How to Become a Daycare Business Owner

If you are reading this article, odds are you want to open a daycare business. Before you take the plunge, you must know that starting a business (any business) is no easy task. Furthermore, daycare businesses are uniquely complex and demand a lot of effort, time, and money.

However, do not let this discouraged you, as it is also a very rewarding and lucrative industry. Based on recent statistics, the daycare industry is currently a $48 billion business — and it is only expected to grow in the next few years. So, it is safe to say you are on the right track!

Right about now, you must be nodding in agreement. But, you most likely are also wondering how you can make your dream a reality. And while there is no magic formula, I can speak from experience when I say that there are critical elements you must cross-off your list when opening a daycare center.

Below a list of the top six factors to contemplate if you want to become a successful daycare business owner: 

1. Business Structure 
2. Costs & Expenses
3.  Licensing & Insurance Policies 
4. Location/Set-Up 
5. Staff & Personnel 
6. Branding & Marketing

You must understand these six factors as connecting parts of a puzzle and not dissociated pieces if you want to succeed. 

Below I will go over each one of the aspects mentioned above for better understanding:

1. Table of Contents

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   Business Structure 

The first thing you must decide on is what type of daycare center you want to open. Do you want to open a home-based daycare or a small-to-medium daycare based on a commercial facility? After answering this question, you will have a clearer picture of your business structure (e.g., sole proprietorship, partnership, limited liability company (LLC), and cooperation.)

It is important to note that the business entity you pick will affect many factors of your business from size, to your liability, to how much taxes you pay. Once you decide what type of company suits you best, you can move on to other formalities such as:

• Registering your business
• Opening a business account
• Enrolling for taxes

After all of this is taking care of, you can finally start drafting your daycare’s business plan — an important task that requires due diligence as this will determine your success as a business owner.

Here, you will describe your mission and vision statements, organizational plan, operations, budgets, staffing, and more. Think of your business plan as the roadmap you will follow to cross-off each of the elements on your list.

2. Costs and Expenses

Depending on your business’ scope, the initial investment needed to open your daycare ranges from $10,000 to $50,000. This number covers legalities, insurance policies, certifications, supplies, and marketing. However, there might be other business-related expenses and startup costs, such as building renovations, learning software, payroll, and more.

Hence, make sure you dedicate a significant portion of your business plan to outlining and itemizing your costs and expenses and defining strategies that will allow you to effectively manage and secure the necessary funds to open your daycare center.

Some of the fundamental questions that should be covered in your business plan are:

– How are you going to fund your project? (e.g., your own money, a business loan, an investor)

– Will you be applying for daycare grants or other government aid?

– What is your budget, and what does it include?

– How long will it take you to break even?

– What is your predicted revenue over the next two to three years?

– How much money will you charge for tuition?

– How much will you spend on salaries, utilities, rent, etc.?

If you have no idea how to do this or where to start, I genuinely recommend seeking professional help as cash burn is one of the top five reasons why startups fail.

3. Policies & Licensing

Once you have factored in all your costs and expenses, you will need to make sure you have all the necessary licenses, policies, and certifications before opening your doors.

The legalities you need to comply with will depend on the state and city you are located in. Why? Simple. Each state has a child services department that governs and enforces state child care laws. However, most states in the United States will require you to solicit a Childcare License to operate your daycare legally.

Just like you need a license to prove that you know how to drive, you need a Childcare License to show that you have the skills and knowledge necessary to handle children of all ages and the appropriate facilities to keep them safe.

There are two kinds of child care permits, depending on the sort of business you decided on starting:

1.  Family Child Care Home License – designed for daycares that are based on a home.
2. Child Care Center License – designed for daycares who wish to operate from a commercial facility.

Furthermore, although from a professional standpoint, childcare givers often only need a high school diploma or GED, you and your teachers/assistants will also need to take childcare training courses. These training courses are administered by specialized institutions such as the American Red Cross, Newborn Care Specialist Association (NCSA), YMCA, and more.

You will also need to get certified in First Aid, CPR, and AED practices. Remember taking care of children is not an easy task and carries a lot of responsibility.

Lastly, make sure you comply with all business-related insurance requirements. As a rule of thumb, all businesses need insurance. But, when it comes to childcare centers, you can never be too careful! So, aside from the regular General Liability coverage, Property Insurance, and Worker’s Compensation insurance, you will also need a: Professional Liability insurance and Abuse and Molestation coverage.

4. Location & Set-up

Now that you have taken care of all the bureaucracies, it is time to roll up your sleeves, commit to a location, and start setting up!

Purchase any equipment needed for your daycare. In addition to toys, books, and school supplies, you will also need sheets, mats, blankets, child-sized utensils, plates and cups, high chairs, step stools, booster seats, and more.

I suggest you make a detailed list and categorized it base on priorities. By doing so, you will not only stay o budget, but you will also make sure you do not miss any of the vital elements.

Additionally, make sure your facility is up to date with all safety and hygiene regulations.

5. Staff & Personnel

Daycares are as strong and thriving as the people who manage and work in them. Thus, hiring the right staff is crucial in your journey of becoming a successful daycare business owner. To simplify your selection, process an ensure success, you must consider the following elements when deciding whether or not a person is right for the job at hand:

• Qualifications

From a strictly professional standpoint, childcare givers often only need a high school diploma or GED. Nonetheless, you might want your staff to be better qualified. Keep in mind that the better trained your team is, the more attractive your service is to potential customers.

• Soft skills 

Daycares ask for people with a specific set of skills and capabilities. Some of the most important include excellent communicational abilities, a passion for teaching, patient, good problem-solving strategies, physical stamina, and professional presence.

• References 

It would be best if you asked your potential employees for personal references. Taking care of children is a big responsibility, and you shouldn’t take it lightly.

• Background checks 

Screen all potential caregivers very carefully. As you know, negligence or unfit employees can harm children, damage your reputation, and tank your business.

Please note that there may be other things to consider when selecting quality childcare staff. However, based on our experience, the elements mentioned above are the most crucial.

6. Branding & Marketing

Last but not least, considering how you are going to brand and market your daycare. Go back to your mission and vision statement and plan your objectives accordingly. Know that you gathered a lot of the information you need to brand and market your daycare center earlier when drafting your business plan. So, it is now time to use that information to come up with strategies and tactics that will help you reach your target audience.

I suggest you start small by putting up fliers in your community, creating social media profiles and a website, and letting your friends, family, and colleagues know. From there, you can then explore other more complex and costly marketing practices such as online ads, billboards, and more.

Related Questions

• How can I start a daycare business with no money?

In the United States, many ways and methods can help you start a childcare business with no little-to-no money. For instance, you can begin by considering:

– Requesting a Government/Institutional Grant

– Asking for a bank loan

– Securing a Small Business Association (SBA) Loan

– Attracting investors

– Starting a crowd-funding or crowd-sourcing campaign

– Looking for a business partner

– And more

• How much does it cost to rehabilitate a place for it to meet the basic daycare requirements?

Unfortunately, there is no definitive answer to this question, as estimating the costs of remodeling/renovations is one of the hardest things to do. It all depends on the current conditions of the building you are planning on securing and how big you want your daycare to be.

But, consider that on average, expenses could amount to as much as $55,000 or more. Therefore, I recommend doing your homework on local zoning, regulations, and safety requirements before deciding or securing a location.

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.

Become a Daycare Business owner now with this startup course and documents.