The Chelmsford YMCA may be a charity but its trading arms are vital lifelines for ensuring its continued existence.

Using a profit-making arm, in the form of a nursery, to subsist charity work is still a relatively new concept for the 130-year-old organisation, according to current chief executive Rowena Kerslake.

The opportunity to use a profit-making arm to underpin the charity arose in 1995 when a childcare business renting the YMCA's rooms was forced to close. Twelve years later, she agrees this was probably a blessing in disguise for the Christian organisation.

When Kerslake began heading up the childcare programme in 1998, the YMCA doubled its intake of children and expanded its services to that of an after-school club.

But the charity began to rely heavily on the nursery's profits, creating an unhealthy stress on the childcare business. Kerslake wanted this to stop when she took over as chief executive in 2001.

With that in mind she increased the number of intakes to keep profits at a reasonable level without driving up the cost of childcare to parents. The entire operation increased to cater for up to 89 children between the ages of three months and 12 years, while after-school and breakfast clubs run by YMCA childcare staff were also opened at surrounding schools. Holiday play-schemes were also introduced and run as the need increased during holidays.

Kerslake, however, is still mindful of conducting business in keeping with the ethos of the charity.

But this approach has done few favours for the profit-making arms - the downward trend of the charity's net income is evidence of this. The nursery also offers lower fees - charging £170 a week for babies, compared to their counterparts in the town, which charge up to £190. In addition, while there were absolutely no reserves previously, the organisation has begun to accumulate reserves - equivalent to three months' running costs - since 2004. This has equated to an average of £20,000 a month - yet the current balance runs to just £36,000.Factors such as the increase in minimum wage, the high cost of maintaining their premises, expensive utility bills and a high turnover of about a third of the youngest staff impede growth.

'My ideal would be to grow the trading company outside of the childcare in some shape or form. There's a limit to how much childcare we want offer, as it is a personal service, which risks becoming impersonal if it were too big.

'I would like to take the onus off childcare and find alternative profit making ventures, along the lines of something that would fit in with our ethos,' says Kerslake.

The organisation is in the fortunate position of owning thefreehold: 'There are some options which we could take outagainst the building. But theboard is not anxious to do that while we are not in a crisissituation as they don't want to threaten the freehold of the charity.

'But if we were running a true business, we would have done so and looked for outside investment,' she says.

The coffee shop is also somewhat defunct, due to its physical location on the property opening onto the actual nursery areas.

Kerslake says only staff and the youth club really make use of it - and minimally at that - since it would present problems to allow public to access the shop, as they would then have access to the childcare areas.

'At the moment we're in a position such that the trading arm just about keeps us from being in the red. I want to turn that around to achieve a positive benefit, especially as the climate of fundraising becomes more difficult.

'I think the trading arm needs to think of itself as a business. I would like to get it to be more lucrative,' says Kerslake.

The main challenges:

• To turn the nursery into a more lucrative business
• Reduce staff turnover
• How to tackle downward net income
• Reduce costs of building maintenance
• How to recussitate defunct coffee business

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