Mompreneur creates new daycare model

(Reuters) - Felicity Chapman had a newborn, a design business in its infancy and a problem.

They did not get along.

After the birth of her first daughter, Chapman decided she would only work part-time, but found it all but impossible to juggle both her clients and childcare. Chapman knew she needed to find some flexible childcare that would allow her to accommodate her clients' needs, without shortchanging her daughter.

"I didn't want to leave her with just anyone and I couldn't tell my clients that I can only come from Monday to Wednesday from 9-12, because that's the only time when I have childcare," she said, echoing the sentiment of many working mothers. "I thought there has got to be a better solution."

The seed that began as a line in Chapman's notepad has grown into Cubes & Crayons <www.cubesandcrayons.com/>, a hybrid business offering moms a place where they can literally take their kids to work.

One part office space provider and one part daycare, Chapman believes her Silicon Valley-based business is the answer for working moms, or dads, who are finding it impossible to get the job done from home and look after their children at the same time.

Chapman has attempted to create a space where kids can play on one side and parents can get down to business on the other. The daycare side accepts children ages 6 weeks to 7 years and has multiple packages to accommodate parents who only need an hour here and there to those who require between 10-60 hours of childcare a month.

Cubes & Crayons charges anywhere from $10-$17.50 an hour for daycare, the high end being for drop-in care, and maintains a three-to-one ratio of staff to children, overseeing a maximum of 10 kids at any one time. Office space rental ranges from $20 a day to $850 a month for unlimited access 24-7.

Through Cubes & Crayons, Chapman also tries to offer clients a "water-cooler" experience where parents can regain that human connection they lose when they work from home.

Her idea appears to have struck the right chord with local parents, as Cubes & Crayons boasts about 100 members a year after opening its rumpus room. Most of Chapman's customers use her space in a drop-in capacity, as opposed to making a more substantial monthly commitment.

Today Cubes & Crayons employs three part-time childcare workers, with two more in an on-call capacity, and a part-time receptionist. Chapman is still in the office everyday, but has more time to spend on marketing and building her client base.

Chapman estimates her startup costs at about $75,000 - spent mostly on staffing, rent, utilities, furnishings, renovations and permits. She self-financed all of it through the sale of her home and by cashing in some personal investments.

To save on marketing costs, Chapman has heavily leveraged social media, mainly through blogging and having a presence on websites such as Twitter, Facebook and LinkedIn. As a result, she is gaining popularity among mommy bloggers.

Despite launching her business a year ago, Chapman has been relatively unscathed by the current recession. She altered her marketing material to emphasize affordability in order to appeal to those who have lost their jobs and benefits -- or who are just feeling the economic pinch.

THE PITCH

Not one to rest on her accomplishments, Chapman has an ambitious plan to expand Cubes & Crayons in 3 to 6 more cities over the next 18 months. San Francisco is first up, with other possible locations in Austin and New York.

"We plan on being nationwide and hopefully international at some point in the next five years," said Chapman, who estimated the initial U.S. expansion will cost $750,000, which she has been seeking primarily through angel and other private investors.

Chapman anticipates the San Francisco startup will cost a more reasonable $30,000, mostly due to recession-style concessions by the landlord.

"He's taking on a lot of our startup costs, because we were willing to sign a five-year contract, which was also a lower rate," said Chapman.

So far Cubes & Crayons has been effective at garnering media attention, but it hasn't translated into enough clients to really make the business profitable. Chapman is always looking for new and creative ways to get the word out.

"The key is to get people to walk in the door," said Chapman. "At our last open house we had a lot of people who were expecting, so if all those people were to come onboard we would be pretty much at capacity."

TAKING IT TO THE EXPERTS

Public relations consultant Mat Wilcox thinks Chapman should be given "huge kudos" for implementing her idea, but is ultimately unsure about the business model, as the target audience is limited to essentially part-time mothers.

"It sounds really appealing, but when you actually think about whom the audience is this is a tough one," said Wilcox, who was working three days a week when she had her daughter. "Being a mom myself, I don't know how much work I'd be able to do with my child in the next room."

Despite her trepidation, Wilcox is impressed by what Chapman has already done to connect with her audience, but feels she can go further. She suggested Chapman reach out even more to mommy bloggers, so that when they think flexible childcare, Cubes & Crayons is foremost in their mind.

While Chapman has successfully generated some media buzz, Wilcox said she should develop a media campaign around certain key dates that are important to mothers looking for childcare, namely August and September when kids are going back to school.

"She needs to figure out when it is that women really need that kind of service and figure out her marketing model based on that," said Wilcox, adding many women may just be looking for after-school care, when they could use Chapman's facility for a couple hours after they pick up their kids. Another route for Chapman might be to partner up with corporate recruiting firms that assist employers in finding affordable and flexible daycare for their employees.

"You want your employees to be happy and if childcare is a big issue for them, you need to take care of that," said Wilcox, who currently has two women on maternity leave at her own small firm.

Bob Goedjen, a small business counselor with the SCORE network based in Silicon Valley, cautions that childcare businesses have their own special set of challenges, which make it even harder to be successful.

"It's not like opening a store or retail establishment," said Goedjen, whose office advises as many as 2,000 entrepreneurs each year. "Since this involves children there are critical elements that need to be addressed or even the best marketing will fail."

Goedjen said Chapman, if she's not already, should be extremely cognizant of the sensitivity of parents in regards to their children and variables such as age ranges (i.e., not mixing infants with six-year-olds), hours of operation, and qualifications of staff and clients, as well as the all-important issues of liability and insurance.

"Daycares are expanding all over the place, so it's not like the general model isn't there," said Goedjen, "but if I was an investor, I'd sure like one of these to demonstrate success in this unique business model."

Goedjen would like to see Chapman hone her business more before expanding, as growing too soon can be fraught with its own challenges. The biggest problem is successfully communicating your vision to staff, as the CEO can't be in two places at the same time.

"It's all about getting the next office to understand things the way you understand things. You've got to get that story down really clearly before you try to duplicate it."

Goedjen helps many businesses get government-backed loans and thinks this is preferable to trying to elicit financing from angel investors, who will likely demand a significant stake in the venture in return. He said Chapman's business plan has to be rock solid, as her testimonials will only carry her so far "when you're talking about three-quarters of a million."

Steve Borg, a small business loan specialist at the San Diego division of California Bank & Trust, said a Small Business Administration (SBA) loan may be the way to go for Chapman. Last year Borg's bank made close to 200 SBA-backed loans, typically from $500,000-$900,000, and thinks Chapman could qualify. Borg added that if Chapman doesn't have any success with her own bank, she should try a more SBA-friendly shop.

"Just because one said no doesn't mean she doesn't have a bankable deal," said Borg, whose bank is part of the Zions Bancorporation, traditionally ranked by the SBA as one of the top small business lenders. "You're odds are best in securing an SBA loan from a bank that is a very active participant in the program and ones that are preferred lenders, or PLP-status lenders."

Borg said Chapman needs to keep some things in mind, other than a strong business plan, if she decides to go the SBA-loan route for her financing: strong cashflow projections, good personal credit, experience running her own business and the ability to provide some personal equity.