The Ultimate Guide on How to Start a Daycare Center

The Ultimate Guide on How to Start a Daycare Center

For children, daycare centers are a jumpstart to socializing and early education. For you, they could be the key to financial freedom and a rewarding career. 

Opening a daycare center is not as easy as ABC, 1-2-3. There are several components to consider like the economy, business benefits, insurance and liabilities, and more.

This ultimate guide has everything you need to know about opening a daycare center and the nine steps you can take to start your business.

Daycare centers in the current economy

The daycare industry has always been essential. However, the COVID-19 pandemic did have a negative impact on many childcare programs. 

To cooperate with social distancing regulations, USA Today reported that more than 2 in 3 of the United States’ formal child care centers were closed or operating at reduced capacity. In addition, many parents lost the need for childcare when many corporate jobs shifted to remote work. 

Additionally, daycare centers continue to battle against inflation affecting the costs of rent, power, food, and supplies, staff salaries, and tuition. And while this might all seem daunting, the childcare industry is on the rise again.

With the reduction of COVID-19 regulations, parents have returned to their offices, and the need for childcare has returned. The U.S. Bureau of Labor Statistics reports that the job growth outlook for childcare workers between 2020-2030 is 8% — on par with the national average across all industries. And while the economy can quickly bring about the downside of any industry, there are many benefits associated with opening a daycare center to consider.

The benefits of opening a daycare center

Three significant benefits of opening a daycare center include personal childcare, financial freedom, tax benefits, and a rewarding career.

Personal childcare

When parents of young children go to work, they have to consider child care. Who will watch their child(ren)? How much will it cost? Will they be available to drop them off and pick them up? Opening a daycare center eliminates these questions for you. Starting a daycare business could lead to increased financial freedom if you already provide at-home care for your children. 

Financial freedom

Most workers in the corporate world rely on their supervisors and managers for a paycheck. Opening a daycare center gives you financial freedom and autonomy over your income. Owning your own business also allows you to make decisions to propel the business and ensure your financial security.

Tax benefits

Opening a daycare provides tax benefits that save you money. For example, as a business owner, you can write off certain daycare expenses, including your utility bills, vehicle, and childcare supplies. 

Opening an in-home daycare also allows you to write off a portion of your housing payment as a business expense when you file taxes.

Rewarding career

There is no doubt that many daycare owners and workers find their job of teaching, helping, and encouraging children rewarding. Daycare is essential to young children's social, emotional, and mental development. Teachers have a direct hand in shaping their minds and behavior.

Before opening a daycare, ask yourself why you want to start a daycare. For example, are you passionate about fostering young children's development? Do you want to help families? Reflecting on the reasons why you want to start a daycare will motivate you through the process and help your business succeed.

What are the costs of opening a daycare center?

Before we outline the steps to starting your daycare center, you might find it beneficial to understand the financial obligation you’ll be making. The operating costs of running a daycare center include:

  • Employee compensation
  • Rent and utilities such as electricity, water, heating, TV, phone, and Wi-Fi
  • Insurance
  • Food (the USDA website provides information on Child and Adult Care Food program nutrition standards)
  • Furniture and appliances such as bedding, changing stations, tables, chairs, mats, meal carts, microwave, dishwasher, security cameras, and cleaning supplies
  • Toys and craft supplies
  • Miscellaneous supplies like cups, pencils, toilet paper, etc.

When opening a daycare, use this information to estimate your daycare’s monthly budget and expenses.

How to start a daycare in 9 steps

Opening a daycare requires careful preparation. To open a daycare in your community, follow these steps:

  1. 1. Learn about daycare licensing requirements.
  2. 2. Write a daycare business plan.
  3. 3. Find a location for your daycare.
  4. 4. Get insurance for your daycare business.
  5. 5. Prepare your daycare facility.
  6. 6. Develop policies and procedures.
  7. 7. Hire staff to help you run your daycare.
  8. 8. Invest in childcare software.
  9. 9. Finally, market your daycare business and seek applicants.
  10.  

Follow these steps carefully in accordance with your local and state guidelines to keep your business compliant and help your daycare run smoothly.

1. Learn about daycare licensing requirements. 

Daycare businesses often start small. You might transition from babysitting and nannying to owning your own childcare business. Making that transition requires you to be compliant with local and state regulations. 

To comply with the rules and regulations, check out Child Care Aware of America’s licensing guidelines for childcare and daycare providers. This resource allows you to research your specific state and city. 

If the information for your state is unavailable, contact your state’s Department of Children and Family Services (DCFS). While the requirements will vary across the country, to obtain a childcare license to open a daycare, you will need a current CPR certification. 

Most states will also require a child development associate (CDA) credential. To get a daycare license, you will also need to provide additional documentation demonstrating your commitment and experience with child care. Your documentation should include further proof of any training, experience, or credentials. 

Your local agency will play a significant role in the information you need. Use them as a resource to satisfy and remain compliant with all child care regulations.

2. Write a daycare business plan.

Writing a daycare business plan will provide a great advantage and guide you through the rest of the startup process. 

To start, decide on your daycare's name, mission statement, marketing plan, organizational plan, staffing, operations, and budgets.

Next, you will need to research the costs of successfully launching a profitable daycare business. Consider the financial aspect of your daycare startup: are you using your own money or seeking a small business loan? Have you looked into daycare grants? 

Creating and setting financial goals is crucial to running a successful business. In business, everything costs money, so make realistic expectations and estimates.

For additional help, the U.S. Small Business Association provides detailed instructions on writing a general business plan.

3. Find a location for your daycare.

Are you starting an in-home daycare? Are you looking to rent an existing daycare center? Are you planning to start a daycare business from scratch with a new facility?

You’ll often hear the phrase “location, location, location” in real estate. Consider this when searching for your daycare facility location. Note that all parents will likely have a preference on  where to send their child. Some might choose a quiet suburb over a bustling city. A facility next to a highway might raise some safety and security concerns for parents. Remember these factors when searching for a location that fits your business needs.

Additionally, check your city zoning laws and childcare licensing guidelines to ensure your daycare business location is compliant with the guidelines.

4. Get insurance for your daycare business.

Depending on the type and size of the daycare you're opening, you will need various insurance policies. 

With the exception of home-based daycare centers, daycare facilities need licensing by the Department of Health and Human Services (DHHS). Part of the licensing includes getting liability insurance. Liability insurance protects you and your business if someone gets hurt on your property. It is essential when caring for other people’s children.

Other types of insurance that could be beneficial in running your business include workers’ compensation — if an employee is injured on the job — and commercial property insurance — if your daycare center or assets are damaged and need to be repaired or replaced.

Insurance can get complicated. Find out what coverage is required and check your local childcare provider licensing requirements for guidance.

5. Prepare your daycare facility.

What do you need to open a daycare business? You'll need furniture and supplies if you're getting ready to open a daycare center. Use this list to guide you through preparation.

Safety supplies:

  • First aid kits
  • Smoke detectors
  • Carbon monoxide detectors
  • Fire extinguishers
  • Emergency preparedness kit
  • Emergency plan

Cleaning supplies:

  • Cleaning supplies (all-purpose cleaner, vacuum, rubber gloves, etc.)
  • Bathroom supplies (sponges, bucket, mop, etc.)
  • Hand sanitizer
  • Sanitation plan

Furniture & equipment:

  • Tables
  • Chairs
  • Highchairs and/or boosters
  • Nap mats and/or cribs
  • Step stools
  • Shelves and/or storage system

Play materials:

Ages 0-1

  • Crib mobiles
  • Rattles
  • Floor gyms

Ages 1-2

  • Stacking rings
  • Nesting cups or boxes
  • Large play vehicles

Ages 2-3

  • Dolls and stuffed animals
  • Musical instruments
  • Puzzles

Daycare technology:

  • Attendance tracking
  • Automated billing
  • Daily event tracking and recording
  • Digital check-in/check-out system

After getting the necessary supplies for your daycare facility, preparing the space also means ensuring it is childproofed. Having safety supplies and measures is an irreplaceable step, but you’ll need to take it further. Secure furniture and large appliances to the wall. Install covers on electrical outlets. Avoid keeping small items and toys around the facility to prevent choking.

When opening a daycare, the safety of the children comes first. So spend the time and use the proper resources to set up a safe, compliant daycare center.

6. Develop policies and procedures.

Use childcare forms and templates to kick-start developing policies, procedures, and handbooks for your staff and families. 

Three important forms are daily report, staff evaluation, and enrollment forms. 

  • Daily report forms allow the staff to communicate with the parents on their child's progress. 
  • Staff evaluation forms provide insight to your workers on whether their actions and behavior in the facility align with your business values. 
  • Lastly, enrollment forms will typically be one of a parent's first interactions with your business. Carefully craft the messaging to demonstrate a welcoming, inclusive environment for the parents and their children.

As mentioned in the previous section, preparing your daycare facility also includes needing emergency and sanitation plans. You’ll want to develop a disaster or crisis management plan under the guidance of your local childcare licensing requirements. Your crisis management plan should include health, safety, privacy, and nutrition protocols.

7. Hire staff to help you run your daycare.

A daycare center is only as good as its staff, so carefully consider your childcare hiring decisions.

Verify the daycare licensing requirements for staff ratios. The child-to-staff ratio ensures that all children receive adequate care, but depends on factors like the children's age and the daycare center's size. If you plan on running the daycare facility on your own, this will limit the number of children you can have in your facility. 

Additionally, you will need information on the licensing requirements for teachers’ educational backgrounds and other qualifications. Childcare staff may also be subject to criminal background checks and fingerprinting for further investigation. Therefore, verify references and education levels rigorously to avoid faux credentials.

8. Invest in childcare software.

One of the best ways to start a successful daycare in 2022 is to take advantage of the fantastic daycare technologies at your disposal. Streamlining your administrative tasks gives you more time to focus on providing families with a quality childcare experience. 

Brightwheel makes easy-to-use childcare software to help you manage your daycare and stay in touch with families. Your staff can use brightwheel to record and track daily events and activities, and parents can get real-time updates delivered to their mobile devices throughout the day.

Our powerful daycare app also offers secure, digital check-in/check-out and an automated paperless daycare billing system. This is a great way to keep your families looped in on daily activities.

9. Market your daycare business and seek applicants.

At the very least, your childcare center will need marketing collateral and an online presence. 

Here are some other ways to get the word out about your daycare:

  • List your business in local child care directories and participate in your community's daycare or preschool enrollment fairs. 
  • Advertise through local businesses, parent groups, local events, and popular child care blogs. 
  • Try popular early education sites like Red Tricycle and Winnie.
  • Run a social media campaign focusing on your target population.
  • Host a grand opening event to attract families. 

Once you’ve managed to fill your inaugural child roster, continue with ongoing marketing efforts so that you’ll always be building a customer base.

FAQs about starting a daycare center

Can you open a daycare center from home?

Yes. Like commercial daycare centers, in-home daycare centers require a license from your state. The National Database of Child Care Licensing Regulation and Childcare.gov outline each state's licensing policies and regulations. 

How much does it cost to get daycare licensing?

Daycare licensing fees change from state to state, but they typically cost between $100 and $200. This cost does not include the expenses associated with any additional requirements — education, CPR certification, or training.

How long does it take to get licensed?

The average time it takes to receive daycare licensing is six months. However, you can delay this process if you lack the proper experience or documentation to fulfill your state’s requirements.

Are daycare centers profitable?

Your daycare center's profitability depends on your location. Daycare centers in areas with higher costs of living are more profitable. 

Profits will vary depending on the teacher-to-child ratio and the number of children you care for. Requirements vary from state to state.

How much can you charge?

The average cost of center-based daycare in the United States is $10,000 - $12,000. However, the price you charge for childcare will depend on numerous factors, including business location, local rates, average state tuition, and the child’s age. 

Your rates can also fluctuate based on what kind of child care you provide and whether you offer part-time, full-time, or afterschool care. 

How much does it cost to get insured?

The cost of business insurance varies based on the type of coverage policy. On average, you’ll pay the following premiums for business insurance:

  • Business owner’s policy (BOP) = $84/month
  • General liability insurance = $53/month
  • Business property insurance = $63/month
  • Professional liability insurance = $46/month
  • Workers’ compensation = $86/month
  • Small business health insurance = $623/month, single coverage

What makes a daycare attractive to parents?

When choosing a daycare center, parents look for small class sizes, staff with prior teaching experience in early childhood development, and low staff turnover. 

Additionally, becoming nationally accredited will show parents that your daycare center provides higher-than-average care to their children.

Take the first step to opening a daycare center today.

Now that you know the general process of opening a daycare center, research the specific requirements for your state. A lot of work goes into opening a daycare business, but the time, money, and effort you invest will be returned to you through the change you bring to the families and children in your community.

 

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