Owning a daycare center is very rewarding. Not only because you are your own boss, but also because you get to be a part of the development for the children you care for in your center. Daycare centers are in very high demand due to the number of parents who are required to work to make ends meet in the household. Not to mention the number of single parents who need to work in order to provide for his or her household.
On average how much does a daycare business make in profit? An in-home based daycare business averages just a little over $13,000 annually. A center-based daycare business averages a little over $75,000 annually.
So what is the average income versus expenses for a daycare center? What is a profit and what affects the profit of a daycare center?
What is the Average Profit for a Home Daycare Center?
A home-based daycare center is beneficial to a stay at home parent whom is trying to make an extra income, or for someone who loves children and wants to give back to the community. A home-based daycare center is a less expensive avenue for a business owner. This is applicable to start-up costs as well as maintaining monthly and annually expenses.
According to VeryWellFamily, The nation’s average income, as of 2020, for an infant is $752 per month or $9,024 per year. VeryWellFamily also states that the nation’s average income for a toddler is $688 per month or $8,256 per year. These rates are an average for licensed home daycare centers.
In a home daycare, the maximum number of children you are able to care for is six children with a cap of two infants. According to Next Insurance, the average annual expenses for an in-home daycare center is $38,000.
So let’s assume that you have the cap of six children with two of those children being infants. According to the nation’s average, that is an average income of $4,256 a month, or $51,072 a year.
So what would your profit be? If your total income is $51,072 and your total expenses are $38,000, then your total profit would equal to $13,072 annually or $1,089 per month.
This is why you want to see what grants apply to your home-based daycare center. There are grants and programs that help with funding so that you can have a successfully operated business. These grants and funding will vary depending on your state and local regulations.
Some in-home daycare centers also provide a preschool program. You will want to get information on your state and local regulations to make sure you are compliant, as well as learn of any funding programs that may be available for your center.
The nation’s average income for a preschool program is $665 per month or $7,976 per year.
What is the Average Profit for a Center-Based Daycare Center?
A center-based daycare is designed for someone who has a desire to care for as many children as possible. The benefit of having a center-based daycare is that you are able to keep your home and work life separate.
VeryWellFamily also explains the average income and average costs for a center-based daycare.The nation’s average income for an infant is $991 per month or $11,892 per year. The nation’s average income for a toddler is $847 per month or $10,164 per year. These rates are also an average for licensed daycare centers.
The nation’s average annual expenses, according to Next Insurance, is $138,000.
Daycare centers provide care for seven or more children. The total amount of children that you are allowed to have on-site will depend on the capacity that is allowed for your building that you have for your center.
Keep in mind that daycare centers have a teacher to child ratio. You will need to get with your state and local requirements to be sure that you are in compliance. The nation’s average teacher to ratio is as follows:
|Nation’s Average Teacher: Child Ratio|
|Age Group||Teacher:Child Ratio||Nation’s Average Max|
So let’s assume that you have 20 children in your daycare center,with six infants and fourteen toddlers. According to the nation’s average, that is an average income of $17,804 per month or $213,648 per year.
If your annual income is $213,648 and your average annual expenses are $138,000, then your annual profit would be $75,648 or $6,304 per month.The more children, you have, the more income you will make, but you will have the additional cost of payroll if you are required to hire an additional teacher. Remember you must adhere to the teacher to child ratio.
Consider the community in which you will have your daycare center. Some areas have higher rates than the nation’s average rates and costs. This will also play a factor as to how much profit you will make.
Remember to check to see what grants and programs qualify for your daycare in your area. The nation’s average cost for preschool is $771 per month or $9,254 per year.
What is a Profit?
Profit is the bottom line that you will look at monthly, quarterly, and annually. Profit is the amount of money that you are actually able to keep once you have covered all expenses for the center.
How is the profit calculated? Total revenue minus total expenses equal to total profit. Revenue will consist of tuition, registration fees, and any grants you may receive that qualifies for your daycare center. Expenses will consist of rent, utilities, food, supplies, equipment, and more.
What Affects Profit?
There are a few things that will affect the profit of your daycare. The first thing to consider is whether you will have a home daycare center or a center-based daycare center. Why does this matter? A home daycare centre tends to be cheaper regarding startup costs, expenses. This usually results in cheaper tuition for the enrollees.
Let’s start with the premises where the daycare center will be located. For a home daycare center, all bills are already calculated. This is because you are not adding any additional expenses since you are currently paying a mortgage, rent, property taxes, utilities, and insurance. Your insurance will more than likely increase since you will be hosting a home business. You may also have to buy a few things needed, such as furniture, equipment, and toys.
For a center-based daycare center, you will have to be able to make the payments for your rent or property taxes if you own the commercial building/lot. Other areas that will affect your profit will be payroll, training costs, utilities, food, equipment, toys, and supplies.
What will you require that the parents provide for their child? Some items that could help with your expenses would be diapers, wipes, a blanket, and a sippy cup. The more the parents provide, the less you will need to spend on items.
Things to Consider:
- Scope out the area. Get to know your community and the area in which you will have your daycare center. You will want to know your competition in the area and the going rates in the area. This will help you deteremine how to set the rates for your business.
- Market and promote your daycare business. Let people know that you are in the area and that you are ready to service them. Keep in mind that you may not have a full roster when you first open up your daycare business.
- Child-proofing is required. Along with the rest of the requirements you will need to adhere to, child-proofing is very important not just for the safety of the children but also so you do not get fined. Safety is very important when it comes to caring for children.
- Maintain a profitable business. In order to maintain a profitable business you will want to make sure everyone including yourself is held accountable, your daycare center is organized, and that you maintain the needs of your customers and business.
- How much insurance will I be required to have for my daycare center?
You will need to speak with your insurance agent. The amount of insurance you will need will be deteremined whether or not you have a home-based or center-based daycare center. Another factor will be if you are providing transportation for the daycare kids.
- How many children will be allowed in my daycare center at one time?
This will be deteremined by the type of daycare business you will operate. If you are operating an in-home daycare business, you will not be allowed to have more than six children. If you have a center-based daycare business, you will need to review your inspection report for capacity. You will also need to review your state and local requirements.
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.