Perhaps you have a background in early childhood education, or maybe you’re a stay at home mother looking to start her own business…
If you’ve ever considered starting a daycare or child care business, now might be the time.
The international child care industry has an anticipated compound annual growth rate (CAGR) of 11.3% by 2022…
And parents are collectively spending over 42 billion on early childhood care!
But is a childcare business profitable?
Can you start a daycare from home?
And ultimately… Is it worth it?
I'm Ippei, a master of all things online business, passive income, and local lead generation...
In this 7 step guide to help you get a child care center started today, I will walk you through everything you need to take into consideration before opening a daycare center.
Plus, I’m including all the realistic startup costs, and my secret piece of advice for all new business startups!
Let’s dive right in!
How to Start a Daycare Business in 2021
Starting a Daycare Business in 2021? Here's What You Can Expect:
Starting a daycare business can be both profitable and rewarding. To get started, you will need to write your business plan, and determine whether you will run your daycare center from home or as a traditional child care center. And you will need to get licensed and obtain daycare insurance.
Start Up Costs
While this list is not a comprehensive compilation of everything you need to start a daycare or child care business, it provides a snapshot of what you need to add into your business plan.
Annual Revenue of Established Daycare Business
According to Daycare Business Boss, the average annual revenue of this kind of business is: $20,000-$60,000
Profit Margins of Established Daycare Business
According to this website, the average Profit margin of this kind of business is: 1-20%
7 Step Quick Start Checklist:
1. Write a Business Plan
Drafting a business plan for your future daycare center is an extremely important step in the process.
In fact, it should ideally be your first step!
It’s easy to get carried away with planning and ideas for a new business endeavor without actually stopping to think what will be required to make that dream a reality.
When it comes to opening a childcare center, whether from your home or a professional facility…
Planning is essential.
Not only will you need to draft contracts and obtain insurance, but you will also need to go through the standard process of creating a business plan and legalizing your business.
Basic Things to Include in a Business Plan:
If you have a solid business plan written and in place, it will help you to plan for long term success.
You will have taken adequate time to complete a thorough market analysis of your area, as well as creating 5-10 year realistic financial projections.
Although it might seem simple, or even a waste of time…
Your business plan exists to be your field guide and strategy for the business road bumps that may arise in the future.
The important thing is that it is based on factual research, realistic numbers, and actionable steps.
Don’t create a business plan for a daycare center that won’t actually be useful to you!
Trust me, it will add much needed credibility if you go to purchase a childcare facility, or even just when you are talking with a child’s parents in the future.
They will be able to sense your level of commitment and preparedness for your business.
2. Licensing and Requirements
Who people trust with their children is a big deal.
Which means that proving that you are not only a trustworthy childcare provider…
But also an educated and credible childcare provider is a top priority.
While having a degree (whether a Bachelor’s or Master’s) in early childhood education can be helpful…
It is not required.
There are however, multiple different licensing programs available for future daycare owners.
Licensing requirements vary from state to state, but generally these programs cover the following subject matter:
Despite the variance in requirements within different states, you will be legally required to obtain the applicable licensing for your area…
Regardless of a previous background in education.
When looking into the licensing required in your region or state…
Reach out to your local Department of Children and Family Services (DCFS for short) and ask them what the licensing requirements and steps are.
In addition to obtaining the correct license within your state, you will most likely need to meet the following basic qualifications:
Licensing Qualifications:
There are a few exceptions to the licensing laws required for daycare centers.
Such as:
But don’t assume that if you fall into one of these categories that you will be exempt.
You will still need to complete your due diligence and speak with your local DCFS.
3. Obtaining Insurance
The other major requirement for running a daycare or child care center in your home or even in a professional child care facility…
Is that you have the proper insurance!
I cannot reiterate enough how important it is that when caring for children…
That you take every precaution!
For the sake of the parents' peace of mind, for the sake of the quality of care for the children…
And also for your own sake as the owner of the business.
Insurance is a huge part in taking the correct precautions before opening a childcare center…
And parents will want to see proof of both your licensing and insurance posted and visible within your establishment.
When starting a childcare center or nursery school, you are actually required by the Department of Health and Human Services (DHHS) to have daycare liability insurance.
Although you are not required to have specific daycare insurance by the DHHS for a home based daycare center…
Your home insurance policy will likely require you to have coverage related specifically to any place of business that is run out of your home.
So regardless of where you operate your daycare business, it’s a wise idea to go ahead and make the investment in daycare insurance right away.
With most daycare insurance policies, you can mix and match coverage to suit your individual business needs.
The different kinds of coverage that are necessary are:
One thing to keep in mind is that daycare insurance is a very specialized niched…
So finding a suitable insurance policy may take a little more work than typical business and liability insurance.
On top of this, smaller home based daycare centers are considered a higher risk investment, and therefore insurance coverage will be higher and harder to obtain.
4. Home Daycare vs Daycare Center
One of the major appeals to starting a daycare business is often that is a business model that can actually be done from home!
From mothers who want to create an income from their house while still spending plenty of time with their own little ones…
To entrepreneurs that desire the flexibility of a home based business…
A home daycare center can be a great option.
However, there are some key differences between a traditional daycare facility and a home daycare.
Potential differences between a daycare center and an in-home daycare:
One major difference is the ratio of children to care providers.
In a typical daycare or child care center, the class sizes will be much larger than a home based daycare center.
For some parents, the more direct and individual attention that their child will receive from a home daycare is preferable.
In the home daycare industry, there are two primary types of care centers.
Types of In-Home Child Care:
Many parents are more comfortable with a traditional daycare center because of the strict regulations and strategic educational environment that they offer.
Now, this isn’t to say that a home daycare center can’t have a safe and amazingly educational environment!
But as a home day care center, you will need to work harder to ensure that you are up to par (or preferably above par) with your local daycare facilities.
Another huge decision making factor for both daycare owners and parents will be the cost.
Starting a home daycare center is infinitely cheaper than running a traditional child care center.
Primarily because the cost of a building is already taken care of!
Leasing, remodeling, or purchasing a building for a professional childcare center is extremely expensive…
And side stepping these costs by starting out in your home can be a great way to begin.
Just keep in mind that there may still be significant upgrades and modifications to make to your own house before it is a suitable location for daily child care services.
5. Prepare Your Space
Which brings me to preparing your space.
Whether you have chosen to start a daycare center or an in-home daycare, you will need to prepare your space.
Running a childcare facility is about far more than just starting a business or being able to run one from home.
It’s about prioritizing the needs of young growing minds, and doing everything you can to make space for that growth and care.
Which means that the environment of your daycare will be one of the most important aspects of running your business with excellence.
Not only will you need to make allowance for different spaces like:
Setting the Child Care Environment:
But you will need to create a repeatable and efficient system for maintaining the cleanliness of your entire space.
Children are notorious for tracking colds wherever they go, and spreading them around.
Which means that you will need to be prepared for the hard work that it will take to keep your facilities in tip top shape.
Beyond the sterilization and prepare of your child care facilities…
Strive to foster an environment that kids can thrive in.
This requires so much more than just taking safety precautions to childproof your home for a daycare business…
Or purchasing the right desks and toys for your child care center.
If creating a space for the minds of little ones to thrive, imagine, and develop doesn’t sound like something that sets your soul on fire…
It might be time to consider a different business opportunity instead.
6. Contracts and Procedures
As I mentioned above, you will need systems in place to run a daycare facility well.
This is true whether you will be hosting children out of your home, or from a larger daycare center.
Your systems will be a key to your success:
The very first “system” that you will 100% need to implement in your business from day one…
Is a contract.
Your daycare contract will serve to protect both you and the families whose children you will be responsible for.
A basic contract for a daycare center should include:
Daycare Contract:
I also highly recommend drafting a contract and then having it reviewed by a professional attorney.
This will ensure that nothing has been accidentally left out, or worded in a confusing way.
A skilled attorney will be able to help you make revisions to such a contract so that it will offer maximum benefits and protection for both you and the parents/children.
But in addition to contracts, you will need a clear set of written procedures for every area of running your daycare center.
This handbook can be revised at any time if you discover a better way to do something…
But even starting out, the way that you run your business and train your staff should be compiled into a document for future reference and staff training purposes.
You will also need to be diligent about health and safety precautions such as:
7. Hiring Employees
Even if you think you can handle a small group of children on your own…
There are other factors that affect whether or not you should hire staff.
For one thing, most parents like the level of accountability that comes with having two people monitoring children at the same time.
Not only does it provide a second set of eyes if one care provider is occupied with a certain child…
But it also adds another layer of safety since children will never be left alone with an individual adult.
Trusting someone else with your child is a difficult enough decision already…
And the added reassurance that nothing could happen to their baby without someone else knowing is a great peace of mind for most parents.
In addition to offering safety precautions and added accountability…
You will also allow yourself the luxury of a vacation day (or maybe a week, eventually!) if you hire staff.
Even having one additional person available would alleviate the chaos that catching a simple cold can induce!
If you come down with a virus, you will have a whole group of parents that will have to find last minute solutions for child care for that day or week.
And perhaps longer, especially in Covid-19 times.
Plus, completely shutting down your daycare due to a lack of employees will also be a major financial and professional hit for your new business.
As soon as you are able, consider bringing on an additional 1-3 employees that can help run your child care business.
And once you're ready to start marketing your daycare business...
Take a look at our local lead generation course for small businesses, here!
Pros and Cons
of starting a daycare business
Pros
If you are already a stay at home mom or dad, and feel like you can handle more than just your own littles throughout the week… Starting a home based daycare business can be a great solution for making extra income! And having a business that you can run from home is becoming increasingly valuable.
There’s one thing that’s for sure: working with kids isn’t for everyone. But if you do have a soft spot in your heart for caring for the next generation of young ones, a daycare business is a fantastic way to do this, while offering parents more attentive and specialized care for their kids than a larger daycare chain will be able to.
As I’ve stated above, this is such a great idea for the entrepreneurial mom (or dad) who feels like they would enjoy caring for more than just their own kiddos during the day. Running a business as a parent is completely possible! And many of the tasks you would perform as a daycare will be routine tasks for you as a parent already.
And if things happen to go really well… You can even scale your daycare enterprise into a full size daycare facility. But this option is completely up to you. You can keep things small and operate as more of a side hustle, or take it all the way to franchising. The choice is yours.
Cons
This is one crippling downside to the daycare business model. Your hours and your income will be directly linked, since you will only be getting paid for how long you care for each child, and there are only so many kids you can care for at once. This isn’t exactly the best solution if you’re looking to create passive income at home. Running a daycare is more extremely… “active” income.
Just because you like kids, doesn’t mean you’re cut out to spend day in and day out caring for them. And this is an honest, personal determination that you will have to make for yourself. These kids deserve your best, and if you aren’t cut out to run a daycare… then you shouldn’t even attempt to start one in the first place.
Offering childcare services is a serious thing. People will be entrusting you with their kids! And in light of this, there are extremely strict laws and regulations that govern both traditional and in-home daycare facilities. Know your local regulations, and be prepared to comply with the rules so that the parents you are serving will get the highest level of care for their littles.
It’s pretty simple, when people lose their jobs… they stop sending their kids to daycare. Daycare services are a luxury for many families, not a necessity.
Starting a Daycare Business Can Be Profitable, If You Know This First:
Let’s be honest..
A home daycare business without the kids is just you sitting at home in your sweats like you have been all of quarantine, am I right?
There is one common denominator that every business needs to be successful:
And that is new leads.
Without new leads for your business…
Well, you don’t really have one!
Fortunately, my number one go-to method for online business is actually local lead generation.
And it can change the way that you look at, operate, and market your daycare business!
(Or any business that your heart desires to start in the future!)
Local lead generation took me from making around 2K per month at my traditional job, to making over 50K in five years.
If that sounds too good to be true, just hear me out.
Online lead generation relies on the localization abilities of Google, alongside strategic SEO to harness a steady stream of new leads for small businesses.
And it’s a skill that anyone can learn, including you!
Just think about how much more energy you’d be able to put into providing excellent child care if you never had to worry about getting new students?
Ready to see how local lead generation can transform your business?
