How to Start A Daycare Business: 12 Essential Steps
So, you’ve thought about opening your own daycare? I was a director for 21 years and know firsthand how rewarding but challenging it can be.
Starting a daycare business is a rewarding venture, but it involves several crucial steps. Whether you aim to open an in-home childcare or a childcare center, success relies on careful planning and adherence to specific processes. In this guide, we'll take you through the essential 12 steps, from understanding licensing requirements to creating policies, enabling you to establish a thriving daycare business.
If you’re new and just getting started, download my daily schedules for infants, toddlers, and preschoolers for free!
Now let’s talk about how to start a daycare
Step 1: Learn about childcare licensing for your state
The first thing you want to do when deciding to start a childcare business is to learn about the licensing requirements for your state. Each state has its own licensing agency with certain guidelines and requirements. You can start with a simple google search. For example, try searching for “daycare licensing department for the state of GA.”
Most states require licensing if you provide care for a certain number of children. For example, in Georgia, you can provide care for 2 children plus your own without a license.
Licensing can be extensive so you could choose to keep your enrollment low and avoid the licensing process all together. Do your research and learn about what kind of licensing your state requires, and decide how many children you plan to care for at one time.
Here are some examples of possible licensing requirements:
Education and/or training requirements: You may be required to have an Early Childhood Education degree or other certifications in Early Childhood such as a CDA or TCC. Sometimes, having many years of experience in child care can replace education. On-going annual training is also usually necessary along with maintaining current CPR and First Aid certification.
Location and physical space: There are requirements for ample square footage for classrooms and playgrounds, proper fall zones for the playground, fencing guidelines, sinks, diaper changing areas, restrooms, ventilation, and storage areas just to name a few.
Records: Enrollment forms, immunization records, sign-in and out logs, employee records, and transportation forms if applicable are all needed.
Emergency & fire regulations: a posted evacuation plan in each room and monthly documented fire drills.
Posted signs: You will be required to post no smoking signs, visitors’ check-in signs, infant-safe sleeping signs, hand washing signs, and 911 emergency signs just to name a few.
Toys and equipment: There will be a list of toys, play equipment, and furniture needed for each age group to ensure appropriate age development activities. Click here to download my free New Daycare Supplies Purchasing List.
Background Checks: A clean criminal history is usually required for anyone caring for children. In some states, a misdemeanor not involving children can be repealed.
Once you have read the licensing requirements carefully, you might want to call and talk with someone from your state department to ask questions and review the procedure for obtaining your license. Be sure to get a comprehensive overview of everything needed before you start the process.
Step 2. Research other daycares
Make a list of daycares in your area and gather the following information:
Ages of enrollment - What ages do they care for?
Capacity - How many children do they have enrolled? How many of each age?
Hours - What are their daily operating hours? Are they open Monday – Friday or on the weekends also?
Tuition cost - What are they charging per age? Most daycares charge weekly tuition rates. Parents are usually in contract and are required to pay regardless of attendance. Do they offer only full-time care? or do they offer drop-in rates or part-time rates?
Location - Are they in a home or a center? Is it in the city or the suburbs?
Step 3. Develop your business plan
Do you want a smaller in-home daycare or a child care center that can care for more children?
In-Home Advantages:
The start-up expenses are lower making it easier to start without business loans. A typical in-home daycare can be set up for less than $1,000, depending on what you already own.
There are lower monthly expenses. You don’t have an extra mortgage or rental payment. There is very little or no payroll, no extra utilities, maintenance, or supplies. Your main costs would be supplies, food, insurance, and advertising.
You can stay small without employees to manage.
You can spend time with your own children.
The licensing process is usually quicker allowing you to start without the need to build or remodel the facility, obtain funding and extra building licenses and permits.
Having a home daycare allows you to take advantage of tax breaks. Some of the expenses you already pay for, such as rent, mortgage interest, taxes, and utilities can be deducted as a business expense. The amount determined is calculated by the amount of time & square footage your home is used for daycare purposes.
Child Care Center Advantages:
Centers are more profitable since they can accommodate more children. Although the operating costs are more, the income is substantially more bringing in more cash flow.
You can train assistants to run the center while you are away. After your center gets established and becomes a “well-oiled machine”, you can hire and train people to help you manage the center while you take vacations and much-needed time off.
You can qualify for grants. There are many grants available for large centers, especially non-profits.
It won’t intrude on your home life. You can keep your home and work life separate.
You can make a larger impact on your community especially if you love people and children and have the heart to make a difference.
You can build a business to sell later. A center is an asset you can sell later and use the money to retire or invest in your next venture.
Once you decide on the type of daycare you want to open, ask the following questions.
What facility will I use?
If you decide on a center, will you find an existing daycare to purchase? Will you build your own? Will you rent or purchase a building and transform it into a child care center?
What are the start-up costs and monthly expenses?
While the typical in-home daycare can be started with less than $1,000, a center will take $50,000 - $100,000 or more depending on whether you purchase an existing center, or build or lease a building that you need to equip and set up.
Monthly ongoing expenses depend on the type of daycare you have. For in-home daycares, you can expect to have food expenses, supplies, insurance, and maybe advertising. Other bills such as utilities and a mortgage are normal expenses you would have for your home. For a center, you will have a mortgage or rent payment, utilities, food, supplies, insurance, payroll, and maintenance repairs.
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Who is your ideal customer?
Where does your potential family live? What are they doing for child care now?
How much can you charge?
Childcare rates vary depending on several factors.
Where is your business is located? What are the rates of the daycares near you? Daycare centers charge anywhere from $80 to over $250 per week per child for full-time care. Average tuition varies state-by-state.
What kind of childcare do you provide and what special services do you offer? Will you offer full time care, part time care, after school care?
What is the child’s age? Tuition rates are usually higher for younger children and decrease as the child grows older.
Whose money will you use?
Do you have your own money to use? or do you need a small business loan? Have you looked into daycare grants? For additional help, the U.S. Small Business Association provides detailed instructions on writing a general business plan. If you’re looking for a business plan template, check ours out here.
What will you name your business?
Choose something catchy but simple. You want people to easily remember your business name when referring you to a friend.
Search locally and state wide to ensure your name is available. You will want to search the domain name and register your business name through the secretary of state website. You also want to know If a business name has been trademarked, you can find out on the USPTO website. For detailed information on researching business names, read How To Research Business Names.
Step 4. Set up an LLC
Establishing a legal business entity such as an LLC prevents you from being personally liable if your daycare is sued. It protects your personal assets from your business assets. There are many services like Legal zoom that can easily set up an LLC for your business. It’s fairly inexpensive and well worth the minimal effort required.
STEP 5: Apply for an EIN
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free! You can get your EIN (Employer Identification Number) through the IRS website.
STEP 6: Open a business bank account & credit card
It’s important to keep your business finances separate from your personal finances. Open a business checking and get a business credit card. Have all your business income and expenses flow through that account. This will allow you to keep accurate and detailed financial records.
STEP 7: Obtain all necessary licenses and permits
Each state has its own regulations regarding child care licensing. Here you can check out your state’s information and make sure your day care center is operating according to state law.
Also make sure you comply with local business licensing and permits. Failure to acquire necessary permits and licenses can result in fines, or even cause your business to be shut down.
Step 8. Get insurance
Depending on the type and size of your daycare, you will need several different types of insurance policies. You will want to have property insurance, workers’ compensation, business insurance, and daycare liability insurance. Read more about business insurance here. You can also check with state licensing department for recommendations and guidance.
Step 9. Get your facility ready
When you're getting ready to open a daycare center, you'll need age appropriate furniture, toys, and supplies. You’ll also need fire extinguishers and disaster supplies. You ‘ll need to ensure everything is safe and ready to enroll those little ones. Click here to download my free New Daycare Supplies Purchasing List.
Get FREE 3 PDF schedules designed specifically for each age; Infants, Toddler, and Preschoolers. Click here to download.
If you have a center, you will need a computer and a good child care software to help with administration. Having a software that keeps up with your enrollment, parent and child info, employee info and payroll, billing, tuition, attendance, etc. is an absolute necessity. There are several options including Brightwheel and ProCare. ProCare is what we have used for 20 years and works perfect for our center.
Step 10. Create Your Policies
It is very important that parents know the center's policies before enrolling their children. Your state licensing department also requires certain topics be disclosed in your policies and procedures.
Create a parent handbook for parents to review, detailing your policies and procedures. You will also need enrollment forms for parents to fill out requesting information such as their name and child’s name, address, emergency numbers, authorized people allowed to pick up, child allergies, etc. Parents will sign the enrollment contract acknowledging that they have read and agree to your policies.
You will also need to have all of your other forms and documents in place such as daily schedules, class allergy list, ouch reports, etc. If you don’t want the hassle of creating your own policies, forms and documents, we have several packages available that include complete, ready-to-print forms that make this process super easy. Scroll down the page to download my daily schedules for free.
Step 11. Hire teachers & staff
Follow your state’s licensing guidelines when hiring staff members and make sure they meet all requirements. Verify their educational backgrounds and call their previous employers for references. Look for people who are competent in the classroom, work well with others, and are dependable. They will also most likely need criminal background checks. Teachers and staff are a representation of your child care program so be careful to hire the right people.
Create an employee application and employee handbook detailing your staff policies and what is expected of them. Have current tax forms available for them to fill out and keep on file. Make sure you conduct a detailed orientation going over your handbook and explaining your policies. Have them sign an orientation form upon completion of the orientation.
Step 12. Advertise and Start Enrolling Children
Promote your daycare business through various channels, including:
- Create a professional website that showcases your services, policies, and contact information.
- Establish a strong online presence through social media, such as a dedicated Facebook page
- Encourage friends and family to spread the word about your daycare.
- List your business in local childcare directories and networks.
- Consider hosting a grand opening event to attract new families. Advertise this event on local radio stations and your Facebook page. Offer incentives like cash drawings and free registration for early sign-ups. During the grand opening, provide informative tours and answer any questions potential parents may have.
If online advertising seems overwhelming, check out this Beginners Guide To Advertising.
Conclusion:
I hope this helps give you more clarity on how to start a daycare business. Starting a childcare business is a significant commitment, and these 12 steps are your roadmap to success. Beyond the paperwork and regulations, your mission is to provide a safe and nurturing environment for children while building a prosperous enterprise. With dedication and passion, you'll create a space where children thrive, families find peace of mind, and your daycare business thrives. Use these steps as your guide to realize your dream of a successful childcare venture.
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