The importance of proper budgeting for anticipated expenses in the construction and development of a new child care facility cannot be overemphasized. Developing a comprehensive and detailed budget is one of the first steps toward ensuring the smooth progression of your project.
Attached are both a sample construction budget and a sample development budget for a typical large urban child care center. The construction budget details out-of-pocket expenses involved in actually building a new facility, while the development budget details all of the expenses that are involved with preparing the land for development (e.g., acquisition and preparation, utility installation, legal fees, architectural/engineering fees, financing fees).
CONSTRUCTION BUDGET
Actual construction costs vary widely across the country, and the budget for any one specific project would be more detailed than shown in the attached sample construction budget. Nevertheless, this budget covers major line items. Costs are given in both actual dollar amounts and per square foot. The per-square-foot amount enables you to calculate roughly what your costs would be for a somewhat larger or smaller facility.
In calculating the construction budget, you must enter the total square footage of the facility, as well as the contractor’s overhead and fees (which are usually indicated as a percentage of a total budget). Those line items vary from deal to deal, depending on the strength of the contractor and the local construction market, as well as the relationship of the child care center with the general contractor.
It is also important that you include a contingency line item. Cost overruns and design changes after a project has begun are typical in the construction of any facility. Failure to anticipate those contingent amounts can lead to a shortage of financing and unnecessary project delays, not to mention mounting frustration. Allocating anywhere from 5 to 10 percent is typical – the higher the better.
Note that this sample construction budget is for the construction of a new facility. The rehabilitation or conversion of an existing facility often requires a budget that is unique to the building being renovated.
DEVELOPMENT BUDGET
It is important to remember that development of a child care facility entails much more than construction. Development includes land acquisition and grounds-related work (e.g., signs, fencing, playgrounds), as well as a host of other expenses. It is these types of expenses that are addressed in the sample development budget, attached. In other words, the total construction budget is merely a line item within the development budget. In our example, the development budget assumes land acquisition costs of $75,000. That cost can be far higher in some cities.
In addition to these costs, a child care center should include in its development budget all "soft costs" associated with the facility. These include such expenses as tap fees, architectural, engineering, environmental, legal and loan costs. Soft costs, including loan costs, may often constitute 10 percent or more of the total budget.
ADDITIONAL EXPENSES
Unfortunately, facility development expenses do
not end there. A center may require moving expenses from an old
center, as well as new equipment and materials. It is also important
to carefully budget anticipated revenues for the early months of
operation in a new center. Often, center expenses will exceed
revenues until most of the center’s slots are filled. Those losses
will need to be covered by an appropriate amount of working capital.
Our sample budget does not include numbers for these miscellaneous
expenses, since they vary widely from center to center.
