Calculating occupancy seems to throw everyone into a spin, and for a variety of reasons.
When I’m valuing a setting, I will always ask about occupancy, and the answer is rarely confident. The fluctuation of demand, coupled with the sheer intensity of day-to-day management, often stops managers from exploring their occupancy levels and understanding them. In many cases, a manager will tell me occupancy is at 85 per cent, only for me to calculate it at 70 per cent.
For those who use occupancy software, it can go the other way. I only recently found out that one software provider calculates a full-time equivalent (FTE) place to include all opening hours, which sounds logical on paper. However, it means that a child who doesn’t attend breakfast club and arrives at 8.30am rather than 7.30am would be calculated as a 0.9FTE – so the report will say you have capacity, when you in fact have a full house by 9am.
So, what is the solution? How do you know if you have capacity, and that the ratios you are working to are being fully utilised along the way?
This came up recently while talking with a nursery owner and business coach about how important it is to constantly review not just the financial key numbers, but the operational ones as well, of which occupancy is the upmost important.
Using the term ‘we sell hours’, she says you may work on day rates and sessions, but ultimately if you have 50 places, and you are open 50 hours a week, then you have 2,500 hours a week available. Start there and work out how many of those hours you are being paid for. You can create a basic Excel spreadsheet or work it out on paper. Once you know your true occupancy, you can take it one step further to see when and where you have hours spare.
Armed with that knowledge, you can fill those hours, and when you do then look at the financial figures, you will see the direct impact that understanding your operational numbers has made.
