Childcare Viability and Impact

Challenge

Our client subsidises multiple childcare locations across Australia (over 1,000 places) to make life easier for their target community (essential workers). They needed to understand the viability and impact of each location so they could better understand and communicate the benefits of the subsidised childcare.

Solution

Smarterknowledge combined multiple internal and external data sources to evaluate each childcare location across two dimensions, (i) commercial viability, and (ii) the impact of the location on the local childcare market. Critically, the consequence of removing the subsidy on both commercial viability and market impact was also assessed:

• Would the location still be commercially viable?
• Would the market be able to absorb the target community’s children if the location closed?

Commercial viability was measured by analysing income, cost-base and attendance across the previous 12 months, and establishing profit per child. The local market was assessed by calculating childcare demand and supply (places per child) within the vicinity of each location. This was done using geographic data based on isochrones (drive time) centred on each location. Commercial viability and market assessment were then combined to categorise each location into four quadrants:

• Could be absorbed by the local market, some impact on target community
• Could be absorbed by the local market, high impact on target community
• Places likely lost without funding, some impact on target community
• Places likely lost without funding, high impact on target community

Result

By categorising each of the locations, our client was able to clearly articulate the impact of their subsidised childcare. They had analysis that explained if funding ceased:

• Approximately two thirds of the locations would likely close due to inadequate commercial viability, and
• Of the locations that would likely close, almost all of them would have a significant impact on the client’s target community, due to the local market being unable to absorb the additional demand

With this information, our client has been able to understand how critical their childcare funding is to support their essential worker community. They have also been able to communicate and advocate this information to key stakeholders so that the impact of the subsidies is understood and appreciated.

Further insights from this analysis also showed where future potential locations would deliver the greatest benefit to the target community. This was done by comparing target community populations with current childcare demand and supply.