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How to Create a Children’s Care Home Business Plan

By Rose Brown
Content writer
Published: 31 January 2022 | Last update: 25 May 20221 minute read
Rangewell

Children’s homes provide care for children across the country.

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All the information you need

The UK has an excellent record for child protection, with strict rules and regulations meant to safeguard children. Only 3% of children in the UK are in the social care system. Unfortunately, even those who enter foster care sometimes need a more specialist approach - facilitating the need for residential children’s care. 

Unlike a foster home, residential care for children helps support the needs of young people as they grow - providing food, shelter and socialisation but also catering to unique behavioural and medical requirements. 

A children’s care home is one that provides care and accommodation wholly or mainly for children or those under 18. People aged over 18 may also live in the home but must be in the minority. 

Public sector funding has failed to meet the needs of many children in the country, which has led to a rise in private children’s homes. 80% of children’s homes in the UK are run by private companies, with 2032 homes offering 7,555 places as of 2021. 

As demand continues to rise and local authorities fail to manage needs, the private care sector for children will continue to flourish. For investors who want to make a positive impact and a significant profit, owning a children’s home is ideal. 

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Why you need a children’s care home business plan

Starting a children's care home is a significant investment. To attract finance from banks and other lenders, you’ll need to show that you have planned your business correctly. Producing a business plan will help you contextualise each step of your business and will also help attract lender investment. 

Crucially, the government’s social care assessment team will only consider applications that include a clear business plan and a reference from your bank/lender. The government specifically states that it wants to see evidence of the costs of running a children's care home, such as staff salaries, travel and food costs etc. 

The business plan also includes the financial aspects a lender has to assess such as profit projections, expense requirements and estimates for things like property upgrades, planning application requirements, equipment purchases and dealing with any future legal issues. 

The business plan also shows that you’re a responsible owner who has considered every aspect of operating a children’s care home, from the property itself through to regulatory compliance issues and staffing. Whether you’re buying an existing care home or creating one from scratch, a business plan helps show your investors that you understand the market and can generate a return on their investment.  

What’s included in a children’s care home business plan? 

Your business plan has to address the fundamentals around setting up the business, how you’ll run it, what the competitive landscape and market is like and how you’ll drive profit as a result of these factors. 

To do this, you’ll put together a document that is split into sections, each of which addresses the main concerns of operating a children’s care home. Below is an example list of ‘headings’ you could use - but some business plans will condense these elements under one section. 

  • Corporate structure - how you’ll run the business
  • Legal/compliance requirements - what legal requirements there are and how you’ll meet them
  • The market - the need for a children’s care home in the area and the local competition
  • Competitors - what local competition exists and how will your business differentiate itself against them? 
  • Goals and objectives - what you’ll work to achieve
  • SWOT Analysis - the strengths, weaknesses, opportunities and threats to the business 
  • Financial objectives - the profit targets and other financial goals of the business
  • Overheads & employees - the costs and structure of employment to support these goals

Business plans are twofold: you will use it as a way to win investor confidence, but you may also share it publicly as a way to show the public your intentions. Many larger corporate groups issue their business plans as public-facing documents available to download from their websites. If you intend to do this, we would advise only sharing some parts of the plan with the wider world, as details such as financial forecasts can be negatively received. 

How to write your children’s care home business plan

Creating the business plan requires time as you’ll need to manually create each section or outsource the creation to a business plan writer. If you’re going to take on the task yourself, here are some tips for writing a clean, coherent business plan that wins investor confidence and puts your business on the right track. 

  • Brevity is key: a business plan isn’t an essay. While there’s lots of information you’ll need to include, presenting it in a clear way is best. Keep sentences short and use bullet points and paragraph breaks to make sections more readable. Use bold headings and page breaks between each section. 
  • Write your executive summary last: the introductory part of a business plan is the executive summary, which is a recap of the main points of each section. Despite the fact these summaries are placed at the start of the plan., you’ll need to write it last once you’ve completed the other sections. 
  • Stick to the numbers: the main goal of your business plan is to attract investors to offer to finance for your care home, so make sure the finance-focused elements are most visible. Profit forecasts, overheads and other critical numbers should be easy to find within the document and made clear in the executive summary. 

Executive summary 

The start of any business plan is the executive summary - essentially the ‘cliff notes’ that discusses the findings within the plan and outlines what you’d want someone who was skim-reading the plan to understand. 

For children’s care homes, you’ll also need to include the regulatory and legal requirements you’ve factored into your plan so that the reader knows at-a-glance- whether you’ve properly researched your business and understand the risks. 

If you intend to bring in any therapeutic care services such as cognitive behaviour therapy (CBT), it’s worth stating this in the summary as it’ll be a crucial part of expanding the services in the care home and will be a funding consideration as you might need to recruit specialists and buy new equipment. 

Though the summary comes first, you need to write it last. You’ll do this only after you’ve completed the rest of your business plan so you’ve got more authority over the findings and can discern what’s most important to summarise to the reader. 

Corporate structure & regulatory requirements

You’ll need to discuss the corporate structure by which the children’s home will be operated. As an owner, you may be better suited to recruiting a care home manager with the right qualifications and experience in children’s care - unless you yourself have that existing experience. When you apply, the government will want to assess both the owner and the manager’s experience so be prepared to answer questions. Including your corporate structure and how you’ll appoint a qualified team in your business plan prepares you for the application process. 

Regulations in children’s care are very strict and applications for registration can take over 17 weeks. You must register with the government under the Care Standards Act 2000 and must meet a number of requirements including: 

  • Care Standards Act 2000
  • The Care Standards Act 2000 (Registration) (England) Regulations 2010
  • The Children’s Homes (England) Regulations 2015

When you register, you’ll need to apply through a form called an SC1. All named applicants associated with the SC1 will also need to complete an SC2 - so if you’re in a limited business with other shareholders they’ll need to do this. The government will assess these forms and documents, then check your DBS records and GP health assessment. They’ll ask for referees and will even ask the local authority about you. 

Your application must include the following: 

  • Statement of purpose - you’ll need a statement of purpose that complies with Regulation 16 and Schedule 1 of the Children’s Homes (England) Regulations 2015. This is a vision for your service and will cover all areas in the regulations. 
  • Children’s guide - a guide aimed at children that discusses your services. It must be written with the age group you want to house in mind.
  • Policies - what policies are going to be in place to safeguard children. 
  • Planning permission - do you have planning permission for your site? If so you’ll need to include any documentation. If not, you cannot progress with the application. 
  • Business plan - a clear business plan is a regulatory demand from the government, so you’re lucky you’re reading this guide first!
  • Local area risk assessment - you’ll need a safety risk assessment for the local area to help the government ensure the children you home are kept safe. 
  • Registered manager - the appointed manager must have the skills and qualifications needed for the role. You can have one care manager across two homes if they can show they have the experience needed to manage two homes at once. 
  • Responsible individual -  there’s no need to register a specific responsible individual, but one must be nominated for the interview to discuss their knowledge and capacity to supervise the home. 
  • Referees - you’ll need a reference from employers in social care. 

Including all of this information is only the first stage. The government then moves to stage 2 where they ask questions either directly to you or to third parties to find out more. You’ll have an inspector for the application who can be contacted to discuss progress. In stage 3, the government’s social care team interviews you to assess: 

  1. Your overall plan for the children’s home
  2. Your fitness for running/operating the children’s care home
  3. How you meet the requirements for registration
  4. How you/your management team is qualified for the task 

Customers/market

In this section, most typical businesses discuss the overall market opportunity in terms of potential customers. For a children’s care home, that means an assessment of the social care situation in the area and whether there’s a demand for children’s services. 

However, you can also use this section to outline the risk assessment findings in the local area so that any investors can quickly get up to speed with the potential market and the risks it may incur. 

Goals and objectives/opportunity 

Business plans need to talk about the goals of the business and how it will meet these goals. For a children’s home, this can include goals around total occupancy but also take things further by outlining upgrades/services you can offer to improve results. 

For example, could bringing a qualified psychologist into your care home increase overall satisfaction and demand? By improving the quality of the care service, the government’s social worker team will perceive your business in a better light and may therefore send more children to your home. 

Unlike traditional businesses, where customers are attracted through outbound sales and marketing, a children’s care home is more of a reactive measure. 

SWOT Analysis

A SWOT analysis stands for strengths, weaknesses, opportunities and threats and is basically a summarised version of the major opportunities and potential setbacks your business can face. 

For example, you might have factors such as: 

  • Strengths: quality premises with state-of-the-art facilities
  • Weaknesses: high staffing costs
  • Opportunities: growing social issues in the local area leading to rise in childhood homelessness
  • Threats: competing children’s care home 20 miles away with heavy investment plans over the next 6 years

Financial objectives

The financial objectives of your business are crucial to securing lender interest. Remember that every property transaction is a balanced risk for the lender - they want to ensure that you can repay whatever finance they provide to you in the right timeframe and therefore need to know you have sound financial planning and that the investment is solid. 

The financial objectives of the business include profit and loss forecasts, expenses and EBITDA. You’ll need a specialist accountant to put these together for you so that they stand up to scrutiny and are realistic based on the current market. You should include cost projections for additional work to support your goals such as: 

  • Land purchases or planning costs
  • Building or conversion costs
  • Staffing costs - especially those of the care manager
  • Legal costs - DBS checks, safeguarding policies etc
  • Equipment purchases
  • Food and catering costs
  • The total cost of the care home/valuation

Services

List out the services you’re going to offer and any policies you’ll put in place to protect children such as an anti-bullying policy. You should try and show that your services are matched to the national standards for children’s homes. 

The plan must also show how you’ll actually achieve these new services. If they require the recruitment of new staff, you’ll need to discuss your strategy for that and how you’ll find and recruit the right people. If it requires new equipment, the plan should list the equipment and specify costs and potential returns. 

Services in a children’s home extend from general housing through to nutrition, development and education so you’ll need to show you have accounted for all of this within the plan. Your services should be on a continual journey of improvement - raising the standards of service delivery and improving inspection ratings go hand-in-hand. With better ratings comes more satisfaction from the government, which is a positive result that all children’s homes need to strive for. 

Sales and marketing

Independent children’s homes have little need to do standard ‘marketing’ activity as demand outstrips supply. Local authorities must place children in their areas into care and many have no choice but to choose independent homes. 

A report by the Central Markets Authority found that due to the demand for places and the lack of supply, many local authorities were paying higher costs to private care in order to place children there. This meant that in general, private care providers were earning more than expected. 

The average weekly price for children’s homes across the UK was £3830 with an operating profit of 23%. Despite this, the same report found that many private homes had high levels of debt which made their position difficult and could potentially lead to having to exit the market. 

All of this is to say that in your business plan, your sales and marketing activity section must address the need for homes and how you can sell at a profit to the local authorities without incurring their negativity. By setting a fair price and operating profit margin, you’ll establish your children’s home as a safe and sensible option for local authorities who will value a more reasonable provider in the area. 

Competitors

Business plans usually include sections about competitors and how market competition may impact profit/the plan. Currently, children’s care homes operate in a space where there is less supply than demand so competition is not an important factor. However, it’s still worth listing local competitors and potential future competition, as well as assessing the risk each pose to your business. 

Sometimes, competition may be for a specific service rather than the whole home. For example, if you plan to operate a new CBT offering in your home, will it impact other local authority mental health provisions or compete against private counsellors in the area? 

Finalising your business plan

Once you’ve completed the sections above, you can now summarise each of them in the executive summary. By completing your plan in this section-by-section approach you’ll have a better understanding of the ‘headline’ elements that can really win your investors over. 

Creating a business plan is a significant challenge but one that represents the best ‘groundwork’ you can do for your business. The authoring of a plan naturally informs you of the various steps and stages your care home is going to have to go through to reach regulatory approval and then hit profit targets. In the case of a children’s care home, it’s also a must-have document that the government will want to review during your application. 

At Rangewell, we offer independent advice for existing or prospective children’s care home owners who want to gain investment for their projects. We don’t just help you secure finance, we’ll also help review your business plan and make it as robust as possible so that it appeals to the lenders you need to achieve your goals. 

When opening a children’s care home is such an exciting opportunity to do social good and generate profits, why leave anything to chance?

Get in touch with Rangewell to see how our team can help you work through the details of a care home finance application and secure funding from a lender that will help you establish your business and grow it into a profitable and fulfilling venture. 
 

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