If this article caught your attention, it is because you are considering opening a daycare business. However, you might be hesitant as to whether or not it is a good idea. And while that heavily depends on several factors ranging from personal goals to financial possibilities, certain things can help you decide.
Opening a daycare is a good idea if you have a passion for children and are looking for a lucrative business opportunity. The childcare industry is a multibillion sector that is only expected to grow in the foreseeable future. Plus, daycare centers come with other significant advantages, including limited startup costs, manageable schedules, minimal education requirements, tax breaks/exemptions, and high emotional and personal rewards.
Nonetheless, like any other business endeavor, opening a childcare center also has its downsides. Thus, make sure you know what you are getting into before taking the plunge.
Pros & Cons of Starting a Daycare
Daycare businesses are a lot of work! Thus, before you set your mind on opening a childcare center, you might want to examine the pros and cons of starting this type of endeavor.
Let’s start with the advantages or reasons why starting a daycare can be a good idea:
1. Lucrative business
Undoubtedly one of the most sought of benefits is profitability. And daycare centers, if managed appropriately, can be highly lucrative businesses. On average, a daycare center can expect an average salary of nearly $40,000, which, according to the Bureau of Labor Statistics, is above the median personal income in the United States.
But, we will go more in-depth about the profitability of a daycare business in the following section.
2. Limited startup costs
When compared to other business endeavors, the capital needed to start a daycare business is considerably low. Depending on the scope, the childcare center’s initial investment ranges between $10,000 to $50,000. This sum includes legal fees, insurance policies, certifications, supplies, labor costs, and marketing.
3. Manageable schedule
Another great benefit of owning a daycare center is that your schedule will be very manageable. Most daycare centers operate only Monday to Fridays from 8 AM-5 PM, most Americans’ regular work schedules. Plus, you do not need to worry about extra time or hours, as it is implausible that children will stay in your care past 5 PM.
Lastly, daycare owners and workers usually follow the school year calendar, which means that you can enjoy long summer vacations and expect to have all major holidays free.
4. Minimal education requirements
From a strictly professional standpoint, childcare givers only need a high school diploma or GED. More so, many local community colleges and hospitals offer low-priced courses to assist potential workers in learning the essentials.
Nonetheless, you want your staff to be better prepared. As you know, the better trained your daycare worker is, the more attractive your service is to potential clients.
5. Tax Breaks
Home-based daycares and childcare businesses licensed by the state often benefit from full or partial tax deductions for meals, maintenance, property taxes, mortgage interests, and more.
Thus, make sure you seek professional advice regarding tax breaks and tax filings.
Learn about government grants HERE!
6. Emotional Reward
Owning and operating a daycare has many personal and emotional advantages. When you spend most of your day with children, you appreciate the simple things in life, like health and friendships. The environment is filled with laughter, color, and positive energy, and you do not need to stress about meetings, copious amounts of paperwork, or a hostile work environment.
Furthermore, working with children also teaches you to be patient, improves your ability to communicate, and can help you develop other soft skills such as good problem-solving strategies.
However, like every business endeavor opening a daycare also has its drawbacks. Below some of the most important:
1. High responsibility
Caring for children is not something you can take lightly. Opening a daycare comes with high responsibility, and states tend to have very stringent laws and regulations regarding what you can and cannot do when running a childcare facility.
More so, you need to be very attentive to whom you hire. Daycares are as successful and dependable as the people who manage and work in them. Thus, it is advisable to always ask for previous job references and screen all potential caregivers very carefully.
Note that negligent or unfit employees can harm children, damage your reputation, and tank your business.
2. Stringent legal requirements
As we mentioned above, depending on the state, you will need to comply with certain legalities to successfully and legitimately operate a daycare center.
The legal requirements you need to comply with will vary based on the state and city you are operating. Thus, make sure you know and understand your state’s child care laws. However, most states will require all daycare businesses to solicit a Childcare License to operate legally.
Why? Simple. Just as you need a license to demonstrate that you can drive, you require a Childcare License to prove that you have the skills and knowledge necessary to supervise and care for children and the appropriate facilities to keep them safe.
Plus, you will also need to comply with all business-related insurance requirements. All businesses need insurance! But, when it comes to daycare, you can never be too careful.
Therefore, aside from the regular General Liability coverage, Property Insurance, and Worker’s Compensation insurance, you will also require Professional Liability insurance and Abuse and Molestation coverage.
3. More prone to getting sick
It is no secret that children tend to get sick… a lot! More so, when it is flu season or the weather gets colder. Plus, small children tend to touch everything that crosses their path, making them more volatile to catching viruses and infections.
As a result, as an owner or worker at a daycare center, your chances of getting sick can be higher than with an office job.
However, there are many ways in which you can lower the risk of contagion, such as:
Making sure rooms, playing areas, supplies, bathrooms, and toys are regularly cleaned and disinfected
Washing your hands constantly
Encouraging parents not to drop off their children if they are feeling sick or under the weather
Boosting your immune system through healthy eating habits
4. Demanding job
As a daycare owner, you are ultimately responsible for everything that goes on at the center. You will need to take care of all financial and bureaucratic affairs, supervise staff, coordinate schedules, order supplies, tend to parents, and have many other tasks and responsibilities.
Consequently, it is safe to say that running a daycare is a very demanding job. So, we suggest you hire professionals who can help you organize and manage your business more effectively (e.g., lawyer, accountant, assistant) and do not attempt to do everything on your own.
5. Highly competitive market
Another critical disadvantage or challenge of opening a daycare is that you will be entering a highly competitive market. There are over 750,000 daycare centers in the United States, and the demand for child care services is only expected to continue growing.
As a result, more and more daycare facilities will open, and you would need to fight harder for a piece of the pie.
Hence, it is imperative that you conduct market research and analyze whether or not opening a daycare would be right for you.
The Profitability of Daycares
A recent report from IBIS World suggests that throughout five years, revenue in the daycare industry has grown at an annualized rate of 4.0% to $57.0B — 2.9% in 2019 alone.
Plus, as of January of 2020, according to the Economic Policy Institute, in the country, parents with children under the age of five spend a total of $42B for early child care and education, such as preschool programs and daycare centers.
As a result, it is safe to say that daycare centers can be highly lucrative businesses. Depending on location, size, and demand, daycare center owners can expect to reel in between $25,000 – $75,000 a year in net profits.
1. How much money is needed to start a daycare business?
Depending on the scope, a daycare’s initial investment ranges between $10,000 to $50,000. This figure includes legalities, insurance policies, certifications, supplies, and marketing.
Please note that other expenses may include building renovations, payroll, and additional administrative costs to consider.
2. How can I start a daycare business with no money?
Various methods can help you start a childcare business with little-to-no money, such as:
– Requesting a Government/Institutional Grant
– Asking for a bank loan
– Obtaining a Small Business Association (SBA) Loan
– Drawing investors or business partners
– Starting a crowd-funding or crowd-sourcing campaign
– And more
3. Are outside playgrounds required in all daycare centers?
No law explicitly requires you to have an outdoor playing area. But playing outside is essential for the development of children. Hence, it would be best if you tried to habilitate a safe place outside of the classroom, where children can freely run, jump, and play.
However, know that other regulations and safety issues could apply (depending on your state) if you are a licensed daycare.
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.