Goodstart Early Learning Faces a Significant Loss in FY2023

Goodstart Early Learning, a prominent name in the early education sector, has reported a significant financial loss for the fiscal year 2023. The not-for-profit organisation disclosed a loss of $85.3 million, marking a sharp increase from the previous year's $65.7 million loss. This development raises concerns about the sustainability and financial management practices of the largest single operator in the sector.

Despite the concerning figures, the management of Goodstart Early Learning has addressed the situation, highlighting the unique position of the organisation. As a not-for-profit entity, Goodstart operates under a different set of objectives compared to for-profit businesses. The primary aim is not to generate profit but to reinvest in the community and the services it provides. This perspective sheds light on the company's financial outcomes and its operational ethos.

Goodstart's management also noted that their organisation should not be viewed as a representative of the early learning sector as a whole. They pointed out that Goodstart holds a legacy portfolio of centres that require significant capital expenditure for updates and refurbishments. Additionally, the organisation faces challenges due to increasing leasing costs, which are exacerbated by long-term legacy leases and market conditions.

The company's approach to addressing issues through increased staffing has been a topic of discussion within the industry. According to data from IBISWorld, Goodstart's revenue per employee ratio stands at 83.87, below the industry average of 105.01. This statistic indicates a heavier reliance on staff to solve problems, which, while commendable for prioritising quality care, raises questions about efficiency and cost management.

Goodstart's staffing strategy, often described as "throwing staff at any problems," has its merits in enhancing service quality but also contributes to a more significant administrative burden. The organisation's structure has been described as head office heavy and bureaucratic, a factor that may impact its agility and operational efficiency.

Furthermore, a recent report by the Australian Competition & Consumer Commission (ACCC) highlighted that not-for-profit providers like Goodstart tend to face lower land costs than their for-profit counterparts. However, these savings are often invested back into labour costs for centre-based day care services, reinforcing Goodstart's commitment to quality childcare over profit margins.

In contrast to Goodstart's not-for-profit model, Finexia targets the for-profit sector of early learning. Finexia believes that for-profit entities are better positioned to manage costs, occupancy, and staffing more efficiently than not-for-profit operators. This perspective underscores the diversity in approaches within the early learning sector and the varying challenges faced by different types of organisations.

As Goodstart Early Learning navigates through its financial challenges, the broader early education sector continues to evolve. The differences between not-for-profit and for-profit models highlight the complex dynamics at play, each with its own set of advantages, challenges, and strategic focuses. The coming years will be crucial in determining how these models adapt and thrive in the ever-changing landscape of early childhood education.

Learn more about the Finexia Childcare Income Fund here