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Business Plan: Preschool Startup in Dubai Report (Assessment)

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Updated: Apr 29th, 2021

Introduction

Education, one of the most important sectors in the UAE, attracts 21% of the government budget. The Ministry of Education governs the school education in the country. The government provides public schools, which the students can attend free of cost if they are citizens of the country. School education in the UAE is divided into four stages. This business plan looks into the first cycle i.e. the preschool or nursery education.

UAE, a country that boasts of a 90% literacy rate, has a preschool enrollment of 107% (Duncan 2012). There has been a growing demand for private schools in the region that follows an international standard. According to the Knowledge and Human Development Authority (KDHA), the demand for private schools has increased phenomenally. In 2003, 88% of the school students in Dubai were enrolled in the 153 private schools (Given the exploding demand for education 2013).

There has been a spurt in the enrollment in private schools in Dubai since 2003 and the demand for the same has increasingly grown both among local and expatriate students. Hence, the rising demand for private schools presents a unique opportunity in the education industry of the UAE. Further, there is a high demand for private preschools in the region (Duncan 2012). Given this high demand for private preschools in the region, the preschool industry in UAE provides unique opportunities for entrepreneurs. This report is a business proposal for a preschool startup in Dubai, UAE.

Description of the Business

The preschool will be a privately owned chain of schools for children within the age group of 1 to 4. The schools will operate in Dubai. The school aims at proving a learning and colorful environment for the toddlers to grow, learn, and play. The school will aim to inculcate interest in education and tap the potential talent of the children. The studies will be arranged in such a way that the toddlers do not face any pressure to become early learners and yet may develop areas that interest them. The business will aim to provide educational prospects that will help them cope with their future education. The preschool will provide a safe and conducive environment for the children to grow, play, and learn.

The company will be privately owned in the UAE. The chain will take the aid of venture capitalists to generate the initial capital required for the initial investment.

Product & Services

The preschool will cater to toddlers from the age group of 1 to 4. This is the age that children are not yet eligible for primary school, which starts at the age of 5 and yet parents feel it is essential to start some form of educational activity. Learning early is considered, one of the best ways to stimulate the young brain, and children at a very early age show their natural inclinations. The services that the school will provide are as follows:

  • Schooling for toddlers where they will be taught through music, singing, dancing, painting, and other activities.
  • The school will provide a proper playground adhering to the safety norms of the education board to offer a proper environment to play and develop motor and social skills.
  • Provide a nice atmosphere that facilitates interaction among children and help in their learning process.
  • The timing of the school will be from 8 am to 1 pm. However, the school will operate as a daycare facility for the students if such services are requested at higher fees.

Market Analysis

The demographic profile of the target market for UAE demonstrates that in 2010, 6.4% of the total population was within the age group of 1 to 4. In 2015, the percentage of toddlers in the population would increase to 7%. Therefore, the total market that the preschool industry targets are 7% of the total population, which comes to 670,000 (see Appendix, Table 1) (World Population Prospects 2012). The population of Dubai within the age group of 0 to 4 has been 48,354 in 2000, 54,693 in 2005, and 82,547 in 2013 (Population by Sex and Age Groups 2014). Therefore, there has been a definite increase in population within the target age group from 2000 t0 2013 (Population by Sex and Age Groups 2014).

The business plan concentrates more on the market of preschool in Dubai where the preschool will operate. Data shows a large market in the city for the industry. The population of children within the age group of 0 to 4 in the city is shown in table 2 in the appendix. The high number of the expatriate population in Dubai indicates a larger pool of children who will be willing to enroll in the private schools as expatriate children are not eligible for free education in UAE (Nereim 2013).

Competition is intense in the private preschool industry in Dubai (Bennett 2009). In 1980, the Ministry of Education first established a nursery section in the schooling system of the country. Today more than 90 percent of the children are enrolled in preschools in Dubai indicating a growing demand for nursery education.

The preschool industry faces tough competition from a growing number of private preschools. Another impediment to the growth is the general attitude of Emirati mothers towards daycare, preschools, and crèches (Given the exploding demand for education 2013). As traditional attitudes and beliefs become a predominant part of the upbringing of the children, many mothers prefer home education for children to schools. However, due to the higher population of expatriates in the city, the demand for preschools has increased, as expatriates usually prefer sending their children to preschools (Enrollment in Education 2014).

There were 311 nurseries in the UAE in 2012 (Duncan 2012). The number of nurseries is not very high compared to the institutes of secondary and higher education. Therefore, it can be concluded that competition in the preschool industry is not very high.

Sales & Revenue

Initially, the company will open a single school in Dubai and start with an enrollment of a maximum of 150 students. This is a conservative number for a new nursery. This section will provide the cost for opening and the cost of running a preschool. Then a projected revenue earning will be shown along with the possible time required by the business to breakeven. The cost for a nursery start-up ranges from $500,000 to $750,000 (Duncan 2012).

The revenue earned by the school will be from two sources

  1. enrollment fee
  2. monthly fees.

The annual fee is set at $1000 in the first year and increases to $2000 in the fifth year. The monthly fees will be $500 initially and then increase to $1000 in the fifth year. The enrolment projection shows that the number of students expected to enroll in year 1 is 50, which will gradually increase to 70, 90, 110, and 130 in years 2, 3, 4, and 5 respectively. However, in this calculation, we have not included the fee structure that will be followed for the daycare. The fee structure is shown in table 5 (in the Appendix). The monthly fees will change depending on the hours of service required for the child.

Financials

This section will provide a Pro-forma balance sheet and financials for the preschool for the first five years of its operations. According to KDHA, start-up schools need to obtain a license from the Ministry of Education to open a nursery. Further, a proposal of the finances has to be presented to the KHDA (Open a school in Dubai 2014). The financial planning for the nursery is provided in the Appendix (Table 4).

The rental information for Dubai shows that property is very expensive in a good locality and may cost up to $250000 per annum (Flanagan 2015). According to salary comparison websites, the primary teachers receive an annual salary of AED 70,750, which amounts to $1600 (Average Salary for all K-12 Teachers 2015). Hence, the salary given to the preschool teachers in the first year is $2000, increased annually. The teacher to student ratio is taken to be 1:10 and 10 other staff are engaged, dedicated to looking after the children. In the first year, the school is expected to enroll 50 students. The startup cost is calculated to be $62000 and operational expenditure comes to $418000. The company will incur losses in the first two years and break-even in the third year (see table 3 in the Appendix).

Organization

The preschool will be a privately owned company. Initially, the company will open only one preschool in Dubai. The organizational structure of the preschool is shown in figure 1 (Appendix). The Principal, who will be the operational head of the institution, will have the teachers, other staff, accountants, and security people under him. If the demand for the school exceeds expectations then the company will venture into franchising its operations in other cities of UAE. Regular maintenance of the school is essential as strict government inspections have closed schools that do not meet set standards (Nereim 2013). Thus, maintenance and safety regulations must be checked to avoid danger to children.

Exit Plan

The initial investment in building a school is very high. Hence, exiting the business may result in incurring a lot of loss. However, if the projected numbers of students are not enrolled by the fifth year, and the company still does not break-even, it would be wise to exit the business. Further, the best possible exit plan will be to sell the business to someone else to regain as much as possible on the initial investment.

References

2015. Web.

Bennett, J 2009, . Web.

Duncan, G 2012, Web.

Enrollment in Education 2014. Web.

Flanagan, B 2015, . Web.

2013. Web.

Nereim, V 2013, . Web.

Open a School in Dubai 2014. Web.

2014. Web.

World Population Prospects: The 2012 Revision. 2012. Web.

Appendix

Table 1: Population aged 0-4 years in UAE. Source (World Population Prospects 2012).

Year (Thousands) (%)
2000 259 8.6
2005 289 7.0
2010 538 6.4
2015 670 7.0

Table 2: Child population of Dubai in 2009, Source: (Enrollment in Education 2014).

Age Local Expatriate Total
1-2 years 4954 12331 17285
2-3 years 4005 11753 15758
3-4 years 3980 11951 15931

Table 3: Nursery and enrollment in Dubai in 2007, Source: (Bennett 2009).

Service type, no. of centres Total enrolled Nationalities
Emirati Arab Expatriate
Private Nurseries, (1-4 years): 71 nurseries 6,155 552 864 4,739
Gov.KG (4-6 years) 2,181 2,041 140 0
Private KGs (4-6 years) 31,559 5,419 4215 21,925

Table 4: Five-year financial statement of the start-up (own calculations) Source: (Bennett 2009).

(Annual in US$)
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue
Number of Children enrolled 50 70 90 110 130
Enrolment Charge 50000 84000 135000 187000 260000
Fees 300000 490000 720000 990000 1300000
Revenue 350000 574000 855000 1177000 1560000
Expenses
Start-Up Expenditure
Legal 1000 0 0 0 0
Marketing Cost 10000 0 0 0 0
Insurance 1000 0 0 0 0
School Building Decoration 50000 0 0 0 0
Furniture/Fixtures 100000
Operational Expenses
Salary Staff
Teacher 180000 260400 334800 409200 483600
Other Staff 120000 201600 324000 475200 624000
Total Salary 300000 462000 658800 884400 1107600
Other 1000 1100 1200 1300 1400
Educational Supplies/Equipment 2000 2800 3600 4400 5200
Brochure 5000 5000 5000 5000 5000
Rent (Annual in $) 100000 100000 100000 100000 100000
Recruitment 5000 7000 9000 11000 13000
Maintenance 1000 1000 1000 1000
Administrative Expenses 5000 7000 9000 11000 13000
Total Start-up Expenses 62000 0 0 0 0
Total Operational Expenses 418000 585900 787600 1018100 1246200
Total Expenses 480000 585900 787600 1018100 1246200
Profit -130000 -11900 67400 158900 313800
Organizational Structure of the Preschool.
Figure 1: Organizational Structure of the Preschool.

Table 5: Fee Structure (own estimates based on Average Salary for all K-12 Teachers.com estimates).

Year 1 Year 2 Year 3 Year 4 Year 5
8PM -1PM $500 $600 $700 $800 $1000
8PM -3PM $700 $800 $900 $1000 $1200
8PM -5PM $1000 $1100 $1200 $1400 $1600
8PM -7PM $1500 $1600 $1700 $1900 $2100
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