A business plan is a guide that helps a business find direction. If you are starting a daycare, you may want to know whether a business plan is necessary. Simply stated, whether for personal use or for obtaining funding, a business plan is highly recommended.
If you intend to apply for a business loan or pitch your idea to investors, you will need a complete, formal business plan. Formal business plans may be dozens of pages in length because banks and certain investors require plenty of information. If you are not applying for a loan or seeking investors, it is still highly recommended that you create a business plan. Make sure to cover the basics, such as:
- Structure and Setup – Legal Structure, Number of Owners, Home-Based or Center, etc.
- Financial Plan – Startup Costs, Projections, Expenses, etc.
- Marketing Plan – Strategies, Budgets, Promotions, etc.
- Plan of Operations – Number of Employees, Number of Kids, Daycare Curriculum, etc.
Including these details in your business plan will help you reach your goals for growth and revenue, so you should create at least a simple business plan regardless of how you intend to finance your business. If you need help putting a business plan together, get professional advice from an accountant, lawyer, or even a business plan writer. Without a business plan:
- You are more likely to become unorganized within the business.
- You could end up spending more on startup costs and monthly expenses. This means your profit potential will go down because a financial plan has not been created.
- You’ll need more staff and more advising to help you get the business on track, which will also hurt your profit potential.
Create your structure and setup, financial plan, marketing plan, and a plan of operations to get your business plan together. Add as many more areas of detail as needed, as that will be beneficial to you in the long term. The more detailed the better.
Structure and Setup
It is crucial to choose a legal structure for your business. Decide whether the daycare will operate as a sole proprietorship, a limited liability company (LLC), or even a corporation. If there are any other owners besides yourself, clearly define how ownership is split between all parties. Also, make sure you understand how you will be taxed under your daycare’s legal structure.
Home versus Center
The types of daycare businesses can vary from a small-scale, home-based setup to a large, stand-alone daycare center with kids in many different age ranges. In your business plan, make sure to disclose the following:
- Home-Based or Center-Based Location
- Square Footage
- Zoning Details
- Other Details: Number of Bathrooms, AC/Heating System, etc.
Include any other information on the location of the daycare that needs to be known or addressed when setting up and running the business. In some states, licensing may not be required in home-based daycare businesses that are taking care of just a few children.
Additional Licensing and Certifications
Your business plan should contain information about all the proper licensing and certifications needed to open the daycare. To access all licensing requirements, visit www.daycare.com/states.html to reference the provided information.
You must account for everything needed to get the daycare started. Account for as many expenses as possible for tax purposes. Some daycare startup costs are:
- Business Filing Fees (Articles of Incorporation, etc.)
- Salaries and Wages
- Kitchen Equipment
- Learning Supplies
- Playground Equipment
- Local Advertisement
- Cleaning Supplies
- Accounting Fees (Accountant or Software)
- Rent/Mortgage of Daycare Location
The more expenses you can account for, the better. Also, be sure to determine your monthly costs. That way, you can keep track of how much it costs to run your business each month.
If you need to hire an accountant, include this in your simple business plan and explain what services they are providing. Otherwise, using accounting software can help you keep track of your financial records. You may need an accountant to help you with income projections for your business plan. These projections are useful for scaling your daycare business in the future.
Your daycare’s legal structure will determine how your business is taxed. LLCs and sole proprietorships with DBAs are subject to self-employment taxes. Corporations can undergo double taxation if not registered as an S-Corporation.
You should explain your financing for your starting capital in your business plan, regardless of whether your plan is formal or simple. Funding can come from many places, such as savings, crowdfunding, a business loan or line of credit, private investments, or even angel investments.
Marketing your business is very important, especially as you’re starting up your daycare. In your simple business plan, outline the strategies you will use to increase enrollment in your daycare. Since your business is local, you will need a marketing plan that strategically targets your city or town.
Ways to Get Children Enrolled
- Grand Opening – Make the opening of your daycare a welcoming event with refreshments for all in attendance. Be sure to have plenty of activities for children in the age ranges you accept in your daycare. Have all the information that parents will want to know readily available, and you’ll establish trust with the parents.
- Targeted Online Advertising – Even local businesses can thrive from online and social media ads. Just be sure to customize your ads specifically to those who are ideal for your daycare. It may be best to target parents in your area, with children in a specific age range.
- Local Advertising – Newspaper ads can still work for local businesses. Business cards are great and can be posted or distributed everywhere. Network at every possible chance you get and find local events where plenty of parents plan to attend.
Set a budget aside for all your marketing plans and break down the budget in your business plan, if not already broken down in your financial plan. Pay attention to things like:
- Conversion – the percentage of those who enrolled their children in your daycare of all the parents that inquired
- Cost Per Client – how much it costs to gain each new enrollment
Experiment with different marketing ideas to test out what works best for your business. Be sure to include the ideas you are testing in your business plan to make it easier to budget for the most effective strategies.
Your system of operations can gain the trust of parents and influence enrollment. Be clear on how almost everything will be carried out. There are a few areas to consider:
Policies will keep things in order in the daycare. Having procedures in place for staff, daycare structure, payment, children’s requirements, parent responsibilities, late pickup, and more will help operations run more smoothly.
Curriculum and Schedule
Include in your business plan what you plan to teach the children. Parents have much more trust in daycare centers that offer an excellent education for small children. In the business plan, explain your curriculum and include scheduling. Parents prefer daycares that outline their child’s whole day, so think beyond class time. Detail what a typical day consists of for the children your daycare.
Make sure you have the right ratio of staff to children within your daycare. Explain in the business plan how you will hire your staff and what qualifications they need. Guidelines, policies, and action plans should be in place for employees and noted in business planning.
Business plans are not necessarily required for starting a daycare business. However, having a business plan is strongly recommended, even if it is just a simple version. At the very least, include your structure and setup, financial plan, marketing plan, and plan for operations. You don’t want to start a daycare business by doing things “on the fly.” A lack of preparation will only make the process more time consuming or costly.
What are some useful tools and resources to help plan out my daycare business?
- For accounting software, I highly recommend QuickBooks software. You can access a real, live accountant for additional help within the software if needed.
- For business plan help, try software like LivePlan or seek assistance from an experienced freelancer.
- For daycare requirements, refer to www.daycare.com for points of contact and information about required licensing.
Why doesn’t an angel investor need a formal business plan?
Angel investors are usually those within your community who support your business. Since you aren’t “pitching” an idea to your angel investor, you may not need to create a formal business plan for them.
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.
If you are serious about starting a daycare business, check out our resources on this very topic! Click here.