By ANGUS LOTEN
"Take Two" is an ongoing series about first-time business owners over 50.
A lot of retirees go back to school. Bill Clark and his wife, Gayla, went one step further: They built a school from the ground up.
After watching their grandchildren flourish in an early education program, the Rochester, N.Y., couple decided a preschool was an ideal post-retirement venture a project with purpose, and one that would provide a boost in income for a "second" retirement down the road. "I guess I wasn't ready to retire," says Clark, 65, a former mechanical contractor with no previous experience in education.
Even in the risky world of new businesses and late-life career changes, starting a for-profit preschool is considered fairly daunting. The industry is highly regulated, with an ever-shifting landscape of state laws and licensing issues. It's competitive, with the most successful schools offering classrooms with advanced media technology for the kids and high-tech security for the parents, and the promise of a top-quality education. Early childhood educational trends change rapidly, and the customer base can be particularly demanding -- children and parents alike. For these reasons and more, nearly one in five child-care centers were in financial trouble, according to a survey by First Children's Finance, a Minnesota-based research group.
Name: Bill Clark
Former Job: Mechanical Contractor
Location: Rochester, N.Y.
Years of Experience: 35
New Job: Owner, Primrose School
Location: Birmingham, Ala.
Years of Experience: 1
Still, there are compelling reasons to consider it. Despite the recession, the preschool market has grown at a steady pace over the past decade, as the share of working mothers in the labor force has risen sharply, according to U.S. Census figures. Last year, revenue in the child day-care services sector nationwide rose 4% to $33.6 billion from $32.3 billion, with 120,000 licensed centers and over 1.5 million jobs.
The Clarks initially had their eye on a school in Atlanta, Georgia, where they had moved after retiring to be closer to family. "Our daughter lived in Atlanta and her children were in a Primrose school," says Clark, referring to the Atlanta-based chain of 200 early-learning preschools across the country. Impressed with their grandchildren's experience, Clark applied for a franchise from Primrose, launching a months-long training regime in preschool administration and business management.
The biggest mistake new preschool owners make is underestimating costs, says Nancy Ware, the president of EduKids Inc., a New York State-based chain of a dozen preschools. "What people are looking for is a high-quality education in a great facility," she says. "That isn't cheap." One reason costs are rising, Ware says, is that demand has shifted from simple custodial day-care services to advanced early childhood education, increasing the need for higher-priced certified teachers to keep parents and their children coming through the doors. Including ongoing training and professional development expenses, Ware says staffing accounts for upwards of 65% of her annual budget, a share that's likely to continue growing in the years ahead. Running a preschool can cost anywhere from $4,000 to $10,000 per child, market figures show.
Growing competition only adds to that pressure. "As with any business, new preschool owners find themselves competing against large and established chains," says Peter De Beer, executive director of International Preschool Curriculum, a Florida-based trade group. These resource-rich businesses are constantly raising expectations from parents, creating spiraling costs, De Beer says, citing a need to offer the "newest and largest facility with biometric fingerprint door entry for parents, CCTV cameras and state-of-the-art play equipment."
Tapping $600,000 in cash from his retirement savings, Clark secured a $2.5 million loan from CIT just months before the small-business financing firm filed for bankruptcy, though it ultimately honored the loan. "It was a big risk. You've got to worry about how well the school is going to do," says Clark. Though he and his wife requested a location in Atlanta, Georgia, another Primrose franchisee's funding for a new school in Birmingham, Alabama, fell through at the height of the financial crisis in 2008. With another daughter and her family in the city, the Clarks agreed to the new location.
What followed was a two-year process of more training, screening prospective teachers and keeping up with regulatory compliance. Last year, the couple opened their doors to seven children attending their first day of school despite a state restriction on preschool advertising before opening day ("Absolutely a challenge," Clark says of the regulation). Fourteen more children are signed up for this summer, he says, and they're now on track for more than 20% growth in enrollment for September.
"We're just about at the break-even point and expect to be profitable after 10 months," Clark says. And despite the heated competition and the looming risk to their retirement savings, Clark says he now has only one metric for success: "The education and growth of our kids."