Starting your own daycare business can be an exciting venture that will hopefully lead to a fulfilling and profitable career. Although this is an exciting time, there are some serious questions you need to ask yourself and research that needs to be done before you jump in and start building your business.
Before you start your daycare business, go over these items to prepare yourself for what running a daycare will actually take.
- Is a daycare a good fit for you?
- Start-up costs
- Legal requirements
- Marketing basics
1. Is a daycare a good fit for you?
Before you dive into all the legal, marketing, and business tasks that come with owning a daycare, you need to find the answer to a critical question.
Do I really want to own and operate a daycare?
Owning your own business gives you autonomy and freedom to make your own choices that most jobs can’t provide. There’s a price to pay for those benefits though. Long hours, financial risk, and cumulative stress are a couple of the downsides of owning a daycare.
We don’t mention these things to scare you away. We mention them to make sure you know the full scope of what you are getting into so you can plan and prepare accordingly.
Pros and cons of starting a daycare
Do you have children?
A lot of daycare businesses are born out of mothers who love to take care of their children. They figure if they’re going to be home taking care of their kids, why not take care of other people’s children as well?
It makes sense, you can be there for your children, help other children grow, and help get them all socialized. Not only that, but instead of paying for child care, you are getting paid for child care.
If you have children and are willing to take on the challenge, opening a daycare might just be the perfect fit for you.
There are different sizes of daycares, some with just one employee, some 2, and some 10. When you are just starting out you might be looking to just take care of your kid and a handful of others and won’t need any extra staff.
One benefit of being the only staff member is you are in charge of every aspect of the business. This means you can make the business uniquely yours, while also having quality control over each part.
Running a business all by yourself is definitely not an easy task, it takes a lot of hard work and usually takes up more time than you are expecting. This is usually a good starting point for most entrepreneurs because they can build a solid foundation, and then expand their reach.
Working with children
Working with children is one of the most fulfilling occupations one can have. You get to see them grow, develop, and interact with one another. On top of all this, they are hilarious and will always surprise you with what comes out of their mouths.
Children can be tough at times, but if you love children, it is a whole lot better than sitting in a cubicle staring at a computer screen all day.
Low start-up costs
- Art & craft supplies
- Sleeping supplies
- First aid kit
- Kids furniture and equipment
- Cleaning supplies
Another factor that helps keep your overhead low is that you don’t need to rent a location for your daycare business. This obviously is an advantage financially, but can feel a little overwhelming for some people having that many kids running around their house on a daily basis.
Simple expansion model
As your business grows and evolves, there will be some things that change, but for the most part it is a pretty simple model to grow your daycare business, if you so choose.
- Start small (1-3) employees
- Gain customers
- Hire more employees to meet demand
- Gain more customers
There is obviously a finite amount of children you can have at one daycare, but if expanding is your goal, it is pretty straightforward.
Having a daycare is a messy business. Kids are going to be making messes constantly and you will need to keep up with this in order to keep everyone safe and to keep your sanity.
Running a daycare means you will be doing just that, running. Activities, conflicts, tantrums, cleaning, and miscellaneous tasks will keep you plenty busy throughout the day. You might get a little break at nap time, but even then you will likely have tasks that need to get done.
As long as you understand what you’re getting yourself into, you should be okay on this front. Hard work is what some people crave and would much rather be busy than sitting around twiddling their thumbs.
Wear multiple hats
When you are starting your daycare you will likely be the:
- Legal assistant
Just to name a few.
This can be stressful for a lot of people to take on this many tasks all at once. Many people start a daycare for the simple fact that they love children and are a good caretaker. Don’t make this mistake, either learn about how to run a business beforehand, or be prepared to hire these tasks out.
With technology these days you can find cost-effective help via online sites such as:
Do your research to find what combination is most effective for your business. It is much more efficient to pay someone $15/hr to do your accounting rather than you spending hours on it every night.
Little adult interaction
When you have children, you know that nearly every second of your day is dedicated to them to some degree. Running a daycare while also having little ones of your own can be a little overwhelming for some people.
This is obviously a different environment than meeting rooms and cooler talk. As long as you are prepared for this then you will be alright.
Since most parents have to drop off their kids before work and pick them up after, there is potential that you could have children at your house before 6:00 AM and not leave until after 6:00 PM.
You could set your own hours to limit this, but that would affect your competitiveness in the market. Half-days are another option to help mitigate these long hours.
It will affect your family
When you make the decision to start your own home daycare business, understand that it will affect your entire family.
Sometimes your children won’t be in the mood for having multiple other children in their home. Sometimes your spouse will have to work from home which can cause conflict.
Another thing to consider is your family will likely get sick more often due to children coming into the house when they are contagious.
2. Start-up costs
As mentioned earlier, the start-up costs for a daycare are relatively low. Obviously, depending on the size and type of your daycare, these costs can increase depending on your situation.
If you are opening a small, home-based daycare center, you can expect your start-up costs to be around $300-$400 per child, with operational costs being about $80-$100 per child, per month.
For example, if you are starting a daycare and you are expecting to have 6 children, your start-up costs will be $1,800-$2,400. Your monthly operational costs should be between $480-$600.
That is on the relatively low end of the spectrum, some estimates go as high as $10,000-$50,000 if you are opening a larger daycare or renting a facility.
3. Legal requirements
It is important to do your research to make sure you are compliant with the laws and business regulations in your state and city. Some things you will need to do if you start a daycare:
- Register your unique business name with the Secretary of State’s office
- File your federal tax identification number with state and local revenue offices
- Choose what type of business to register (Sole proprietorship, partnership, LLC, or corporation)
- Obtain a federal employer identification number from the IRS office and register the number with state and local agencies
- Obtain a business license from the Department of Revenue
- Obtain business insurance
- Join the National Child Care Association (NCCA) and any other associations you want to be apart of, you can find a list here
- Join your local chamber of commerce
If you need more information here are some more resources on the legal side of starting a small business:
4. Marketing basics
Just because you open a daycare doesn’t mean you will have customers waiting to enroll at your facility. You need to be prepared to spend a fair amount of time on marketing in order to attract customers. Some basic marketing things you should do are:
- Develop marketing plan and budget
- Identify target market
- Identify competition
- Identify niches you can serve
- Create marketing materials
- Distribute marekting materials
TIP: No matter how much time you spend on marketing, make sure you are providing excellent service. No amount of marketing or advertising will make up for poor service.
Do I need a business loan to start a daycare?
This all depends on your current financial state and what size of daycare you are wanting to create. If you are doing a small, home-based daycare and can spare $5,000-$10,000 you should be able to start it without a loan.
If you are wanting to create a larger daycare center it may be wise to get a loan so you aren’t putting yourself in as much financial risk.
How long does it take for a daycare to become profitable?
Since daycare centers have a relatively low start-up cost, you could be breaking even within the first year.
With larger facilities, this might be pushed down the road to 2-3 years but they still become profitable relatively quick. All of this, of course, is assuming you built a quality, well-run daycare facility.
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.
Ready to get started? Checkout our startup course and documents here.