The Risks of Starting a Daycare

While there are certainly many positive aspects of starting a daycare, it is important to consider the risks assumed by business owners. Because of the extensive legal process involved in the creation of a child care center, the risk of not receiving proper licensing or training is present. Additionally, once the daycare is running, there is a constant risk of health and safety concerns, as well as enrollment and staffing issues that may arise. Further, as with any business, financial challenges also pose a significant risk to new daycare facilities.

The risks of starting a daycare include insurance issues, regulatory noncompliance, legal liabilities, understaffing, safety problems, and licensing difficulty. Many daycare owners can expect to address some of these challenges, especially when first starting up. However, with a deeper understanding of the risks involved, they can be greatly mitigated.

Legal and Licensing Risks

Starting a daycare requires the acquisition of licenses, which consists of a particular process that varies by state. Although these processes can be different depending on where one wants to start a daycare, many state licenses share similar aspects. In order to comply with the relevant laws, orientations, inspections, consultations, and a certain set of educational qualifications are required.

Because this can be a lengthy process with lots of different parts at play, there is risk involved. Failing to comply with state regulations and specific daycare-related guidelines can result in legal consequences. If an inspection is failed or if a complaint is filed against a daycare center, an investigation is conducted by a licensing analyst. The analyst concludes an investigation with a report that states whether the complaint was unfounded, inconclusive, or substantiated. If the complaint turns out to be untrue, it is considered to be unfounded. If the legitimacy of the complaint cannot be proven, it is inconclusive. Lastly, if it is determined that the daycare broke the law, the complaint is categorized as substantiated.

Reports that result from such investigations become a part of the daycare’s public file. Consequences may include a citation or a civil case. Further, licenses may be revoked or suspended if laws or regulations are not followed.

In order to lessen the risk of licensing issues, those starting a daycare should be very careful to follow all appropriate guidelines. Thus, it is important to follow fire safety requirements, respect the personal rights of children, prepare food properly, and comply with building regulations.

Staffing and Enrollment

Maintaining the appropriate number of staff, as well as ensuring their qualifications, is a key part of reducing risk. Daycare owners risk licensing and legal consequences for understaffing or hiring unqualified individuals. There are specific child-to-adult ratios that are strictly enforced in each state. Noncompliance with these regulations can result in fines or closure.

Staff members must be properly screened, background checked, and have references verified. The Department of Health and Human Services’ Administration for Children and Families outlines the ratio guidelines. Additionally, they explain why it is important to childhood development. Low child-to-adult ratios ensure that children receive sufficient one-on-one care needed to address their unique needs. More personalized treatment results from low child-to-adult ratios. Consequently, children may feel less overwhelmed and are made more comfortable in a daycare environment.

For infants, a trained child caregiver should not supervise more than three to four children. The ratio increases with age, as school-age children need only one trained adult per every ten to twelve children. Although these numbers may change slightly depending on state guidelines, it is the recommendation by child care experts with the Administration for Children and Families.

Low child-to-adult ratios are an important part of reducing risk because it decreases the chances of injury or illness occurring, If a smaller number of children are supervised by a larger number of adults, they can be supervised much more closely. Thus, they can better ensure a safe and healthy environment for children. Risk is lessened because, without such close supervision, an injury may occur, which increases business liability.

Enrollment issues may also arise, which could pose additional risk. It is important to only supervise the number of children that the facility is approved to care for. This is based on the size of the daycare and the resources available at the facility.

Accepting more students than the daycare is approved for can result in fines or suspensions, as well as potential additional legal action. Because of this risk, daycares should always be sure to keep enrollment below full capacity. However, it may be a good idea to maintain a waitlist, which would help keep enrollment the same even if a client is lost.

Safety

Perhaps the most important consideration when opening a daycare is the safety, health, and well-being of the children. There are some inherent risks related to this, as child behavior can be unpredictable. However, there are certain actions that child care centers can take to reduce such risks. Daycare owners should also strongly consider adding additional safety measures and practices to assist. Not only does this help the children, but it also makes a daycare center more appealing to potential patrons.

The first step is to strictly follow the appropriate building and grounds regulations outlined by each state. This applies not only to the interior of the daycare but also to the exterior. It is estimated that each day, 8,000 children are treated in hospitals for injuries from falls. This puts a particular emphasis on the safety of playgrounds and outdoor spaces on the premises.

Buildings are inspected before the daycare can open to ensure compliance with all safety regulations. Around water, constant supervision must be maintained. Safety covers must be placed over electrical outlets, gates must be added to certain areas, fire safety code must be adhered to, and additional hazards must be attended to.

In addition, staff training in a number of different medical areas can be very helpful in reducing health and safety-related risks. Training requirements often include areas such as CPR, pediatric first aid, disease prevention, medication use, emergency preparedness and response, and nutrition. This kind of training would be very useful in situations in which child safety is at risk. Further, it allows staff to better teach children about healthy habits, such as a good diet and hand washing.

It is also important to accommodate children of various backgrounds and needs. Parents of children with disabilities need to be reassured that the daycare center that their child attends is attentive and mindful of their needs. Not only is this beneficial to the children, but it also reduces the risk assumed by the child care center. Appropriate staff training will allow the daycare to be prepared and have the necessary resources if any situations arise.

Mitigating Business Risks

In addition to working hard to comply with all relevant laws and regulations, risk can be significantly reduced by purchasing daycare center insurance for the business. General liability insurance is the most basic type, which covers property damage and physical injury. While this does not necessarily prevent these situations from occurring, it can lessen the financial consequences.

As with any other business, starting a daycare means that the owner or founder assumes a considerable deal of financial risk. It can be challenging becoming profitable, especially at the very beginning. However, running an honest business that follows the law can greatly reduce risk. Also, exercising good business practices can also help.

Additionally, there is a risk related to loss of income if the business proves difficult to sustain. Clients may end up being unpredictable. This may be because of job loss, economic changes, schedule changes, among other factors. Any of these may result in a loss of clients, which negatively impacts income. This can have a significant effect on the way the daycare is run, as owners may find that they no longer possess the financial means to properly sustain the business. Thus, the potential risk of this occurring should be kept in mind.

Related Questions

What other considerations should daycare owners be mindful of?

Maintaining a safe environment that is conducive to proper care and education is very important. Although seemingly insignificant, the choice of toys can prove to be impactful. They should be age-appropriate, educational, and easy to clean. This aids in childhood development, while also reducing the risk of health issues such as the spread of disease and lice. Further, a certification by the National Association for the Education of Young Children requires a robust, clear curriculum that supports most of the materials used by the daycare.

What are some additional tips for reducing the risks involved with starting a daycare?

In order to reduce risks as much as possible, it is important that daycare owners work hard to take additional steps. This could include maintaining open communication with parents, as this fosters trust between caregivers, parents, and children. This relationship is critical to the success of a daycare center. Reporting incidents, complying with inspections, and maintaining a healthy and clean facility also goes a long way.

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.

If you are ready to be your own boss and start a daycare business, take a peek at our startup documents to help you!