How Much Money Do You Make Running A Home Daycare?
Running a home daycare is a great way to use your existing home to earn a living. There are approximately 3,767,000 home-based daycares across America. The majority of these daycares are owned and operated by one person, according to Child Trends. With low overhead costs and a relatively small amount of equipment to buy, home daycares have the potential to make large profits. Let’s find out how much…
The income of home daycare is determined by a few variables, such as how many children you are allowed to care for at once and your operating expenses. If you have children under the age of six, they will count against your total. Licensed childcare providers need to follow the rules and regulations of the Child Care and Early Years Act as well. With that said, home daycares earn between $20,500 and $31,500 per year. Top earners have reported $64,500 annually.
In this article, we will take a look at home daycares, and discuss what goes into calculating the fees of an in-home daycare. We will also examine all of the factors that determine whether your home daycare will make a profit, or if you will lose money.
What Goes Into Calculating the Daily Rate of Your Home Daycare?
The daily rate that you charge per child is the most important factor in determining how much money your home daycare will make. There is a fine line between not charging enough and charging too much. If your daily rate is too low, your home daycare business will end up losing money. Of course, this is not a business model that can sustain itself for very long. However, if you charge too much for your childcare services, you run the risk of possibly losing many children you care for to other daycare providers. Either way, you are shooting yourself in the foot.
Because several different factors go into configuring your daily rate for your services, you will find that the daily rates of home daycare services have quite a bit of fluctuation. Your home daycare should be charging anywhere between $700 and $900 per month, per child. One expense that can factor into your daily rate is the start-up cost for your home daycare. For example, your house may not be daycare-ready, and you will have to come out-of-pocket for these adjustments. You must also factor in other operating expenses, such as liability insurance, food costs, additional equipment expenses, increased utility expenses, and possibly additional labor costs.
Another thing to consider when determining the daily rate of your home daycare center is the level of training you or your staff may have in comparison with other centers in your area. For example, if you have a college degree, and you are certified in early childhood education, you will be able to charge more for your services because of the level of teaching you provide. However, most parents usually do not expect this level of training in a home-based daycare. If you are looking for a niche for your daycare, this can be what sets you apart from the others. As a parent of three, I can tell you that I do not mind paying more for childcare services if my children are receiving an adequate amount of teaching, as opposed to merely being occupied.
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What Are the Operating Expenses of a Home Daycare?
Just like any other business, your home daycare is going to have certain operating expenses. However, what separates your home daycare from other businesses is the relatively low amount of overhead involved in operating an in-home daycare. This is great news for parents because we all know that operating expenses are always passed on to the customer. Lack of overhead expenses is one of the primary reasons that home daycare services are much less expensive than traditional daycare centers.
Yet another reason that you can charge far less than traditional daycare centers for child care services is the lack of rent you will have to pay for an additional space. Unless your home is paid in full, I’m sure that you will have a mortgage. However, your mortgage would not be considered an operating expense because this is a monthly payment you will have to make, regardless of whether or not you are running a home daycare center out of it. Fortunately, according to EZ Child Track, you are allowed to claim a portion of your insurance, utilities, and mortgage on your federal income taxes, which leads me to the next operating expense of a home daycare.
One of the most substantial operating expenses you will incur by owning a home daycare center is going to be your utilities. This is normally chalked up to the cost of being in business. While your electricity bill may not see that much of an increase, your water bill is bound to go up due to all of the extra flushing and hand washing. If you have natural gas, you can also expect to see an increase in your gas bill due to all of the extra cooking you will have to do for the children in your care. However, if you are mindful of your utilities, you can mitigate the damage to your bill. This may require a little extra work on your part, but the money you save will be well worth it in the end.
While this may differ from state to state, insurance is usually not required to run a home daycare. However, I would strongly advise carrying at least a good general liability policy. Chances are, you already have insurance on your home. Make sure that your existing policy will cover any incidents that may occur as a result of running a daycare out of your home. According to American Family Insurance, you will have to carry a liability policy if you want your home daycare center to be licensed. Because the additional premiums are not something you would normally have to pay, this is an operating expense that will go into determining your weekly or monthly rate per child.
In conclusion, while the rates may fluctuate depending on certain variables, the suggested monthly rate should fall between $700 and $900 per child. Home daycare providers generally make anywhere between $20,500 and $31,500 per year. These rates are configured by factoring in operating expenses such as utilities and insurance, although home daycares typically do not have any overhead expenses. The main reasons that parents choose home daycares over traditional daycare centers is because of the individualized attention that their children will receive, as well as the relatively low rates that they can charge.
Is a business license required to run a home daycare center? While traditional daycare centers require their center and their people to be licensed, home daycares that care for only one or two children are not required to have a business license. If you are caring for more than two children, you may need to be a licensed daycare provider. Rules governing whether or not you will need a business license are determined on a state-by-state basis.
Does the area in which a home daycare operates need to be zoned for this type of business? Because home daycares are businesses that operate in a residential area, certain zoning laws dictate that specific rules and regulations must be followed. Speaking matter-of-factly, some of these rules and regulations apply only to home daycares, and not to traditional daycare centers. Most of these laws were implemented because of the unique circumstances involved in operating a home-based business in a residential area.
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.
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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.