COVID-19 Financial Survival Strategies: A Webinar Recap

With the environment around coronavirus changing on a daily basis, it’s a struggle to keep up with all of the information – particularly as it relates to finances. In their latest webinar, Early Childhood Investigations invited Heidi Hagel-Braid, child care financial expert and Chief Program Officer at First Children’s Finance, to give child care centers some practical and easy-to-understand guidance to increase their financial sustainability. The session then featured Joanne Hurt, Executive Director of Wonders Learning, to discuss the measures she has implemented to keep her business afloat.

Heidi kicked off her presentation by emphasizing the importance of “not putting off tomorrow what you can do today.” She said typically child care businesses have lower cash reserves and unstable cash flow, so the first thing to do is determine how much cash is on hand. This is important to figure out how many cash buffer days you have – or the number of days you can operate without any additional income. To determine how many cash buffer days you have, add up all of your cash, then divide it by the total expenses you owe.

Heidi said the average small business has around 27 days of cash on hand, but that 25 percent have fewer than 13 days of cash on hand – this second figure is more in line with what she has seen among child care businesses.

When it comes to crunching numbers, Heidi said that it’s important for child care centers to “move beyond fear,” because inaction is not an option. She advised centers and schools to monitor cash weekly or every few days if necessary, particularly if you’ve closed your program or are experiencing lower revenue due to reduced enrollment. Some actions she encouraged child care centers take include:

• Negotiate short-term relief from lenders.
• Negotiate payment schedules with vendors and suppliers.
• Shift from a “profit and loss” mindset to a “cash” mindset.
• Conserve your cash as much as possible, because “cash is king.”

Heidi also noted that there are also ways of thinking that business owners need to absolutely avoid:

• Pretending the situation will go away.
• Avoiding lenders and creditors – most are willing to work with you than you may realize.
• Promising payments you can’t deliver – it’s important to be realistic and honest.
• Borrowing money at high interest rates or from disreputable sources; avoid payday lenders or predatory financing terms – and read the fine print.

Heidi then focused on centers that are open with reduced enrollment. She offered a list of key considerations to think about, including:

• Ability to meet ratios with staff.
• Ability to ensure a healthy/safe environment.
• Ability to secure food for meals.
• Ability to access cleaning and sanitation supplies.

From a financial point of view, Heidi recommended centers project how much income is required to meet financial obligations. That includes accounting for the increased number of private pay families who are now unable to pay due to furloughs and loss of employment. She also offered ideas around creative ways to generate income, including:

• Marketing directly to essential worker populations.
• Providing extended hours of care, part-time enrollment or drop-in care (contact your licensing agency in your county or state for guidance).

For centers that are closed, Heidi said, “It’s important to keep in mind that program closure does not mean business closure – you still have work to do.” She emphasized the need to make sure employees are aware of unemployment and health care coverage options.

With regard to expenses, Heidi recommended prioritizing all expenses – typically rent/mortgage will be No. 1 on the list. She advised businesses to negotiate terms of any overdue expenses and to not be afraid to talk directly with lenders, creditors and vendors. “We’re all going through this health crisis, and chances are, these companies will be understanding,” she notes. She also said to carefully consider taking on new debt, and that you need to ask yourself whether you can afford additional debt in the future: “You need to project future cash flow to make sure you can pay back any debt you take on.”

Finally, Heidi gave some helpful tips and considerations on reopening:

• As soon as possible, start estimating the operating capital you’ll need to restart your program.
• Families re-enroll in waves; don’t expect 100 percent enrollment when your doors open.
• Think about your staff-to-enrollment levels, particularly given enrollment will likely be staggered.
• If you have closed, you should approach your reopening as you would if you were starting as a brand-new business.
• It will be a journey back to financial sustainability (if the 2008 recession is any indication, it could take between 18 months to three years); continue to project cash flow as often as is helpful for your decision-making.

She closed her presentation by highlighting that profitability does not mean you value money over children, but it does mean “you have enough resources to make sure everyone is taken care of.”

The webinar then shifted to Joanne of Wonders Learning, who provided a quick snapshot of her experience during COVID-19. As a nonprofit that provides early learning and extended day services, Wonders has been one of the many child care centers that has struggled in this new environment. She indicated they closed their doors March 16, and two weeks after that, had to furlough their employees. She said it was the hardest decision of her career, but that furloughing was her way of making sure these employees know she wants them back when the pandemic is past us. Joanne emphasized that while she doesn’t know the future, she does know that how she treats her employees now will have a big impact on her center’s ability to recover.

Given the importance of having cash on hand, Joanne indicated she has been doing everything she can to preserve her resources. While she hasn’t heard back on her Payroll Protection Program (PPP) loan or Emergency Injury Disaster Loan (EIDL) funding (and she most likely won’t unless the funding is replenished), she did receive the $10,000 grant available via the EIDL. Her organization also has a reserve fund, but she is doing what she can to save that money for any expenses she’ll need to reopen.

Before the webinar ended, both Heidi and Joanne made it clear that it’s important for child care businesses to advocate for what they need among their policymakers. They mentioned many organizations, like Child Care Aware of America, have created resources to help your voice be heard, and encouraged providers to get involved.

Click here to view the webinar.