Recommendation

FROM: Marco Chui, Chase Garner, Myriam Ide, Brian Oh, Chloe Palmer, and Komal Rajani

DATE: December 2, 2015

SUBJECT: Volunteers of America Day-Care Consultation

Alta Vista Gardens Day-Care Purpose and Mission Objectives

The Volunteers of America day-care center in Alta Vista Gardens will serve as a quality day-care center with affordable rates while being self-sustainable and autonomous. Uncertainties include costs of hiring high-quality educators and administrative staff, and the main challenge is satisfying current clients while keeping costs affordable. Government subsidies and donations are two solutions to cover expenses without raising prices. Due to Volunteers of America being a non-profit organization, tax reliefs and other benefits can cover more costs. The daycare is also able to avoid rent and interest expenses, but can also eliminate advertising and printing expenses with free advertising through word-of-mouth by showing excellent care services. The break-even number of students without the administrative fee is equal to or less than the amount of students currently enrolled in each respective month. However, the fee is fourteen percent of the total revenue, thus it is not consistent with VoA’s non-profit, community service mission. If the center were to open with Mr. Schaefer’s current terms, it will succeed in the long-run due to a higher return on investment with more students enrolled. However, with cost minimization, state subsidies, and tax relief, the center will be able to achieve success early on even with the administrative fee applied. With success, the center will raise its credibility, attract new clients, and rebuild Alta Vista’s reputation.

Benefits of the Program Offered at Volunteers of America, Alta Vista

Providing child care and employment opportunities for the residents of Alta Vista would be the largest benefit of adding the VOA day care to the community. Low income families face a lot of hardships and the daycare would be eliminating one of these hardships, especially since most of the individuals on the welfare program are required to obtain jobs and are in great need of child care while at work. Acquiring decent and reliable child care is difficult and the Alta Vista day-care center would be providing just that for this community. Taking time to provide great child care and spreading the word of how great it is can attract more families to the city of Alta Vista. This, in turn, can generate a more viable reputation than the one the city currently holds and possibly create an all around better community in general. Also an increase in financial support for the children and the VOA. The day care program would not only provide a place for parents to keep their children safe while they are at work, but it would also be a place for positive development for the children. This would include: activities to obtain a positive self concept, learn social skills, encourage language and cognitive development, promote an appreciation for the creative arts, indoor and outdoor activities, physical development, art, music, and dramatic play. Another benefit of this program is that it will also be open to individuals that are not residents of the Alta Vista community. This is an opportunity to gain more revenue by non-residents being charged a price that is not discounted as it is for the Alta Vista community residents.

Challenges of the Alta Vista Day-Care Project

One of the challenges of this project will be raising awareness of the VOA and in turn, increasing financial support for the program. The organization does not currently have many programs that support the youth in the community. If the proper awareness is not raised about the organization, financial support will be minimal. Also, the provided facility has the capacity to serve a maximum of thirty-seven children. However, there is a great need in the community for child care services. Mr. Schaefer will have to develop a strategy for selection or a method to handle the increasing demand for the services. An uncertainty is whether or not the development of this project will actually increase financial support or not. It is a possibility, but it is not guaranteed. The grant from the national organization of VOA is not guaranteed either.

CVP Analysis and Results

The first three months incurred a loss due to the administrative fee. As they were able to fill the daycare to capacity, they were able to return a profit in the final month. The more students that there are, the higher that they will be able to earn. In the first month, the day care had a net loss of $463 with the administrative fee. The second month had a net loss $698, and in the third month there was a net loss of $530. Finally, even with the administrative fee, the last month incurred a profit of $111. However, if the administrative fees were not put in place, then the daycare would return a profit for all four months. The first month would have a profit of $222.15. The second month would return a profit of $231.68, and the third month would have a profit of $238. Lastly, the fourth month would return a profit of $243.89.

With administrative fee, the break-even number of students for the first month is 23 whereas the number of students currently enrolled is 20. For the second and third month, the break-even number of students are 29 and 33 respectively, while the current number of students enrolled are 25 and 30. The number of students to break even for these three months is higher than the actual number of students enrolled, which explains the loss incurred for these periods. For the fourth month, the number of students to break-even is equal to the number of students currently enrolled, so there is a profit for this month. Without the administrative fee, the number of students needed to break even are 20, 25, 28, 32 for the four months, respectively. Therefore, the number of students to break even are all equal or less than the number of students enrolled, which explains why without the administrative fee, there is a profit recognized for all four months.

Conclusion and Recommendations

After looking at the results, we found that there a few things that Mr. Schaefer could do differently to increase returns. To start, Mr. Schaefer can withhold administrative fees for the first three months. Then, once he is able to see that the daycare center is able to realize a large margin on returns, he may then apply the administrative fee. This would be beneficial to the daycare center because it would give off a better reputation to the clients giving them an impression of a successful company. Another recommendation that would be beneficial to the daycare center would be to include a one time enrollment fee of $25 for each student. This is a reasonable rate that will allow the daycare to cover as many costs as possible. It also makes sense to charge an enrollment fee because most daycare centers do require these fees as well. Also, the daycare will receive $80 to $85 a week per student enrolled, this would allow the daycare to charge clients at an affordable rate without raising prices due to rising costs. Finally, Mr. Schaefer should not consider the administrative fee in the short-term because it will turn net losses; thus, he should omit the administrative fee for the first three months to show clients and the VoA that the daycare center is capable of being self-sustaining. Mr. Schaefer may then start charging the administrative fee once the daycare is able to earn a large enough margin and becomes more reputable among the community. With such recommendations, Mr. Schaefer will be able to rebuild the Alta Vista community and allow its clients to improve the educational condition of its youth.