In this Ask Evan episode, Evan Carmichael answers a newsletter reader’s query about a daycare that is not yet profitable and needs funding for expansion. Evan explains that banks and investors are unlikely to provide capital to a business without profit or assets, so the primary source of growth money must come from customers. He recommends three steps: (1) deliver outstanding childcare service to generate demand and word‑of‑mouth referrals; (2) raise prices gradually when demand is strong, as many small businesses underprice themselves; and (3) sell longer‑term subscriptions (seasonal or annual) with modest discounts to secure cash up‑front and improve cash flow. Guest expert Danny Inney from Firepole Marketing expands on this by stressing profitability as the key to financing growth. He outlines two levers: increase revenue (price hikes, upsells, cross‑selling related products or services such as after‑school babysitting) and reduce costs (renegotiating contracts, switching suppliers). Even modest 5‑10% improvements on both sides can dramatically boost profit margins, providing the internal funds needed for expansion. Both speakers conclude with encouragement to implement these strategies and invite further questions.
Chapters
Hi, I'm Evan Carmichael and welcome to another edition of Ask Evan. In today's video, I'm going to answer a question from one of my newsletter readers, Kenosha, who is currently running a daycare operation. She's not making any money. She said 99% of the money that she makes has to go back into the business. And she's looking for money to expand the company out. So Kenosha, I think this is gonna be a tough one for you. If you're not making any money yet, it's gonna be hard for banks, for example, to give you money to grow your business if you don't have any assets to lend against and you're not turning a profit yet, so it's hard for them to see that cash flow coming in. And for investors, it might be an opportunity, but again, you're not making money and it's not typically the type of business that investors are really attracted to. So I think the best bet for you is gonna be trying to get the money from your customers. And step 1, since you're a service-based business, would be provide awesome service. So how can you make your business the best daycare center around? Make the kids love coming to your place, the parents feel really comfortable with you, and you're providing basically the best childcare service out there. So think about those options so that you have people loving what you do, wanting to come back, telling their friends about it, and your business is basically exploding at the seams, you can't support any more people coming into your facility. At that point, you're ready to look at expanding. The next thing, once you have that great service that you're offering, is start to increase your prices. If you have a lot of demand, you have a lot of people coming because you provide this awesome service that everybody wants, then you should be able to increase your prices. And a lot of entrepreneurs underprice themselves and they should be able to make a lot more money than they can. So you can test it out, just start with little price increases and that's a great way to earn money coming in that you can use to grow your business. The last thing you might want to consider is selling subscriptions. So I don't know how your model works now, but maybe they're buying 1 month at a time or 2 months at a time. See if you could sell them for longer. So can you sell them for a season, so all of spring or all of summer, or can you sell them for the entire year? And you might give a little bit of a discount to give them an incentive to want to do that, but the advantage is you get your money upfront, which can really help with your cash flow and also give you the money that you need to expand your business. So Kenosha, I hope that helps. That's my thoughts on it. I'm going to turn it over to a friend of mine, Danny Inney, who has some thoughts as well. He's going to give you his advice.
Kenosha, thank you very much for your email. I get messages like this very frequently from people who want to expand their business or grow into a new area or do upgrades or any number of things that are going to cost money and they're wondering where they can go to get that money. And I always point them back to the same place which is asking, well, why don't they have the money already being generated by their business? You mentioned in your message that 99% of the money that comes in goes to pay your bills and to keep the business running and so forth. Which means that you aren't really making a profit. You aren't making extra money that can be put aside. And that's very concerning to me. It makes me wonder what's going to happen if there is an emergency or something comes up or— any business needs to be making more money than it costs to just keep everything running. And so my advice to you would be to look at the way your business is structured and find ways to improve your profitability. And at a very basic level, there's two ways of doing that. You can lower your costs or you can raise the money that's coming in. Either way, you end up with more money in your pocket at the end of the day. So you can improve the amount of money that's coming in by raising your prices, which is something that most people don't think to do, but most people really should be doing. A lot of businesses, especially small businesses, aren't charging as much as they should or could. You can add an extra product offer or an upsell or a cross-sell, have something extra to offer to the people who are already doing business with you. You mentioned that you're running a daycare. Maybe you could offer an extra babysitting service in the afternoon, or you have some products that you recommend and that you respect and you think are valuable that the parents might be interested in getting to use with their kids at home. And so you could resell those and add a little bit more money to what's coming in. You could also look at reducing your costs. You could renegotiate some of your contracts or see if you can switch suppliers, or just find a way to make things cost less. If you can increase the amount of money that you're bringing in by 5 or 10% and reduce your costs by 5 or 10%, that suddenly becomes a very big improvement to your profit margin. And that's really where the money should be coming from to make the kind of improvements and to grow and expand in the way that you're looking for. So I hope that this was helpful. If you have any more questions, you can find me directly at firepollmarketing.com. Feel free to go there and just send me an email. I'm happy to answer any further questions. And of course, you can submit another question to Evan and he'll pass it along to me. Thank you very much and have a blessed day.
Kenosha, I hope that helped. I hope what I said was useful and I hope what Danny said as well can help you grow your business. Good luck. I know it's tough when you're not making any money. You put so much hard work and effort into trying to get that business off the ground, but Stay with it and try to implement those ideas that we gave you. If you guys like the video, please give it a thumbs up or leave a comment below. It really helps us make decisions on what new videos to come up with, and hopefully we'll see you in the next episode as well.
