How to Start a Daycare

Parents are increasingly having to work more jobs or longer
hours to make ends meet — that means there’s never been a greater
need for reliable daycare organizations that can take care of the
little ones. If you have experience looking after children, then
starting a daycare business could be a great idea.

You’ll need a combination of childcare experience, people
management and administrative skills. The right daycare
marketing and a solid business plan will give you a great
launching pad to appeal to parents.

Parents are increasingly having to work more jobs or longer hours to make ends meet — that means there’s never been a greater need for reliable daycare organizations that can take care of the little ones. If you have experience looking after children, then starting a daycare business could be a great idea.

You’ll need a combination of childcare experience, people management and administrative skills. The right daycare marketing and a solid business plan will give you a great launching pad to appeal to parents.

We want to help you get your daycare business off the ground. Since 2004, we’ve helped over 100,000 people to become entrepreneurs, starting exciting businesses and bringing their ideas to life. We’ll give you the support, guidance and advice you need to create a daycare business and make it into a success.

From validating your childcare business and doing the research to filing your paperwork and running your business, this guide will help you out. We’ll talk you through the main things you need to do to get your daycare business off of the ground.

Read on for some insight into creating your own childcare organization and becoming an entrepreneur.

Why You Should Start a New Daycare Business

Childcare and daycare businesses can be extremely successful — here are some surprising statistics on their popularity.

700k

Number of daycare businesses in the U.S.

$50B

Total revenue generated by childcare and daycare businesses in 2018

$1.5M

People are employed in the industry.

  • Childcare and daycare business revenue is projected to grow by almost 2% a year
  • There are over 8.5 million children enrolled in pre-primary school institutions in the U.S.
  • Many daycare operators are self-employed and don’t have any employees
The time to take advantage is now — we’ll help you be a part of that success!

Is a Childcare Business Right for You?

Although it can be exciting to form a daycare business, there will be significant demands on you as a small business owner. Here are some of the things you can expect.

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A Day in the Life of a Daycare Business Owner

Here are some of the typical tasks you’ll be performing for your daycare business on a daily basis:

  • Speaking with parents about their child's requirements
  • Caring for children for five or six hours a day (or more)
  • Managing diapering, feeding, napping and other requirements of young children
  • Thinking of new activities and entertainment
  • Buying supplies and equipment
  • Dealing with minor issues
  • Administering your business, including marketing and invoicing

Skills You Will Need to Open a Daycare Business

The following skills will be very useful in your role as a daycare small business owner:

  • The right approach, patience and perspective to care for several children at a time
  • The ability to think up and carry out entertaining activities
  • Understanding where every child is and what they are doing at all times
  • Good interpersonal skills for dealing with the various needs of parents and their children
  • Great administrative skills for managing cash flow and business operations

What Your Daycare Customers Are Looking For

Your daycare customers are going to be parents who are juggling kids, work and other responsibilities. They're looking for a daycare organization they can trust to provide safe, affordable childcare to their children, while keeping them engaged and entertained. If you can meet those needs while managing the administration of your business, your daycare will thrive.

What Type of Daycare Should You Start?

There are several different types of daycare business that you can start. Here are some of the more popular options:

Strong research abilities

Employer-Sponsored Childcare

Many large employers provide daycare services to their employees, either onsite or remotely. Understanding the services that employers need and getting in touch with their HR departments could be a great way to get a foot in the door.

Good math skills

Specialized Daycare for Children With Unique Needs

You might consider running a specialized daycare center for particular children. For example, you might offer daycare for children with special dietary needs like being gluten-intolerant or vegetarian. You could also offer daycare services for children with mild learning or physical disabilities, if you have the right training.

Excellent forecasting abilities

Franchise Daycare Businesses

Some large daycare businesses have franchise opportunities. In these circumstances, you pay a franchise fee but get brand recognition, support and advice on how to set up and manage your daycare business.

Validating Your Daycare Business Idea

The areas we’ve listed above are just starting points — there are many different types of daycare businesses. Once you’ve identified specific daycare areas you might like to go into, you need to validate your daycare business idea.

Remember too that every daycare business will have many competitors. You will need to stand out and offer superior childcare to excel as a daycare business owner.

  • Identify your daycare business’s unique selling points (USPs): You need to find something unique to offer parents. Whether it’s specialized entertainment and activities or customized childcare services, this is going to be one of your main strengths.
  • Look at who your childcare competitors are in the space: Having competitors is a good thing as it shows there’s a market, but if there are too many, you’re likely to struggle without a really good unique selling point. Remember that daycare services are very local, so you will need to be located in the right area.
  • Understand your market: Clearly identify exactly who your daycare customers are likely to be, where they hang out and how you’re going to reach them. This will be essential to your marketing and communications (especially word-of-mouth recommendations).
  • Talk to parents: Speak with parents to understand what they want from your childcare business. Validate your ideas and approach by asking if they would consider placing their child with you.
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Not every idea you have will make it through to becoming a daycare business. There are all sorts of reasons to say “yes” or “no” to specific ideas and approaches — think about what your strengths and weaknesses are so you can choose a type of daycare business that you’d be great at.

Your Daycare Business Plan

You might think your daycare business doesn’t need a business plan, but you’d be wrong. You will need to clearly understand and capture how you’re going to run your daycare business, market yourself, get sales, make a profit and grow. This can only come about through creating a watertight daycare business plan.

Business plans do vary slightly, but they should all cover the following areas:

Here’s what you can expect in an average day
  • 1 An executive summary with the most important points from your business plan
  • 2 Your goals and what you hope to achieve with your daycare business, including your unique childcare approach
  • 3 A description of your daycare business, including background information and context
  • 4 A market analysis and likely demand, focused on your local area and parents
  • 5An overview of how your daycare business is structured
  • 6 Your business model for making money
  • 7 How you will market and sell your childcare services
  • 8 Financial projections, revenue and profitability
  • 9 Appendice

Choose the Right Business Structure and Register Your Daycare Business

There are five main business structures you can have in the U.S., and it’s important to choose the right one. We’ve shared your options below. They are:

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Sole Proprietorship

If you don’t choose to form a legal business entity for your daycare business, you will be a sole proprietor by default. This won’t give you the legal protections you need, so we do not recommend this.

Limited Liability

Partnership

This is a type of business that is formed when two or more people work together without creating a more formal business entity. Like a sole proprietorship, it may not give you all the protections your daycare business may need.

Series LLC

Limited Liability Company or LLC

The most common type of business entity. An LLC is fast, simple and inexpensive to set up and maintain. It protects your personal finances and assets and is a great way to start your daycare business.

S Corporation

S Corporation

This is a more complex type of business and isn't generally recommended for smaller organizations, like a daycare business.

C Corporation

C Corporation

These are the largest and most complex types of businesses and are typically far more than the average entrepreneur or daycare business owner will need.

For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide. If you’ve still got questions, we’ve answered them to help you choose the right business structure for your daycare business.

In most cases, our recommendation for your daycare business would be to create an LLC. We’ve got a complete guide to everything you need to do. LLC formation does vary from state to state, but we’ve got you covered, wherever you are.

Setting Up Your Daycare Business and Business Operations

Once you've legally created your daycare business, you’ll need to get some other things in place.

Location of Your Daycare: In Home or Out?

The location of your business will be critical. You want somewhere with a good amount of potential customers, but also with the right pricing so you don’t spend all your money on rent. You will need to make sure that the location is childproof to reduce the risk of injuries or incidents. Some people open daycares in their own homes, which allows you to save on rent.

Equipment for Your Daycare

In addition to the computer equipment you will need to manage your business, you will also need toys, games, art supplies and more to keep the children occupied and entertained. This could include both inside and outside activities, so plan for both.

Marketing Your Daycare Business

Marketing will be a huge part of your daycare business. Naturally, you will need an awesome website, but you'll also need to get branding, newsletters, digital ads, social media accounts and other channels in place. Make sure that you clearly explain the unique approach you take with childcare to build reassurance and trust with parents.

Software and Processes

The right software and processes will make running your daycare business much easier. See our list of the best apps and software at the end of this guide.

Employees

Many daycare business owners don’t employ anyone else to begin with. Once your business gets off the ground you can look into hiring other qualified childcare professionals.

Finances and Taxes

You will need a separate business bank account for your construction business. You might also want to consider a business credit card. Additionally, you will also need to keep careful bookkeeping records and file business and personal taxes. Here at Incfile we can even help you file your taxes.

Our Start a Business Checklist will get your business going in the best possible way.

Conclusion

If you love kids and get along with their parents, then daycare entrepreneurship could be perfect for you. Find your niche, put together a business plan and perfect your marketing, and you’ll get on the road to success!