Expanding your family child care business may sound like a good idea: you will earn more money and be able to accommodate more families.
But, before you take this step you should take into consideration some additional consequences:
Each state has its own child care licensing rules that govern how many children you can be in your care. Check your state regulations to learn about possible additional requirements: more training classes, more indoor and outdoor equipment, more space that needs to meet licensing requirements, and additional staff.
Often the biggest change when expanding your business is the hiring of an assistant. This may be required under your state’s law or something you want to do on your own. As I’ve written about before (“Are Helpers Your Employees or Independent Contractors?”), anyone who is helping you care for children should be considered your employee, not an independent contractor.
This means you will pay Social Security/Medicare taxes, federal and state unemployment taxes and perhaps have to purchase workers compensation insurance.
Let’s look closely at these costs:
If you paid an employee the federal minimum wage ($7.25 an hour) for 40 hours a week this equals $290 a week. Your share of Social Security/Medicare taxes are 7.65% and federal unemployment is .06% for a total of 7.71%. State unemployment taxes vary a lot as does the cost of workers compensation insurance. We’ll use an estimate of 3% state unemployment tax and $20 a week for workers compensation. Total weekly cost to you: $341 (7.71% + 3% + $20).
If you cared for two full-time additional children you would need to charge $171 a week to cover these costs. If you cared for three children you would need to charge each $114.
In addition, you are likely to have higher food costs and perhaps pay for some additional supplies or training for your employee.
Therefore – if you pay minimum wage for a full-time assistant you will probably need the income of between two and three additional full-time children to break even financially. Run these numbers for your own situation.
This is often the biggest surprise providers discover when hiring an assistant. A few providers have told me that their assistant makes more money per hour than they do! Some providers have dropped their assistant and no longer offer group care because of this and because of the inability to keep their enrollment up.
Deciding to expand your business to a group home is not all about money. There are the non-financial benefits of having another adult to be with you and the children all day. This can relieve some of the stress for you. Having another adult can also help increase the quality of your care, although this can be offset somewhat with the increased number of children. Your decision to expand your business should always be based on your plan to increase the quality of your care.
In addition, you should check with your local zoning laws and homeowners association bylaws to see if there are any restrictions to hiring an employee in your home.
It’s up to you to decide whether to take the step to expand your business or not. You can make a smarter decision if you know what you are getting into.
What has your experience been in expanding to a group home?
Tom Copeland – www.tomcopelandblog.com
Image credit: www.mtdemocrat.com
For more information about the financial consequences of hiring employees, see my book Family Child Care Money Management and Retirement Guide.