High quality and improved profitability – Tellusbarn’s challenges and opportunities as birth rates decline

Published: October 2, 2024

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The Tellus Group started with Tellusbarn in 2007. Today, the group is a fully-fledged education company with several business areas. However, preschool remains the Tellus Group’s largest business area, with 28 preschools and revenue of approximately a quarter of a billion kronor. How does Bijan Fahimi view the future of childcare and the Tellus Group as birth rates decline?

“We see significant opportunities to gain market share, as inefficient municipalities and smaller players struggle to remain profitable. This presents an opportunity to increase our market share,” says Bijan Fahimi, CEO of Tellusgruppen.

The Tellus Group’s preschool operations grew by just over 17 percent last year. What are the main challenges facing Tellusbarn, and how are you working to address them?

– One of the biggest challenges we face is a declining birth rate in certain areas, which directly affects our occupancy rates. It’s a trend we can’t control, but we have measures in place to manage it. We are actively working to improve cost control without compromising on quality, and this sometimes means reducing certain management functions as expansion slows down. We have taken over certain external services, such as food transportation, which reduces VAT costs and makes the business more cost-effective.

–We have a strong competitive advantage over municipal operations, which sometimes lack the efficiency required in a competitive market. In the long term, we see an opportunity to increase our market share, just as independent schools did during the demographic shifts in the upper secondary school sector in the 1990s.

How are you working to increase enrollment rates at the preschools?

– Our primary focus is on strengthening our local presence and promoting our brand. We aim to build trust among parents and guardians by effectively marketing our preschools and making our services the first choice in the areas where we operate. At the same time, we are committed to engaging our employees and improving communication with guardians, which we view as key to building long-term relationships and increasing enrollment.

– We have temporarily paused the opening of new preschools. This allows us to focus on maximizing occupancy at our existing facilities while avoiding high start-up costs.

Here you can read more about our preschools.

What lessons have you learned from the impact of the declining birth rate on the high school sector that you can apply to Tellusbarn?
– We’ve taken a close look at how the high school sector handled a similar situation in the mid-1990s, when student enrollment dropped sharply. The biggest lesson we’ve learned from that is the importance of diversifying and being flexible in our operations. The Tellus Group has already begun this journey by entering the elementary school segment and educational resources.

– Just as independent schools did in the 1990s, we can leverage demographic changes to our advantage by increasing our market share and acquiring smaller operators that are struggling financially. It is also important to adapt and renegotiate contracts where there is an imbalance in demand, which we are already doing at several of our preschools.

The crisis can also create opportunities. How do you view the availability of staff and office space going forward?
– Absolutely, every crisis also brings opportunities, and this is especially true when it comes to the availability ofskilled personnel. We see an opportunity to further strengthen our organization by attracting top talent who may have been difficult to recruit in the past. We already have a dedicated and skilled workforce, but we want to become even better. By offering inspiring and attractive working conditions, with good opportunities for development and a positive work environment, we can position ourselves as an employer that attracts the best talent in the industry. This gives us a strong competitive advantage.

– At the same time, we also see opportunities when it comes to our facilities. During this period, the availability of vacant properties has increased, which allows us to gradually optimize and improve the facilities where we already operate. We can adapt and develop our facilities in a more strategic way to meet both current and future needs. This is a key part of our long-term strategy to ensure that we can offer both employees and children an environment of the highest quality.

Will you be acquiring more companies that operate preschools in the future?
– Acquisitions are an important tool in our growth strategy, especially at a time when the market is consolidating and smaller players may struggle to remain profitable. That said, right now we are primarily prioritizing acquisitions in the elementary school sector. There, we have not yet achieved the economies of scale that we have already built up in the preschool business. By focusing on the elementary school segment, we can further diversify our operations and create more stable revenue streams.

For further information, please contact
Bijan Fahimi, CEO of Tellusgruppen AB
bijan.fahimi@tellusgruppen.noboxdesign.se
+46 707 167 453