If you are asking yourself this question, you have probably already decided to open your own daycare business. Congratulations on your new adventure!
How much money can a daycare owner really make?
Daycare owners average between $20,000 and 40,000 per year. There is not an exact number because your income depends on where you live, how many children you can take in, and your expenses.
In this article, I will break down some of the income and expense considerations so you are armed with the knowledge that will help you start making money.
How Much Money You Can Make
First, all businesses have what are known as “startup costs.” This is the money you need to invest before opening your business.
For daycare owners, each state has its own laws and regulations that you must abide by to care for children. Most states require special licenses, certifications, training, insurances, and inspections.
Teaching certification may be desirable for pre-kindergarten aged children. Certain certifications may make you more marketable as well. Speaking of marketable, you might also have to invest in advertising to get your name out there. More on that later.
After researching what is required by your state, you will have an idea of how much it will cost you to get started legally. It will give you an idea of what your actual start-up costs will be and any additional monthly expenses you might incur.
Licenses, Insurance, and Certifications
As I stated above, your state will require you to obtain certain licenses, Insurances, and certified training to care for your precious children. Contact the appropriate agencies in your state to find out what you are required to have. Here is a list of some of the most common requirements:
- Liability Insurance for unforeseen circumstances and accidents
- Commercial Auto Insurance
- Supplemental Homeowner’s Insurance
- Worker’s Compensation Insurance
- CPR and First Aid Certifications
- Physical Property Inspections
- Department of Health Compliance
- Errors and Omissions Insurance
- Early Childhood Development Education and Certifications
- Life, Accident, and Health Insurances
If you want to provide quality care to young children, you will want to make sure you are well educated and thoroughly prepared. You are, however, asking parents to trust you with their most precious gifts.
The Number Of Children You Can Have
Your primary source of income will obviously be derived from parents that place their children with you. Most states have a maximum number of children per caregiver. This is usually referred to as the “child-to-caregiver ratio.” There will also be a requirement of how much space you will need and safety protocols.
If you are caring for young children, you will probably need some food, toys, and other supplies that will need to be replenished often, as well. It is a good idea to have a monthly budget in mind for these expenses.
When you know a lot of the expenses you will incur, you will have a better idea of how much you should charge parents to cover those expenses and still have money left over to put in your own pocket. After all, nobody can work for free.
Keep in mind that you are not going to have a full house immediately. It takes time to build a profitable business, but it is worth it in the long run if you are doing what you love!
Demand In Your Area
Do you live in a big city or a small town? Are there many young families near you? How many other childcare providers are close to you and what are their rates?
These are just a few questions to ask yourself to help decide how you are going to get children in your door.
As a mother myself who needed childcare when my kids were young, I wanted a qualified, trustworthy childcare provider that was also convenient for drop off and pick up. Location, location, location!
Ask friends, family, coworkers, and search other childcare providers near you. Make sure you do your research to find out where your market and competition is located.
Advertising And Marketing
How are you going to get your name out there and draw parents in? Simple answer, advertising, and marketing. First, you have to decide what you are going to call your business. From a marketing standpoint, your name is your first impression so get creative.
Decide on a logo and create business cards. Vista Print is a very inexpensive way to do this. You also do not need to be an artist. They have templates to help get you started with the design. Again, be creative!
Once you have figured out your name and logo, you are ready to put it out into the world. Nowadays, there are several ways to advertise and a lot of them are free. Cue social media!
- Create a LinkedIn profile
- Create a Business Facebook page and invite all your friends to “like” it
- Look into building a professional website
- Network in your community
- Visit anywhere they have children (e.g., churches, libraries, and camps)
- Talk to your friends, family, and neighbors
Follow your checkbook! The places you regularly patronize may allow you to leave some business cards, flyers, or brochures in the common areas. There are also many bulletin boards in places like libraries and churches where you can tack up your information for free. Just ask!
Check out our advertising tips HERE!
Bookkeeping and Finances
Find a CPA and an attorney to help you legally set up your business. There are several ways to set yourself up as an entity that can help protect you from personal liability and start tax planning.
Before you start collecting money from parents, get some sort of bookkeeping software, like Quickbooks, to track your income and expenses. You will find that many of your business expenses are deductible, but you must keep accurate records.
You will also be able to create invoices for parents and print checks to pay business expenses. It is also a good idea to open a separate business account. You should keep business and personal transactions separate to help your CPA determine deductibility.
If you are planning on running your daycare business out of your home, you will want to learn about what you can and cannot do for tax planning purposes. Again, find a CPA to advise you.
How Much To Charge For Your Services
The answer to this depends on your location. It also depends on demand, how much competition you have, and how much money you need to make.
Do some research. Call a few other providers near you and inquire about their rates. You will want to stay within market rates to give people some incentive to have a conversation with you.
The first thing most of us, as consumers, are concerned with is cost. This might be the very first question a prospective parent asks you. A good way to answer that question would be “It depends on what you are looking for. I would be happy to set up a time to discuss further.”
You should consider having different types of rates. Do not try to anticipate or assume a family’s needs. We all have different circumstances. Some examples of how daycare providers charge are:
- Hourly rates for part-time children
- Weekly flat rates for full-time care
- Rates based on the age of the child
Set your work hours, as well. You will need to consider early mornings and later evening hours. Be flexible with parents because things happen, but do not let them take advantage. If a parent is consistently late picking up, for example, you may need to have a discussion or charge an overtime rate.
Is My Business Going to Provide Steady Income?
Not necessarily. Especially in the beginning. Daycare businesses can be a revolving door. As the children reach school age, parents are probably not going to need full-time private childcare.
It may be wise to make sure you have the ability to care for a diverse age group of youngsters. There are a lot of childcare providers that take children from ages 6 weeks through 5 years. Some providers will also take school-age children before school and after school hours.
If you provide excellent care, your parents will stay loyal to you throughout the years. Most will become your friends and refer you to other parents looking for your services. A win-win!
Are Daycare Businesses Profitable?
If you are committed to building a successful business, you will eventually become profitable. Putting the right business plan in place is crucial. Create your vision or “mission statement” and write it down.
Once you put your plan in writing, post it where you can read it every single day. It will keep you reminded of why you are doing this in the first place.
I know this is a lot of information, but once you know exactly what you must do, you can focus on doing what you love – providing a loving, safe environment to help our children grow! Best of luck!
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.
To learn more on how to start your own daycare checkout my startup course and documents here.
Meet Shawn Chun: Entrepreneur and Childcare Business Fan.
I’m a happy individual who happens to be an entrepreneur. I have owned several types of businesses in my life from a coffee shop to an import and export business to an online review business plus a few more and now I create online daycare business resources for those interested in starting new ventures. It’s demanding work but I love it. I do it for those passionate about their business and their goals. That’s why when I meet a childcare business owner, I see myself. I know how hard the struggle is to retain clients, find good employees and keep the business growing all while trying to stay competitive.
That’s why I created Daycare Business Boss: I want to help childcare business owners like you build a thriving business that brings you endless joy and supports your ideal lifestyle.