Blog 2: Why we are 'not-for-profit' When I first told people, in 2011, that I wanted to change my nursery business into a not-for-profit organisation, the reaction ranged from incredulity and incomprehension to curiosity or cynicism. It usually told me a lot about the person I was speaking to, and it was interesting for me to see who ‘got it’ and who still clearly thought I was a basket case by the end of the conversation. So why did I, and, seven years later, do I regret it? When I opened the first Acorn nursery in 1989, my original plan was to “have my cake and eat it” by combining work and childcare for my four children by running my own nursery. I then planned to return to teaching. Apart from some work since as an associate lecturer for the OU, however, and some training for my own staff and the local authority, I never did go back to teaching. I didn’t intend to end up running an organisation with 240 staff and a £6 million turnover, but opportunities arose that I couldn’t resist. The expansion really got underway when we began running nurseries on school sites and catering for much more disadvantaged families than our more typical middle class professional parents. Lower rents helped to keep fee rates affordable, but I still found that my affluent nurseries were in effect subsidising those in poorer areas. The official guidance on finding a good location for a nursery is to focus on areas with good housing or businesses, but the Guardian reader in me kept asking why children on poor estates shouldn’t also have access to high quality childcare and Forest Schools and I relished the challenge of discovering how nurseries in those areas could be made sustainable. We began to gain experience in working in partnership with schools and as the number of nurseries grew, economies of scale meant that we could afford to run some settings at break-even point. When I did an MBA, and experienced other business growth programmes and organisations, I realised that my approach was a little unconventional in that profit for me was only ever a means to an end and would never be an end in itself. The truth is that I never felt comfortable about the idea of making money out of running nurseries. I found it increasingly frustrating that the perception of some people was that because I was running apparently thriving nurseries I must be “raking it in” whereas in fact we skated on financially thin ice for many years. The final straw came when we were asked to set up an out-of-school club in a deprived area. The head was happy to charge us a peppercorn rate in order to make the fees affordable, but the local authority insisted that because we were a private company we would have to pay a commercial rent – which made the whole project unsustainable. Shortly after, we submitted a tender to take over two council nurseries, and decided that this was the ideal time to make ourselves fully “not-for-profit” as we felt that this would be more palatable to the understandably suspicious and disgruntled staff and parents at the council nurseries. I shared my vision of a group of nurseries run as a social enterprise and charity with my other shareholders and we agreed that we’d transfer the operations of all of the nurseries over into the charitable company that we then set up, but would retain the two freeholds in a separate company so that we weren’t completely giving away our investment. How we did it My vision was to create a sustainable and ethical group of nurseries that could continually reinvest and improve, aiming to lead the field in early years care and education, particularly in terms of outdoor play and learning, and staff development. The route in fact turned out to be a little more difficult that I had envisaged. I recruited four trustees, chosen for their expertise in a range of areas, and we used solicitors who were experienced in working with charities. The stumbling blocks we then came across were: Initially, the charity commission – who along with others, were suspicious that we might be setting up the new company as some kind of tax dodge. The trustees had to demonstrate that they were independent of the original company and in control of the new company. The bank – who were not happy about the transfer of operations because of the borrowing secured on the freeholds, the repayments for which would depend on the rental income from the nurseries. This meant that the process took four years, as we had to transfer the nurseries in stages, with the administrative headache of running two companies side by side in the interim. Ofsted – the paper exercise of transferring over from one legal entity to another requires a new registration fee for each setting and for all of the trustees to complete new EY2 forms on each occasion. We lost count of the number of times forms went missing or were returned for all sorts of reasons, such as one trustee’s form arriving a day later than the rest. Thankfully, all our settings are now registered under one entity. Pros and cons of the board of trustees The biggest advantage of having a board of trustees is without doubt the benefit of having essentially a board of non-executive directors with a wide range of skills and expertise. We now have a well-established board of excellent trustees who offer a range of expertise including childcare, finance, business and governance, and this is invaluable. It is also not without drawbacks and these are not insignificant. I soon realised that although I am still able to run the company on a day to day basis, I need the permission of these trustees for any major decisions, and if they ever decided that I wasn’t doing the job well enough, there is nothing to stop them replacing me with someone else. This was a tough transition, from being answerable to no-one other than the bank to suddenly have a board to answer to, but I felt that I had to have the courage of my convictions if I was to achieve my vision, and the confidence that I would continue to be the right person to lead the organisation forward for at least the next ten years. So far, it’s working well, and the board has gradually strengthened and will hopefully continue to do so. The benefits of charitable status To sum up the benefits: Staff like knowing that they are working for the benefit of the children and not to pay the dividends of shareholders, so it helps with recruitment, loyalty and commitment Parents are reassured for the same reasons, and with our financial transparency, they can see exactly where their nursery fees are going The children benefit, because we are able to make non-commercial decisions. We have always had a policy of being fully inclusive, so that there are no hidden extras, and the children that attend only for their free entitlement also benefit from additional activities such as Forest Schools, which are expensive to provide but which we believe are hugely beneficial for the children’s wellbeing and development. The local communities and schools that we work in partnership with seem to be more comfortable working with us knowing that we are not a ‘private’ commercial company. There are some financial advantages in reduced rates, the ability to negotiate lower rents, in some cases, and in not having to pay tax on any surplus, so that it can all be reinvested in the nursery environments, activities, equipment and staff development. We can develop our action research in a way that a private company wouldn’t, which means we can evaluate our social impact, develop new, better ways of working and inspire the early years workforce and provide leadership to the sector Looking ahead We have lots of exciting plans for the future, with more nurseries planned, an expansion of our training provision and forest schools, and further research. Best of all is the knowledge that we won’t be in the market for being sold, but as we celebrated Acorn’s 30th birthday in 2019, we were able to look forward to many more years of organic growth and development as a not-for-profit organisation.