve been talking about building a business and starting a business from scratch. So more often than not from scratch means that you’re going to lease a building that’s empty or you are going to build a brand new location.
In the example of building a new location from scratch, that obviously is going to give you a lot more runway to get all of your preparation ready to go. If you’re going to lease a building, that’s obviously going to cut the runway down. But my concern in cutting that runway down is you have to think this through strategically.
Reverse Engineering
That is why I’m such a big fan of reverse engineering. And reverse engineering is going to look at where you want to be from a financial standpoint, and a numbers standpoint, in X amount of time. When we start to reverse engineer into that over the next couple of episodes, we’re then going to talk about some of those critical elements that are going to need to get accomplished.
For example, building out a website for your new childcare center, putting up door hangers, direct mail, strategic partnerships, open house, events, and other community events, paid traffic, and setting up analytics and KPIs. So there are a lot of other things that obviously, are going to need to get done. But, and this is the most important piece to this particular episode, how can you start to figure out timelines and the tactics that need to be used if you don’t have any goals for the numbers that you want to hit.
Lack of Planning And Preparation
The other piece is that often what I have seen with childcare centers opening up new locations is that they really don’t even have any plans. Their thought is, let’s get this open, put up a sign, do an open house and we’re all of a sudden going to have 50 to 100 enrollments. Unless you are in an area in the country or the world that is in desperate need of new childcare centers.
There are some cities that do not have enough childcare centers, like parts of Tennessee or parts of Chicago, for example, that it’s not really going to happen that way. It’s not an “if you build it, they will come.”
It just does not happen that way. And far too often what I’m seeing is that these childcare centers are putting all of their money into building up a new location. Or getting this lease, then buying all of the equipment and hiring lots of amazing people when you need that stuff. But they put the cart before the horse, and they do not reverse engineer the math and build out a financial model and a plan and all of that good stuff.
Reverse Engineering
So here’s what I would do. If I were opening up a childcare center and I wanted to reverse engineer the next six months to 12 months.
Step one is I would open up a Google document or a Google Sheet and I would start to literally just write down some numbers. Now, I’m hoping that when you made the decision to embark on this journey, you did do some financial modeling, and I’m not going to go insanely in-depth on financial modeling. But the number that you want to be looking at for a childcare center is enrollment.
So if you were to look at it, let’s just keep the dates and things like that simple. Let’s say that it’s January, and you said I want to open up my center in the summer. That could mean July, which would be seven months or maybe it’s late summer, you might want to be open right before that big rush, for example. So you got to look at some of the seasonality and things like that to time stuff as well.
If I were a childcare center, I would want to make sure that I was opening up and conducting tours over the summer since one of the most popular times for childcare centers in the month of August and September, tends to be one of the highest months of enrollment and again, that varies center by center, city by city and state by state. There are a lot of variables, but you would want to try and plan backward when the ideal opening time is.
Challenges Of Building A New Location
Now the downside with building a new location is that more often than not, you’re going to get behind. It tends to be a moving target and that could be disastrous. What I would look at doing is if I surely wouldn’t want to make sure that they were telling me that they could be ready by July, and then say, “Okay, great.
So we’re going to start opening in July.” So you need to work with your builder, for example, to look at what’s the margin of error, and there are a lot of things that can go wrong in the building process.
Now, in no way am I an expert when it comes to building and all of that stuff, so you want to make sure that you have different contingencies, maybe you’re doing soft openings. But we’re trying to reverse engineer and backward plan.
The key numbers at a childcare center, our capacity, and then your target enrollment.
Again, I’m hoping that you’ve done some financial modeling and I surely can do an episode on that. But that gets a little bit outside of the scope, I guess of marketing. You should have a number in mind of this is the number that we want to open up our childcare center with. I like to use kind of a target, minimum, and mind-blower.
Target Enrollment
Let’s say again, it’s January, you want to open in seven months, which is in July and your target is to open with 50 enrollments. At the opening, you literally open the door at 50 enrollments. Now depending on your tuition, those numbers could vary, I mean, as low as $600 as high as I’ve seen as $2,000, for example.
But we’re gonna just say your target then you say well, we want to open with 50 the minimum we can afford to open with is 40—the mind blower would be 75. Our capacity is 140, for example, and then what you’re doing is you’re going to backward plan off of those numbers.
If you say our target is to open with 50, then what we’re going to do in the coming episodes is what do we have to put in place to hit those 50 enrollments? How many leads? How many tours? If you don’t have a physical location, how do you give a tour? We’ll talk through that. So how do we make sure that you can open with 50 enrollments?
Marketing Budget
The other big piece to this is how much money you need to ensure you get those 50 enrollments and that is often where there’s a very huge discrepancy.
Most of the childcare center openings that I have seen, do not have nearly as much money to invest in marketing to hit those enrollment numbers as they should. So if you’re investing a million dollars to build out a new location, for example, and let’s say that it can hold that 130 or 150 and your tuition is at least $1,000 a month.
So I mean, this is a million-dollar-plus-year childcare center. Then I’m going to push back and will tell me a little bit more about your marketing budget. If you say, “well, I got $25,000. How does that make sense that you want to open up your childcare center, with 50 enrollments at $1,000 a month, so you want to go from zero to $50,000 a month with only investing $25,000? It just doesn’t make sense.”
Sadly, most of the childcare centers that I’m seeing fall into this trap where every penny they have is going into buying books and security cameras and everything to make it an amazing center.
Factoring In The Marketing Budget
That’s important, but unless you factor in the marketing, you’re not going to hit that 50 number. So, what I need you to do is to reverse engineer that 50, whether that 50 is the number that you’re looking at executing. Whether it’s 170, the number is irrelevant. And again, this translates over to any other business.
How many customers do you need to serve in the first month, for example, to continue to start to move the needle in the right direction? Usually, those numbers are based on salaries and fixed expenses. So we need to make sure that XYZ happens.
And if you don’t back into those numbers and reverse engineer, then you have an okay great seven months out we’re 50 enrollments, but more we’re going to do in the next couple of episodes is we’re going to plan out all of those different tactics to help you back into those 50 enrollments.
Final Words
So the reverse engineering piece is the most important piece. You cannot rush the process to just magically have this center just have 50 plus enrollments and you great I’m opening up in three months. You got to plan, you have to lay the foundation for your future business.
Get out there, make a change, and take some action with my reverse engineering strategy.