Starting any business from scratch is a daunting task. Beginning a daycare from scratch is even more involved with the required licensing and regulations to make it a safe place for children to be cared for while their parents and guardians are at work for the day.
But have no fear! The “How to Start a Daycare From Scratch” Guide is here!
You will learn to start your daycare from scratch by following these steps.
- Write your business plan.
- Register your daycare.
- Get funding.
- Open a business bank account and credit card.
- Find your daycare’s location.
- License your daycare.
- Meanwhile, build your online presence.
- Hire Daycare Teachers and Teacher’s Aides.
- Furnish your daycare.
Take everything step-by-step. If you are waiting for one step to be finalized, then move on to the next one and follow up with the previous step as needed. In due time, your daycare from scratch will turn into a masterpiece!
Write Your Business Plan
What Does a Business Plan Do For My Daycare?
Before you even step foot into anything else in starting a daycare from scratch, the very first step is to write a business plan. The business plan is your template for success in the industry. It’s the roadmap to how you will reach your goals as a startup daycare. It will be a blueprint that you always fall back on even after opening your daycare for financial, marketing, and operations-based guidance.
A daycare business plan answers questions such as:
- What are your sales projections?
- How will you enroll children into your daycare?
- What will your projected enrollment rates be for when you open your facility?
- What are your marketing techniques for keeping your business afloat?
- What source of funding will you be using to start your business?
How Do I Set Up My Business Plan?
Set up your business plan by following this template below.
- Executive Summary
- Market Overview
- Customer Description
- Who is the Management/Executive Team?
- 3-5 Keys for Success
- Business Classification
- Summary of Start-up Costs
- Your Daycare Services
- Locations and Facilities
- If a family facility, state from out of your home, how big it is, and how you will host daycare services out of your residence.
- Locations and Facilities
- Marketing Analysis
- Market Segmentation
- Target Market Analysis
- Analysis of Service Business
- Competition Analysis and Buying Patterns
- Strategy and Implementation
- Competitive Edge
- Strategy for Sales
- Forecasting of Sales
- Investment in Staff Members (over a few years)
- Break-Even Analysis
- Profit-and-Loss Projection Report
- Cash Flow Projections
- Balance Sheet
- Business Ratio
- Supplementing charts and graphs not included in the business plan.
View this written daycare business plan sample to act as a template for when you write your own plan. This sample plan follows the same format shown above for placing information accordingly.
What If I am Having Trouble Writing My Plan?
If you are having trouble writing the business plan, there are many resources you can use to expedite this vital step. You can:
- Go to sba.gov to access the Small Business Administration’s free virtual course on business plan writing.
- It is only 30 minutes long, so it’s a quick learning resource
- Receive statement samples to use for your business plan
- Income Statement
- Balance Sheet
- Cash flow statement
- Visit your local SBA district or regional offices for in-person assistance.
- Read other sample daycare business plans to get ideas on how to properly and professionally word a business plan.
- Receive statement samples to use for your business plan
Register Your Daycare
Do I Need to Register My Daycare?
If you are doing business as your legal name such as “Sarah Smith’s Daycare”, then you will not need to register your business.
If you are operating under a unique name such as “Sarah’s Sunshine Meadow Child Care Center”, you will have to register your “doing business as” (DBA) name through the state and county offices.
What Are the Key Things I Need to Register My Daycare?
To register your daycare, you must have:
- A registered agent or registered agent service to receive all the correlating documents on behalf of your business. You could do this role yourself, but the work would be easier with someone more experienced.
- About $300 or less for fees to register your business. This depends on your state.
- Apply and be approved for the necessary licenses and permits from your county and/or city to operate your daycare legally.
What is a Federal Tax ID and State Tax ID?
Getting a federal tax ID and state tax ID will ensure that you operating within federal and state government standards, so you can pay your taxes at the end of the year on the earnings you made from providing daycare services.
You can find out more information on how to apply for and receive a federal tax ID and state tax ID by going to this SBA link.
How Do I Know if My DBA is Taken?
Visit your local county clerk’s office to see if your DBA name is taken or not already in your area. If it is already by some chance, you will have to come up with a new and unique DBA name for your daycare.
Which Business Structure Should I Pick?
When you register your business, you will have to pick a business structure.
- Sole Proprietorship
- You are the only person in your business providing the daycare service.
- If your business fails, your personal assets will cover the losses.
- Limited Liability Corporation (LLC)
- Helps to define how operational and financial decisions are made for your business.
- Protects your business greatly even if your state does not require that you form an LLC.
- And there’s more business structures in which you can choose.
- More than likely, you will affiliate your daycare’s business structure as Sole Proprietorship or LLC, but this is up to you!
For more information on business structures, visit here under the business structure section.
- Get Funding
Funding your daycare will be one of the most challenging steps in starting your facility from scratch.
Here are some funding options for your daycare.
- Donations from family and friends.
- GoFundMe page shares with family and friends and other mutual friends.
- Bank loan
- SBA loan
- Government grant for daycare
- Look for companies or notable individuals to invest in your daycare.
Find out more information on starting your daycare with no or minimal funding by visiting Daycare Business Boss.
Open a Business Bank Account and Credit Card
Open a Business Bank Account
Keep your business funding separate from your personal bank account for proper accounting purposes when you file your taxes at the end of the year. Even if you are a sole proprietorship, open a business bank account to keep track of what money you brought in from your daycare. This is to keep it in its special place separate from your W2 or 1099 job money that you may be doing on the side (if applicable).
Business bank accounts usually have 3 different types of accounts that you can hold. For example, Wells Fargo has these accounts available for small businesses.
Simple Business Checking
- Best for small businesses with low cash flow (home daycares with 4 or less kids)
- Must have an average balance of$500 or more in the account to avoid the monthly service fee.
- Make 50 free transactions or less per fee period (any transaction after the 50th will cause a fee)
Business Choice Checking
- Best for growing businesses (larger daycare centers)
- Must have an average balance of $7,500 or more ($10,000 combined in checking and savings) in the account to avoid the monthly service fee.
- Make 200 transactions or less per fee period (any transaction after the 200th will cause a fee).
Platinum Business Checking
- Best for larger and established businesses (daycares with multiple locations).
- Must have an average balance of $25,000 or more ($40,000 combined in checking and savings) in the account to avoid the monthly service fee.
- Make 500 transactions or less per fee period (any transaction after the 500th will cause a fee).
For more information on Wells Fargo small business accounts visit here.
Open a Business Credit Card Account
Open a business credit card account for those unexpected business purchases that may pop up like a maintenance repair, extra supplies for new enrolled students, and more.
Follow these steps to open a business credit card.
- Operate your business for 6 months to a year before trying to apply for a business credit card.
- Know your personal credit card score before starting to shop around. Creditors will use this score to determine that you can handle a business credit card.
- If your personal credit score is too low to be approved for a business credit card, work on it for 6 months to a year to get it increased.
- Make sure your loans and credit cards are paid on time.
- Try to put more than the minimum amount towards a payment.
- Figure out if your employees need cards tied to the same account to make transactions as well. To have better control over the credit card charges, lend the card to your Teachers only upon request.
- Select whether you want business cash back rewards or if you prefer 0% rates on your credit card.
- Shop around for different business credit cards to get the best deal.
- Choose the top 2-3 credit cards that you would be willing to have for your daycare business. Apply for them in the order in which you ranked them. If you are not approved for the top one, apply for the second one after some time has passed (so it does not lower your credit score with too many credit checks), and so forth.
Find Your Daycare’s Location
If you are operating a family daycare out of your home, you can skip this step of looking for your facility’s location.
However, if you are running a center-based daycare center, you will have to find the perfect location for your facility.
Locate Near the Heart of Your City or Town
When you locate your daycare in the heart of your city or town or nearby, this will be convenient for parents to drop off their children and then head straight to work. When you are the hunt for the perfect location, keep in mind:
- Locate nearby restaurants, fast food locations, and retail stores since many low-income parents work these positions and need your subsidized child care services.
- To maybe find a plaza for higher foot traffic to your facility. You never know if parents working the stores at that plaza may require your child care services.
- To find somewhere that is easily accessible and able to be found. If your daycare is difficult to find, it may lessen enrollment rates.
Find a Big Enough Location
Find a big enough location to accommodate the amount of children you wish to have enrolled at your facility. Here are some tips to find a large enough facility:
- Ask a licensing inspector to analyze the property when you visit it for a tour to see how many children can be in the whole building.
- For 5-50 children, find a smaller building, so you are paying less per square foot and making the most use of your space.
- For 50-100 children, find a larger building that is spacious enough to accommodate them while they are in your care.
- For 100 or more children, you may have to find a very large building or separate your daycare into 2 or more locations depending on the building availability in your town or city.
License Your Daycare
License your daycare by following these steps.
- Complete any preliminary orientations.
- Fill out and submit the licensing application on your state’s website.
- Wait for the prescribed time period for you to receive licensure approval.
- Get background checks, fingerprinting, and Mantoux and Tuberculosis tests on all your staff while waiting for licensure approval.
- Have your daycare inspected for health and safety standards.
- Once you receive your license, you can open your daycare’s doors.
Check for more information about licensing your daycare center by visiting Child Care Aware’s website.
Build Your Online Presence
Building your online presence is very important to maintain high enrollment rates, especially when it’s time for children to graduate your program and move on to an elementary school.
- A website and social media accounts will make it easier for parents to search your daycare online to get more information before considering enrollment.
- You can offer daycare applications online for ease of applying.
- For parents of already enrolled children, you can set up online tuition payments for convenient pay options.
- Parents can stay updated on daycare events with posts on your website and social media accounts.
Here are some tips for building your daycare website.
- Use a professional hosting website such as GoDaddy or Wix for ease of website building.
- If you are financially able, hire a freelance website designer to know that you are going to have a stunning website.
- Have these basic pages, so parents can find what they are looking for quickly.
- About Us
- Contact us
- Enroll Your Child
- Pay Tuition
- Run a blog on your website (if you choose) to post general articles about early childhood development to add more value to your daycare’s website.
Get social with these social media tips.
- Use your Facebook daycare account to post updates about events.
- Use your Instagram and/or Pinterest for pictures of:
- Daycare classroom bulletin boards to show the theme for each week.
- Pictures of students doing an activity (be sure all children have a signed form from parents stating that they can be in pictures)
Hire Daycare Teachers and Teacher’s Aides
While it is up to your discretion on who you hire as your staff members, here are some rules of thumb to get you started if you are unsure what qualifications they should hold.
Daycare Teacher Qualifications
- Have Associates and/or Bachelor’s degree in Early Childhood Development or a related field.
- Hold 2-5 years of experience in child care.
- Have 1-3 years of experience in a teaching capacity.
Teacher’s Aide Qualifications
- Studying for an Associates in Early Childhood Development or a related field while working for your daycare center.
- Hold 1-2 years of child care experience.
- Customer service experience or experience in volunteering with children capacity.
Substitute Teacher Aide Qualifications
- Maybe studying for a degree in Early Childhood Development or a related field.
- Hold a year or two of child care experience or working with children at a school.
- Good work ethic to transition into substitute roles seamlessly.
Furnish Your Daycare
Furnish Your Family Daycare
To get your family daycare ready for operation:
- Set an area for the classroom. This could be a guest bedroom that is turned into a daycare classroom.
- Learning posters for the wall.
- Whiteboard for lessons.
- Toy cubbies and age appropriate toys for each classroom.
- Learning rug for circle time.
- Craft supplies and storage areas for them.
- Choose an area in your home as a suitable eating area for meals and snacks. Get a kids’ table and make it look official even inside your home.
- Office area could be a spare bedroom or even your kitchen table
- Printer ink
- Printer paper
- Laptop or desktop
Furnish Your Daycare Center
To furnish your daycare center for operation:
- Designate each room for its specified purpose.
- Largest room in the daycare as the all purpose area.
- As a cafe for meal time.
- Gross motor time for inside play days.
- Classrooms should be about the same size.
- Largest room in the daycare as the all purpose area.
- Office area in the front of the facility after the front entrance
- Printing supplies
- Paper, pens, highlighters.
- All the classroom furniture necessary
- Lounge furniture for the toddlers
- Craft supplies storage
- Toy storage
Open Your Facility!
After all that hard work preparing and waiting for your license to be approved, it’s time to open your facility and welcome the children into your care. Get ready for daily adventures, new learning moments, and unforgettable experiences as a Daycare Owner.
- What if I do not want to have a business credit card?
You do not have to apply for a business credit card if you do not want to do so. This is a backup source of temporary funding if your daycare hits a rough patch financially.
- What if no children are enrolling at my facility?
If no children are enrolling at your facility, try these tips:
- Hold an enrollment day.
- Market not only on social media, but to surrounding businesses that support young children like children’s consignment shops, toy shops, etc. Look for support from small businesses as some larger corporations may not allow soliciting
Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
Now checkout our startup course and documents to start the Daycare of your dreams!