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Little Lodge Nursery
The founders of West Midlands day nursery group Little Lodge Nursery share their insights into the sector, its challenges and opportunities.
Read time: 6 mins Added: 04/03/25
The children’s day nursery sector is worth more than £6 billion and, while it has seen significant consolidation by a small number of Private Equity-backed players in recent years, more than seven in 10 providers are still independents.
It’s an opportunity that caught the eye of friends Vivek Shah and Khilan Dhanani, who had backgrounds in pharmacy and IT, respectively, and had previously worked together on property development projects.
Both as new parents, they started checking out local providers in Worcester, which eventually became a completely new venture for the pair.
Khilan said: “That short space of time when children are toddlers is actually when they learn the most, and that inspired me to get into a business that can help nurture our future generations. I guess I’m pretty entrepreneurial and I’m always looking to understand how businesses work, and I became curious about what the profit margins on running a nursery would be.”
After doing their research, Vivek and Khilan identified an opportunity to buy local provider Little Lodge Nursery and secured the backing of Lloyds, where they already had an existing relationship through Vivek’s pharmacy business.
Research and regulation
Their due diligence included working with an early years consultancy company, which conducted a mock Ofsted inspection on their target acquisition before they completed on the acquisition.
Support from Lloyds
They wanted to be certain that they were buying a quality provider, and the confirmation of a ‘good’ rating gave them the confidence to go ahead with the deal in 2019. Lloyds then provided term loan funding to support Vivek and Khilan’s purchase of Little Lodge Nursery.
Going from strength to strength, they acquired and developed a second site in nearby Bransford in 2023, which Lloyds again supported with a further £825,000 lend.
And Vivek says his experience in pharmacy has helped them succeed in an industry that is highly regulated.
He said: “This is a very safe sector to operate in, if you are used to regulation. For example, government funding currently accounts for around 50% of our revenues. That’s money that hits your account in the first week of every term, so you have cash in the bank on day one which you can use to invest in your business.
“Compare that with pharmacy, where you don’t get paid until two or three months after you have submitted your prescription claims.”
Enabling investment
But Vivek warns that it can be a challenge to manage parents’ expectations around the Government’s free childcare provision.
“We have to explain to parents that this only covers the childcare element of the service that we provide and that nurseries can still charge for resources and food, for example. Every year we review the hourly rate that we are paid by our local authority and compare that with the hourly rate for a privately paid place and bridge that gap with what we charge as a resource fee, so we are never making a loss.”
Having a stable and predictable income stream has enabled Vivek and Khilan to pursue an investment strategy with two main areas of focus – implementing technologies to increase efficiency and developing their nursery facilities.
Khilan said: “Streamlining systems and embracing the digital age has generated efficiencies which have helped us improve our turnover and margins. We did have some push back from our staff initially, who were used to paper-based systems, so we had to work to help them get to grips with the new IT.”
And Vivek and Khilan credit the longstanding consistent backing of their Lloyds Relationship Manager Anil Chopra for supporting their ambitions.
We have been working with Little Lodge Day Nurseries for several years now. With the increasing demand for top quality childcare facilities, it has been brilliant to see Little Lodge cement its reputation as a leader in the field for early years education. It has taken childcare and education to new heights with its advanced methods.
Anil Chopra Relationship Manager, LloydsA warning on wage bills
Investing in facilities has enabled the business to increase its fees to help counter its growing wage bill.
Vivek said: “Around 60-70% of a nursery’s turnover is wages and in April 2019, when we took over, the National Living Wage was around £8.21 an hour. In April 2025, that goes up to £12.21 – a 50% uplift – which comes alongside the increase to Employers’ National Insurance.
“There are not many nurseries that have been able to increase their fees to match that. The only way to be able to justify putting up fees is to make significant investments to your premises, which can help parents feel that they are still getting good value.”
A gold standard service
Khilan explains that parents are prepared to pay a premium for a ‘gold standard’ service.
We’ve installed biometric facial readers that control access to the nursery, a security measure which makes a big impression when parents come to view our setting. We also invested £50,000 to £60,000 per site in our outdoor play areas. That, coupled with the enhanced curriculum that we have put in place, including lessons in PE, ballet and more, has given us an offer that sets us apart from the competition.
Khilan Dhanani Director, Little Lodge NurseryToday, Little Lodge has two settings in Worcester which are rated ‘outstanding’ by Ofsted. And Vivek and Khilan say that their move into the day nursery sector has proven to be rewarding, both financially and in terms of job satisfaction.
Khilan said: “Seeing how a child develops from when they first start with us and seeing how our staff have nurtured them is really fulfilling. It makes all the challenges of having your own business worth it.”