How Much Money Do You Need to Open a Daycare Center?

When you are planning out your new business endeavors, it is important to consider finances in your plans. Lack of money causes some of life’s most difficult struggles – whether that is about education, marriage, or even businesses.

You will need between $10,000 and $100,000 to open a daycare center, depending on the type of center you are planning to open. This amount could be even higher if you are opening an expensive daycare franchise or if you have to deal with extreme renovations in your new daycare building.

There are multiple facets of finance to keep in mind that will help you both have a more accurate start-up expense goal and decrease that required amount to be as low as possible. Read on to make sure you are as prepared as possible to have the most cost-effective daycare business opening.

How Much Money Do You Need to Open a Daycare Franchise?

How Much Money Do You Need to Open a Daycare Center?Potentially, much more than the original $10,000 to $100,000 that we quoted you.

If you are looking at a more expensive daycare business franchise, you likely have the promise of large financial gain ahead of you. Unfortunately, this comes with a large down payment that you will have to sort out.

This could be in the multi-millions, so be sure you have a clear answer for how much your potential franchise effort will cost you. It is one thing to be out some money from a new effort, it is quite another to be in multiple million dollars’ worth of debt.

How Much Money Do You Need to Open a Home Daycare?

A home daycare business will likely be on the lower end of the $10,000 to $100,000 scale we originally offered. While you may have to make some changes to your space and even have some inspections completed to prove its worthiness, you won’t be purchasing a new property.

Buying or renting a building will likely have you spending a larger amount than inviting children into your homeworld. However, it does come with its own benefits too.

Benefits of Buying or Renting a Separate Daycare Building:

    • No invasion of space.

When you invite children into your home, you are welcoming others into your safe space. As much as you might try to contain them in specific rooms, they may eventually wander into other areas.

This can be a challenge not only for you personally but for others who may live in your home who desire a safe space away from others to work and play.

    • No invasion of privacy.

Not only does inviting children into your home invade your space, but it could invade your privacy on off-hours as well.
This means every child who attends your center (and their parents!) will know where you live, where you eat dinner, and where you sleep at night.
This could be an issue if anyone is ever disgruntled with your services and wants to cause you trouble. It could also be a problem for those who have trouble understanding healthy boundaries and want to visit you during off-hours.

    • Separate spaces can be good for your mental state.

Finally, having separate spaces for your work and relaxation can be very healthy. This allows you to decompress when you are home without being stressed about what happened in that space that day. It also may help you to keep what happens at work, actually at work.
Benefits of a Home Daycare Center
While it’s important to note the many ways a home daycare may not be ideal for all business owners, we must also highlight the ways it may actually be the best option out there.

    • You will save money not buying a building.

How Much Money Do You Need to Open a Daycare Center?A building may be nice to have, but it will also cost you! When you invite children to your home for daycare, you only need to worry about necessary inspections and licensing.

Once your home daycare is approved, you will be able to start right away! This can be a huge incentive over waiting for a building to be built, renovated, or officially purchased.

    • It is much more convenient than commuting.

Another benefit of a home daycare center is you do not have to commute each day. In fact, you don’t even necessarily have to get dressed up! Your children and parents will get used to how you operate each day; as long as you provide a quality business, they likely won’t care if you do your job in sweatpants.

    • You can be a bit more flexible with your availability.

While you may not be able to take on as many children in your home space as you might in a separate center, there is the added benefit that you may be able to take last-minute gigs.

You may not prefer to operate your business this way, but if you decide to watch any children on your off-hours, they will already be used to your space and routine. This may provide extra cash flow to your business, even unexpectedly!

Daycare Center Renovations

One of the most important aspects to pay attention to if you decide to purchase a building is whether or not it needs renovations. And if it does require renovations, how much work does it actually need?

It is not impossible to find a cheap building option out there for your daycare center, but you need to make extra sure you understand all of the needs of the building.

Does it need a new roof? Are all of the walls structurally sound? What major updates will it need and when? These questions and more will help you understand the full cost of the structure beyond what the realtor is telling you the purchase price is.

This will not only be important for you to know for the future financial plans you will write down in your business plan, but also for any lender or grant information that you may fill out.

Grant and Loans for Opening a Daycare Center

How Much Money Do You Need to Open a Daycare Center?Speaking of lender and grant information… don’t forget that there may be options out there for you to get access to money as you are starting in your daycare business!

There may be lenders out there who are willing to invest in your daycare endeavor. They will help you out with funding in the beginning and you will be able to pay them back in smaller amounts down the road. Just be sure that you understand and are okay with any interest fees they may be charging you.

There also may be people willing to give you money as a gift. These gifts are called grants.

Sometimes grants will be given due to financial need, type of business, or even location of the proposed business. Be sure to check with your local, state, and national business organizations to see if there are any grants available to help in your specific situation.

Save Money by Planning Ahead

One of the best ways you can save money for your future business is by planning.

How Much Money Do You Need to Open a Daycare Center?This means writing out a business plan which includes every step of your proposed business. Specifically, you will want to outline every facet of your potential finances.

This can be somewhat difficult as you might not have all of the answers needed to outline something like this. Regardless, you need to do your absolute best to guess. It all needs to be in there:

    • How much will families be charged to send their children to your center?
    • How much money will you need to spend on materials?
    • How much money do you need to get your new center officially licensed?

It may be helpful to ask other daycare centers in other areas of the country what they wish they would have thought of when they were just starting. The more information you have going into your endeavor, the better.

When you draft out a plan for your finances ahead of time, you will have a clearer picture of what is possible for your business in the long run.

Check out some of our budget tips HERE!

Related Questions:

How many staff members should I hire for my daycare center?
There are no “one sized fits all” answer to this question. Quite simply, some daycare centers will require more staff than others.

You need to find the sweet spot between having the needs of your children taken care of effectively and not losing money because you have too many staff. Here are some questions to take into consideration when searching for that “sweet spot:”

  • How many staff can I afford?
  • How many children will we take care of at max capacity?
  • How many hours will staff work?
  • Will staff be full time or part-time?
  • Will I pay benefits for any of our staff?
  • How many children are on our waitlist?

How can I get the word out about my daycare center?
The internet will be a helpful tool for you to spread the word about your new daycare center.

Even if you are not very social media savvy, you will want to set up profiles on all of the popular platforms, even just to make an initial post, add your daycare location, and add some contact information.

This will help anyone who stumbles along with your daycare profile in the future to reach out to you to learn more.

You will also likely want to set up a website as a central hub for information about your center. Once you have your site set up, contact your local newspaper to schedule a press release.

In the article, make sure you have some sort of discount or incentive to urge people back to your website to sign them up for more information or future emails. This will not only get people to your site but get them on your email list for years to come.

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.