Thinking of starting an early childhood education centre from the ground up? Here’s some information on the costs involved to get started.
Quite obviously there are costs involved in buying a piece of land and building and fitting out the centre itself. But there are also a number of costs to know about upfront that come well before any construction happens. You also have to pay for the right to build what you want, where you want it. Resource and building consents are permits you apply to and pay the council for. Every council is different so we’re using Auckland Council as an example here because it’s the biggest and fastest growing region in New Zealand. We’ve also included links to the same information on other council websites.
Under the Local Government Act 2002, local councils are able to impose levies on developments (including new early childhood education centres) to recover a proportionate cost of the infrastructure necessary to service growth in that area. How much varies between councils and even varies within each council depending on the location of your centre and what infrastructure is needed in that area.
Resource consent costs
Under the RMA (Resource Management Act) councils are allowed to recover their costs in processing applications but not profit from them so charges are based on the time spent by staff at an hourly rate.
As an example, Auckland Councils hourly rate is between $150 and $200 per hour, depending on the specialists involved. For a new childcare centre application lodged on a non-notified basis, the council would require a $5000 deposit at the time of lodgement but it could be as high as $7,000 if a regional consent is also required. If they decide to notify an application you will need to pay a further deposit of $20,000 (public notification) or $10,000 (limited notification). There is also a $3,000 deposit required if a hearing is necessary.
Other councils’ fees
Building consent costs
This is also a user-pays system similar to resource consents. Fees are calculated on a time-spent basis with a deposit required at the time of lodgement based on the value of the work.
Using Auckland Council again as an example, a lodgement deposit will be roughly $6,400. In addition to further charges for processing, there are also charges for inspections during construction. The number of inspections varies depending on the extent of work involved and each costs $159.
Other councils’ fees
As each individual council sets their own rules and regulations, there may be other costs you encounter. One such example is the health and safety report you need in Auckland before you can apply for an operating licence. In Auckland, this report is provided by Auckland Regional Public Health Service (ARPHS). The cost for the assessment is charged on a time-spent basis at a rate of $96 per hour plus travel and disbursements.
To find out what your local council’s requirements might be we recommend engaging a planning consultant who knows the ins and outs of your regional plan.
Land, building and fit-out costs
As well as the cost of buying the section/land and attaining the right to build and operate on it as we’ve discussed above, there’s the actual costs of building the centre itself, plus the fit-out. Just like building a house, depending on what you’re trying to achieve, costs will vary.
How to set your budget?
To know if your dream of opening a new early childhood education centre is financially achievable can be tricky. At the same time as searching for a site you need to be developing and evolving your business plan. The two feed into one another and your build budget is affected by the earning potential of the centre, which is affected by the size of the site (among other things). Engaging a consultant to help you undertake financial feasibility report will help you determine if your numbers are going to stack up.
We’re getting ahead of ourselves here, but as well as beginning to estimate design and building costs, you also need to take into consideration the ongoing running costs of your centre to ensure your business plan will work. Don’t expect to make a profit straight away. It’s common to operate at a loss when you first start out; you just need to be able to make enough money to sustain your business during the initial period. A cash flow forecast will help you know if and how much you’ll need to borrow to be financially prepared to start up and run.
Where to from here?
If you’re thinking of moving ahead with your dream of starting an ECE centre, download our free Early Childhood Education Centre Building Guide to begin the journey with a more than basic understanding of what’s involved in the process.