Feb 16, 20217 min read

The Child Care Industry is in Crisis. Solutions Lie in Innovation

With demand for quality childcare spots far outstripping supply, the childcare industry is begging for innovation. Successful operators of the future will respond to Americans’ changing lifestyles by offering more flexible care arrangements. Technology can help centers become more profitable by better matching available capacity to the precise hours parents want.

The career that led up to that fateful 2017 decision to purchase the daycare—a business I have expanded into two locations and a child care management software business under the umbrella of Callahan Learning Center—gives me a somewhat unconventional perspective on the needs of this essential industry. My background is in engineering development. I earned a degree in electrical engineering from Grove City College in 1997, obtained my MBA in 2002 and worked for decades to build a successful career as an executive and entrepreneur in the wireless communication technology and software industry. I hold numerous patents, I’ve invented multi-million-dollar product lines, and I’ve been involved in more than four startups from cradle to exit, including my most recent startup selling for $200 million in 2019.

At heart, I am a problem-solver. I have found great professional joy in combining the problem-solving skills I learned as a software engineer with time-tested philosophies on managing and motivating teams to build healthy and profitable enterprises. When I bought a local daycare business, I discovered an industry screaming for software innovation. That discovery launched my journey to build a better daycare—one of the most fascinating problems I’ve worked on.

An industry in crisis

You don’t have to look hard to find people sounding the alarm on the severe imbalance between supply and demand in American child care. Before the onset of the COVID-19 pandemic, a mere 23% of children under age 3 could be served by the available licensed child care slots in their communities, according to a survey of child care supply in 19 states and the District of Columbia conducted by the Center for American Progress. The mismatch between child care supply and demand costs the American economy an estimated $57 billion a year in lost earnings, productivity and revenue, according to research by the Council for a Strong America.

These studies were conducted before the onset of the COVID-19 pandemic, which has put a ton of bricks on the accelerator of what was already a worrisome trend. In April 2020—just weeks into the crisis—the National Association for the Education of Young Children (NAEYC) surveyed workers in child care centers and family child care homes in all 50 states. At that time, nearly half of respondents reported that their center—like Callahan Learning Center at the time—was completely closed. Of those that were open, 85% were operating at less than half of their enrollment capacity. The stress on these centers as the pandemic has continued has been immense. A July survey by NAEYC found that if the reduced enrollment and increased operating costs brought by the pandemic were to persist, only 18% of child care programs expected to survive another year. Yet the demand for good child care is only going to grow as the post-pandemic economy thankfully starts putting more Americans back to work.

This is an economic inefficiency that is begging us for a market solution.

Matching demand more precisely

At its most basic level, child care is the business of matching people who need care for their children with individuals who are willing to provide that care. In America, we’ve been going about the business of addressing this market demand pretty inefficiently for years. Most child care centers sell care in standard quantities designed to match a typical “9-to-5” work schedule, while only 62% of Americans would prefer to work the ‘typical banking hours’ of the 50s, according to a 2018 survey.

In complete truth, to keep a spot in these centers, many parents end up paying for child care hours they aren’t using, be it unused hours each week, or needing to pay for care during vacations to hold their spots. This setup also prevents center operators from being able to charge a higher rate for smaller and more irregular quantities of care, which would benefit both the center and the families who would gladly pay more per hour for the hours they need versus paying by the week for hours they can’t use.

In the 21st century, we’ve learned that matching market supply more precisely to demand can reap rewards for both consumers and providers. For instance, Uber and Lyft have allowed urban dwellers to stop paying for cars that stay parked most of the time—or make an economic return on that excess automotive capacity. Another example is Airbnb, which has allowed travelers to find lodging in the heart of the neighborhoods they wish to visit, and often without the minimum-night requirements of traditional resorts. Instacart lets us be more efficient in the time we allocate to buying food—while allowing grocers and paid shoppers to charge a premium for items purchased through the service.

We often don’t like to think about applying cold economic principles to something as personal as the care of small children, but the reality is that this is already happening, to the detriment of American working families. The American 9-to-5 office job is quickly disappearing, and the child care industry has not kept pace with this trend. In addition, many existing jobs—from surgeons to paramedics to restaurant workers—demand irregular and unconventional hours that aren’t often served by traditional care offerings. As the millennial generation—whose members seek unprecedented flexibility in their work-life arrangements—is now entering parenthood, it is urgent that the child care industry evolve by providing a product that matches their lifestyles.

Strong child care businesses can no longer be built on providing set offerings of full- or half-time care, but instead must offer a more customizable menu of options. This requires some of the same software-based solutions that have brought us on-demand transportation, lodging and grocery shopping.

Defining the problem

Labor makes up more than half of a typical child care center’s costs, so in the first few months I owned Callahan Learning Center, I spent a lot of time trying to understand how my center director scheduled staff. I watched as she worked her intuitive magic week after week to match our available educators with the children in our care. While this skill was highly impressive, it was also impossible to replicate. As I watched the process, I wondered, “What happens if she gets sick or leaves this job?”

I thought for sure someone had created a tool to help with this.

I tried some of the leading software tools on the market. While many of them kept good data on where children and teachers were yesterday, and where they were today, nobody was helping me answer the question that I believe lies at the heart of making this business better: Who will be in your care tomorrow, next week, and next month? Who will care for those children, and what will that care look like?

Solution: Child Care Seer

This problem sent me back to my software development experiences. I assembled, then spent a year and a half working with an internationally recognized team of developers to build a tool that would relieve child care managers of this ongoing burden, allow them to better understand their available capacity, and plan efficiently to improve the quality of care they could provide. As we worked on this problem, we realized it would impact so many aspects of the business.

Essentially, we were building an all-in-one platform that would free up dedicated caregivers to do what they love—care for children—while minimizing the time they needed to spend on repetitive tasks that keep their business going. We were building something that could allow them to focus on the quality of care they were providing, while giving them ways to increase the profitability—and longevity—of their business.

The result is Child Care Seer. Named for the seers, or prophets, who saw the future in biblical times, Child Care Seer’s job is to smooth out the roadblocks—from late payments to irregular schedules—that cause so much stress for the dedicated child care center workers that our nation needs to keep in business. Seer also allows providers to identify their excess capacity and sell it to parents who need more flexible options. Giving providers this ability to sell program-based and hourly care simultaneously has incredible potential to strengthen these businesses—an outcome that has important benefits for both hard-working child care center operators and the American workforce as a whole.

We’ve been using Child Care Seer to run our operations at Callahan Learning Center since we reopened in August, after using the pandemic shutdown as an opportunity to fully reimagine how we do business. Now that we use Seer, our weeks begin much more peacefully, as we are not spending hours on Monday mornings running credit cards for tuition payments—Seer automates this for us. When parents arrive with their children, our workers don’t have to have difficult conversations about late payments, as all of this is facilitated through the daycare billing software. Our director can see in real-time which children and teachers are in and out of all of the rooms in both of our locations, which makes on-the-spot decisions faster and more efficient. Seer allows us to more fairly and efficiently manage our waitlist, and lets us give parents the convenience of going online to request two hours of child care next Tuesday—or whatever irregular quantity of care their schedule may require. Seer also gives us the tools to engage parents in a way that is consistent, valuable and not burdensome to our educators.

Seer’s capabilities continue to evolve and grow as we begin to offer this product for use in child care centers across North America. Our development team continues to build Seer out as an indispensable platform that can enable child care businesses to offer both unparalleled flexibility and uncompromising quality, while also relieving them of some of the heavy logistical burden that adds hours to their work days.

I think child care is a huge part of the success of the country and the success of the local community, and I truly believe it can be massively better than it is. Let’s look for ways we can bring the American ingenuity that has improved so many other industries to bear on the business of matching caregivers with parents who want a safe place to take their kids while they work. My solution to this problem is a daycare software tool that can make it easier for parents to purchase the care they need, and far less stressful for center operators to run a sustainable business.

To me, that’s a win for everybody.

About Tom Callahan

Tom Callahan is a serial entrepreneur and seasoned executive with a track record of starting, growing and leading companies of all sizes. He is the owner of Callahan Learning Center, a Virginia-based family child care management company that operates centers providing high-quality and highly flexible child care. He is the founder of Child Care Seer, an all-in-one platform that can make child care a more manageable and profitable business. He came to the child care industry after more than two decades in the software and technology industries, where he invented multi-million-dollar product lines and guided multiple startups from cradle to exit, including his last startup selling for over $200 million in 2019. Learn more about Child Care Seer at childcareseer.com.