Starting a daycare center can be an immensely rewarding experience. Not only do you get to care for and nurture young children, but you also get to help shape their future. However, starting a daycare center is also a huge responsibility.
There’s a lot that goes into running a successful daycare business, from finding the right location to obtaining the necessary licenses and permits.
In this ultimate guide to starting a daycare center, we’ll cover everything you need to know to get your business up and running smoothly. We’ll start by discussing the importance of having a solid daycare center business plan in place. Then we’ll move on to tips for finding the perfect location for your daycare center. We’ll also talk about the licenses and permits you’ll need to obtain, as well as essential things like insurance and staff training.
By the end of this guide, you’ll have all the information you need to open your doors with confidence!
Table of Contents
- What is a Daycare Center business?
- Why would I want to start a Daycare Center business?
- How do I start a Daycare Center business?
- How much does it cost to start a Daycare Center business?
- How do I find customers for my Daycare Center business?
What is a Daycare Center business?
A daycare center is a business that provides childcare services for children. These services can range from day-long care for working parents, to before and after school programs, to summer camps.
Starting a daycare center requires careful planning and a thorough understanding of the regulations and licensing requirements in the area, as well as the competitive landscape for daycare businesses. It can also require significant start-up costs for facilities, equipment, and staffing.
However, with a well-designed business plan and an understanding of the needs and desires of potential customers, operating a daycare center can be a successful and fulfilling business venture. Additionally, it helps meet an important need in many communities – providing high quality childcare options for families.
Why would I want to start a Daycare Center business?
According to the National Association for the Education of Young Children, over 60% of mothers with young children are employed. That leaves a lot of working parents in need of affordable, high-quality child care. If you’re thinking about starting a business, a daycare center could be a great option.
Starting a daycare center business can be a very rewarding experience. Not only will you be providing a much-needed service to your community, but you’ll also be able to create your own schedule and be your own boss. Here are four reasons to start a daycare center business.
1. The demand is there
As mentioned, with more and more parents working, the demand for child care is higher than ever. Not only that, but many employers are now offering child care benefits as a way to attract and retain talent. According to the National Association of Child Care Resource & Referral Agencies (NACCRRA), the child care industry currently generates $50 billion in annual revenue. The child care subsidy pays for a variety of child care programs at childcare providers.
2. It’s a recession-proof business
One of the advantages of starting a daycare business is that it’s relatively recession-proof. Even during economic downturns, parents still need to work and they still need child care. In fact, NACCRRA reports that during the last recession, the demand for child care actually increased as more parents entered the workforce.
3. You can be your own boss
Another advantage of starting a daycare business is that you’ll be your own boss. You’ll have the freedom to set your own hours, choose your own staff, and design your own curriculum. Of course, being your own boss also means that you’ll be responsible for everything from marketing to bookkeeping, but that’s part of the fun!
4. It’s rewarding work
Starting a childcare business can be extremely rewarding work. Seeing the smiles on kids’ faces as they learn and grow is something that money can’t buy. And knowing that you’re making a difference in the lives of working families is an amazing feeling. If you’re looking for a rewarding career change, starting a daycare business could be the perfect fit for you.
Starting a daycare business can be a great way to become your own boss while making a difference in the lives of working families.
How do I start a Daycare Center business?
The U.S. daycare industry is booming, with revenue totaling $54 billion in 2021 alone. If you’re thinking about starting a daycare business, there are a few things you need to know in order to set your new venture up for success. In this blog post, we’ll share some secrets to opening a successful daycare center business.
1. Perform market research
As a daycare startup, conducting market research is crucial in determining the feasibility of your business and identifying potential customers. First, analyze the local daycare market by researching competition and demand for childcare services in the area. Are clients using a day care center or family child care homes? What number of children are being served? What are the ages of the children being served, are there childcare providers working with school-age children? Is this primary an in-home daycare market? Look for potential gaps in the market that your daycare can fill, as well as any potential threats from established daycares.
Next, gather information on target customers by conducting surveys or focus groups, investigating daycare review sites, discovering a child care program similar to your startup, and studying demographic data about families in the community. This will help you understand their needs and preferences when it comes to daycare services.
Finally, use this data to determine pricing and marketing strategies that will attract potential customers and set your daycare apart from competitors. With careful market research, you can efficiently launch your daycare startup and anticipate future demand for your services.
2. Write a business plan
A business plan is essential for any entrepreneur who wants to start a business. But what should a business plan for a daycare center include? In this section, we will outline the key components of a daycare center business plan.
Executive Summary
The executive summary is a brief overview of your business plan. It should include your company’s mission statement, target market, and key financials. If you are seeking funding from investors, this is also the section where you will make your pitch.
Company Description
The company description section of your business plan should provide an overview of your business, including its history, ownership structure, and location. This section should also describe your company’s marketing strategy and how you plan to attract customers.
Market Analysis
In the market analysis section of your business plan, you will need to provide an overview of the industry in which your business will operate. This should include information on your target market, competitors, and any trends or changes in the industry that could impact your business.
Financial Plan
The financial plan is one of the most important sections of your business plan. In this section, you will need to provide detailed financial projections for your business. This should include information on your revenue sources, operating expenses, and capital requirements. If you are seeking funding from investors, this is also the section where you will request investment capital.
How do I write a business plan for my daycare center?
A well-written business plan is essential for any new business, including a daycare center. The process of writing a business plan forces you, as the entrepreneur, to assess your goals and objectives, as well as your financial situation and the competitive landscape. This information will be critical in securing funding from investors or lenders.
The first step in writing a daycare business plan is to research the competition. What daycare centers are in your area? How do their prices compare with what you are planning to charge? What unique selling proposition does each center offer? This research will help you develop your own USP and position your daycare center in the market.
The next step is to develop a clear understanding of your target market. Who are the parents of the children you will be caring for? What are their demographics? What are their needs and wants? Once you have answered these questions, you can begin to craft your marketing strategy.
The last step in writing your daycare business plan is to develop a financial projection. This will require you to estimate your start-up costs, as well as your operating costs and income. Be sure to include a contingency fund to cover unexpected costs. Once you have completed your financial projection, you will have a clear understanding of the capital you will need to start and operate your business.
3. Securing financing
If you’re looking to open a daycare center, you’ll need to explore all your options for funding so that you can get your business off the ground. Here are some common financing options for daycare centers.
Small Business Administration Loans
One option for financing your daycare center is to apply for a small business loan through the Small Business Administration (SBA). The SBA offers several different types of loans, including 7(a) loans, 504 loans, and microloans. 7(a) loans are the most common type of SBA loan and can be used for working capital, inventory, or equipment. 504 loans are specifically for real estate or equipment purchases, while microloans are smaller loans of up to $50,000 that can be used for working capital or inventory. This is a popular option for child care businesses.
To qualify for an SBA loan, you’ll need to have good personal credit and a strong business plan. SBA loans also tend to have lower interest rates than other types of loans, making them a more attractive option for small businesses.
Bank Loans
Another option for financing your daycare center is to apply for a bank loan. Bank loans can be either secured or unsecured. Secured loans are backed by collateral—usually in the form of property or equipment—while unsecured loans are not backed by anything. Both types of loans typically have lower interest rates than credit cards or personal loans.
To qualify for a bank loan, you’ll need good personal and business credit as well as a solid business plan. Bank loans can be used for a variety of purposes, including equipment purchases, renovations, or working capital.
Personal Loans
If you don’t qualify for an SBA loan or bank loan—or if you need funding more quickly than those types of loans would allow—you could also consider taking out a personal loan. Personal loans tend to have higher interest rates than business loans but can be easier to qualify for because they’re based on your personal credit rather than your business’s credit.
Grants
Grants are another option to consider when financing your daycare center business. Grants are typically awarded by government agencies, nonprofits, and philanthropic organizations based on factors like financial need, minority status, or location in a underserved community. While grants don’t have to be repaid, they can be difficult to obtain due to their competitive nature.
Angel Investors/Venture Capitalists
Angel investors and venture capitalists are private individuals or firms that invest in early-stage businesses in exchange for an ownership stake in the company. They typically invest larger sums of money than other types of investors—like family and friends—and often offer expertise and advice in addition to funding.
Because they’re investing their own money, angel investors and venture capitalists usually have very strict criteria for choosing which companies to invest in—criteria that you may not meet if your business is still in its early stages of development.
4. Find the right location
Before you can open your doors for business, you need to find the right location. The perfect spot for your daycare will vary depending on several factors, including your budget, the size of your facility, and the demographics of your target market.
Do your research
Before you start looking at properties, it’s important to do your research and confirm that there is indeed a market for your daycare business in the area you’re considering. Once you’ve done that, you can start looking at specific locations.
The first factor to consider is demographics. You want to choose a location that has a high concentration of families with young children. This will ensure that there is a large potential customer base for your business.
Zoning
The second factor to consider is zoning. You want to make sure that the location you choose is zoned for commercial businesses. If it is not, you may have difficulty getting the necessary permits and approvals to operate your business.
Consider the commute
When you narrow down your list of potential locations, take into account how long it would take parents to commute to and from your daycare center. Ideally, you want a location that is close enough to major highways or public transportation so that it’s easily accessible, but not so close that there is a lot of traffic or noise pollution.
Look for a safe neighborhood
The safety of the neighborhood should be one of your top priorities when choosing a location for your daycare center. Not only do you want to make sure the property itself is safe, but you also want to check out the surrounding area to ensure it’s free of crime. You can check out crime statistics for specific neighborhoods online or by speaking with local law enforcement.
Lease instead of buying property outright
When you’re just starting out, it’s often best to lease property instead of buying it outright. This way, you can avoid taking on too much debt early on and you’ll have more flexibility if you need to move in the future. Of course, if you do find the perfect location and have the means to buy it outright, that’s an option as well!
5. Hire the right staff for your daycare
One of the most important elements of any successful business is hiring the right staff. After all, your employees will be responsible for taking care of other people’s children, so it’s absolutely essential that you find qualified, reliable, and trustworthy individuals to join your team.
In this section, we’ll give you some tips on how to find staff for your daycare center business. We’ll cover the importance of creating detailed job descriptions, where to look for potential candidates, and how to conduct interviews. By the time you’re finished reading, you’ll have everything you need to start building your dream team!
Creating Detailed Job Descriptions
One of the first steps in finding staff for your daycare business is creating detailed job descriptions. When writing job descriptions, be sure to include information about the responsibilities of the position as well as the qualifications and experience that you’re looking for in candidates. If you have specific requirements such as CPR certification or experience working with infants, be sure to mention those in the job description as well.
Once you’ve created your job descriptions, the next step is to decide where to post them. If you have a website for your business, make sure to post the job descriptions there. You can also post them on popular job boards such as Indeed or Craigslist. And if you have a personal network of friends or family members who might be interested in the positions, don’t forget to reach out to them as well!
Conducting Interviews
Once you start receiving applications for your open positions, it’s time to start conducting interviews. When interviewing candidates, be sure to ask questions that will give you a sense of their qualifications and abilities. For example, if you’re hiring a preschool teacher, you might want to ask them about their experience working with young children or how they would handle a situation in which a child was acting out.
It’s also important to ask questions that will give you insight into a candidate’s character and personality. After all, even if someone is highly qualified for a position, they might not be a good fit for your daycare center if their personality isn’t compatible with your company culture. Some good questions to ask in this regard include “What do you think it takes to be successful in this field?” or “What qualities do you think are important in a good daycare employee?”
Check References Thoroughly
Before making your final decision, be sure to check each candidate’s references thoroughly. This is one of the most important steps in the hiring process, so don’t skip it! Ask each reference questions about the candidate’s work ethic, reliability, and ability to work with children. If you get any red flags, trust your gut and move on to someone else.
6. Obtain licenses and permits
Before you can open your doors, you need to obtain the proper licenses and permits. Depending on the type of business, the regulatory environment, and your location, the list of required documents can seem daunting.
But don’t be discouraged—obtaining the necessary licenses and permits is not as complicated or time-consuming as it may first appear. In most cases, you can get all the information you need from your local Chamber of Commerce or business license office.
To save you some time, we’ve put together a step-by-step guide on how to get the licenses and permits you need to open a daycare center.
- Child Care Facility License: You will need to obtain a child care facility license from your state’s licensing agency. The requirements for this license vary from state to state, so it’s important that you check with your specific state’s regulations.
- Fire Inspection Certificate: A fire inspection certificate is required in most states. You will need to have your facility inspected by the fire marshal and obtain a certificate of compliance.
- CPR and First Aid Certification: Most states require that at least one staff member be certified in CPR and first aid.
- Health Inspection: A health inspection is required in most states. You will need to have your facility inspected by the health department and obtain a certificate of compliance.
- Business License: You will need to obtain a business license from your local city or county.
- Zoning Permits: You will need to obtain zoning permits from your local city or county.
- Federal Tax ID Number: You will need to obtain a federal tax ID number for your business.
- Property Insurance: You will need to obtain property insurance for your facility.
- Liability Insurance: You will need to obtain liability insurance for your business.
- Workers’ Compensation Insurance: You will need to obtain workers’ compensation insurance for your employees.
- Professional Licenses: If you plan on providing any type of professional services at your facility (e.g., early childhood education, therapy, etc.), you will need to obtain the appropriate professional licenses from your state licensing boards.
- Food Service Permit: If you plan on serving food at your facility, you will need to obtain a food service permit from your local health department.
- Emergency Planning: You should develop an emergency plan for your facility in case of fire, severe weather, power outages, etc.
- Family Child Care Home License: If you plan on operating a family child care home, you will need to obtain a license from your state licensing agency. The requirements for this license vary from state to state, so it’s important that you check with your specific state’s regulations.
7. Develop policies and procedures
As the owner or director of a child care center, you are responsible for the health, safety, and well-being of the children in your care. This means having well-written policies and procedures in place to ensure that your staff knows how to handle everything from diaper changes and snack time to administering medicine and handling discipline issues.
Policies and procedures are the foundation of a well-run child care center. They provide structure and guidance for staff members and help ensure that everyone is on the same page when it comes to caring for the children in your care.
Creating policies and procedures can seem daunting, but it doesn’t have to be. Start by thinking about the areas of your business that you want to develop policies for. Common topics include discipline, safety, health, arrival and departure procedures, food allergies, and field trips. Once you’ve identified the areas you want to focus on, start brainstorming possible policy ideas.
Once you have a list of potential policies, it’s time to start writing them out. When writing policies and procedures, be sure to be clear and concise. Use simple language that can be easily understood by everyone on your staff. And don’t forget to include any necessary forms or documents that need to be completed as part of the policy (e.g., medication authorization form).
Finally, once your policies and procedures are written out, be sure to review them with your entire staff. This will give everyone a chance to ask questions or offer suggestions on how the policies could be improved. It’s also a good idea to review your policies annually (or sooner if needed) to ensure they are still relevant and up-to-date.
8. Market your daycare center
Marketing a daycare center is much different than marketing other types of businesses. Daycares face a unique set of challenges, such as competition from free alternatives like family and friends, as well as the perception that they’re expensive.
To succeed in marketing a daycare center, you need to understand these challenges and address them head-on. In this section, we’ll show you how to do just that. We’ll cover topics like developing an effective pricing strategy, how to stand out from the competition, and the best ways to reach your target market.
Develop an Effective Pricing Strategy
Most families have a limited budget for child care, which means that price is always going to be a major factor in their decision-making process. That’s why it’s so important to develop a pricing strategy that is both competitive and profitable.
To find the right price point for your daycare center, start by researching the going rates in your area. Once you have a good idea of what other providers are charging, consider your own costs (e.g., staff salaries, rent, etc.) and decide how much you need to charge in order to break even or make a profit. From there, It’s up to you whether you want to offer discounts or promotions—just be sure that whatever pricing strategy you choose is sustainable in the long run.
Stand Out From the Competition
There are three main types of child care facilities: daycare centers, nannies/au pairs, and family members/friends. Each has its own set of advantages and disadvantages that parents must weigh when making their decision.
As a daycare center owner, it’s important to position yourself as the best option by highlighting the unique benefits that your facility offers. For example, if you have highly qualified and experienced staff members, make sure parents know about it! You can do this by prominently featuring testimonials from satisfied parents on your website and social media pages, as well as through word-of-mouth referrals. Another way to stand out is by offering additional services that other types of child care providers can’t provide, such as before and after-school programs, pick-up/drop-off services, or meals.
9. Consider a daycare franchise
There are several benefits to starting a daycare franchise as opposed to an independent business. First and foremost, you’ll have the support of a well-established brand. This means that you’ll have access to proven marketing and operational strategies, which can help you get your business up and running quickly and efficiently. Furthermore, most daycare franchises offer extensive training and support to their franchisees, so you can be confident that you have the knowledge and skills necessary to succeed.
Another major advantage of starting a daycare franchise is that you’ll have access to a pre-existing customer base. Customers who are already familiar with the brand are more likely to utilization your services than those who are not. And because word-of-mouth is one of the most powerful marketing tools in the childcare industry, this can help you attract even more customers in the future.
Of course, starting any business comes with risks—and a daycare franchise is no different. One of the biggest challenges you’ll face is meeting the expectations of the franchisor. Franchisors typically have very specific requirements when it comes to things like building design, employee training, and customer service protocols. If you’re not able to meet these requirements, you could find yourself in hot water—or even out of business entirely.
Another consideration is the cost of starting a daycare franchise. Unlike an independent business, which can be started on a shoestring budget, most franchises require a substantial investment of both time and money. In addition to the initial franchising fee, you’ll also need to pay for things like equipment, supplies, signage, and leasehold improvements. And because you’ll be in competition with other businesses in your area (both franchised and independent), you’ll need to be prepared to spend money on marketing and advertising as well.
How much does it cost to start a Daycare Center business?
If you’re thinking about starting a daycare center, you’re probably wondering how much it’s going to cost. While the answer to that question depends on a number of factors, including the size and location of your business, there are some general estimates you can use as a starting point.
There are many factors to consider when determining the cost of starting a daycare center. The most important factor is location. Rent or mortgage payments will be your largest expenses, so it’s important to choose a space that is both affordable and conveniently located for parents who will be dropping off and picking up their children.
You’ll also need to factor in the cost of furnishings, supplies, and equipment. Depending on the size of your daycare center and the age of the children you’ll be caring for, you may need to purchase cribs, car seats, high chairs, toys, and outdoor play equipment.
Finally, don’t forget to budget for insurance, licensing fees, and marketing costs. Once you’ve considered all of these factors, you can begin to develop a more accurate estimate of the cost of starting a daycare center.
On average, it costs between $10,000 and $50,000 to start a small daycare center. For a larger center, you can expect to pay between $100,000 and $250,000. Of course, these numbers can vary depending on the specifics of your business. For example, if you’re planning to open a center in a major city, you can expect to pay more than if you were opening in a smaller town. Additionally, the cost of leasing or purchasing a building will also impact your overall start-up costs.
Location
The first—and arguably most important—factor to consider when determining the cost of starting a childcare center is location. Rent or mortgage payments will be your largest expenses, so it’s important to choose a space that is both affordable and conveniently located for parents who will be dropping off and picking up their children.
If you’re leasing space for your daycare center, make sure to read the lease carefully before signing anything. You don’t want to be stuck with unexpected costs like repairs or renovations that fall outside of your budget. And be sure to factor in the cost of utilities like electricity, gas, water, and trash service when estimating your monthly expenses.
If you’re purchasing a property for your daycare center, there are additional costs to consider beyond the purchase price of the property itself. You’ll need to budget for closing costs, appraisal fees, inspections, and other miscellaneous costs associated with buying a property. And don’t forget about ongoing maintenance and repair costs—those can add up quickly!
Furnishings & Supplies
Another important factor to consider when calculating the cost of starting a daycare center is furnishings and supplies. Depending on the size of your daycare center and the age of the children you’ll be caring for, you may need to purchase cribs, car seats, high chairs, toys, and outdoor play equipment.
If you plan on serving meals at your daycare center (and most do), you’ll also need to budget for food and kitchen supplies like dishes, silverware, pots and pans, appliances, etc. When estimating these costs, it’s best to err on the side of caution—you don’t want to run out of supplies halfway through the month!
Licensing and Permits
In order to operate legally, you’ll need to obtain any licenses and permits required by your state or local government. The cost of these licenses and permits can vary widely depending on your location and the type of business you’re running. Be sure to budget accordingly.
Insurance
To protect your business in case of an accident or injury, you’ll need to purchase liability insurance. The cost of this insurance will depend on the size and scope of your business, as well as your location. Be sure to get quotes from multiple insurers before making a decision.
Employee Salaries
If you’re planning on hiring employees to help run your childcare center, you’ll need to factor in their salaries. The cost of employee salaries will depend on the number of employees you plan on hiring, their qualifications, and the going rate for child care workers in your area. Be sure to budget accordingly.
Starting a daycare center can be a costly endeavor—but it doesn’t have to break the bank if you’re strategic about it. The most important factor to consider is location—choose a space that is both affordable and convenient for parents who will be dropping off and picking up their children.
How do I find customers for my Daycare Center business?
If you’re thinking about starting a daycare business, you’re not alone. According to the National Association of Child Care Resource & Referral Agencies (NACCRRA), there are approximately 11,700 licensed child care centers in the United States. But with so much competition, how can you make your daycare stand out from the crowd?
The first step is understanding your target market. Who are the parents who will be using your daycare services? What are their needs and wants? What are their pain points? Once you have a good understanding of your target market, you can start to craft a marketing strategy that will attract them.
Figure out who your target market is
As we mentioned above, it’s important to have a good understanding of who your target market is before you start marketing your daycare business. Are you targeting working parents who need full-time child care? Are you targeting stay-at-home parents who are looking for part-time child care? Are you targeting parents with special needs children? Once you know who your target market is, you can start to craft a marketing strategy that will appeal to them.
Develop a unique selling proposition
What makes your daycare business unique? What sets you apart from the other 11,699 licensed daycare businesses in the United States? This is what we call your unique selling proposition (USP). Your USP could be anything from having a staff of certified teachers to offering flexible scheduling options to having a focus on social and emotional development. Once you’ve identified your USP, make sure it’s front and center in all of your marketing materials.
Create a marketing plan
Now that you know who your target market is and what sets your daycare business apart from the competition, it’s time to create a marketing plan. Your marketing plan should include both online and offline marketing activities. Some ideas for online marketing activities include creating a website, starting a blog, and using social media platforms like Facebook, Twitter, and Instagram to promote your business. Offline marketing activities could include hosting open houses, participating in local fairs and festivals, and distributing flyers in local businesses and community centers.
Start with your personal network
The first place you should start when looking for customers for your new business is with your personal network. Talk to your friends, family, and acquaintances and let them know that you’re starting a daycare center. They may know someone who’s looking for child care services, and they’ll be more likely to trust you because they know you personally.
Advertise in local publications
Another good way to find customers for your new daycare center is to advertise in local publications such as parenting magazines or newspapers. Many parents read these types of publications when they’re looking for child care services, so this is a great way to get your name out there. Plus, many publications offer discounts for new businesses, so this can be a cost-effective way to reach potential customers.
Get involved in the community
One of the best ways to attract new customers is by getting involved in the community where your daycare business is located. Attend local meetups for parents, sponsor a little league team, or donate time or resources to a local school or daycare center. When potential customers see that you’re invested in making your community a better place for families, they’ll be more likely to consider using your services.
Use social media
Finally, don’t forget about the power of social media! Create a profile for your daycare center on popular platforms like Facebook and Instagram and start posting about your business. Make sure to use relevant hashtags so that parents can easily find you when they’re searching for child care options online. And be sure to interact with other users regularly so that people will start to remember your name and associate it with quality child care services.
Starting a daycare business can be a great way to help families while also running a successful business. But with so much competition out there, it’s important to take steps to make sure your daycare stands out from the crowd.
