How to Start a Daycare

To be a child care provider, you will need to be responsible, caring, patient, and demonstrate excellent communication skills. Parents and guardians will place a lot of trust in you to care for their kids. Therefore, it's important that you're sure about your choice.

As a daycare owner, it will be your job to reassure parents that their children are safe with you and that they'll have an educational and fun experience at your daycare center. Evaluate your abilities, responsibilities, and circumstances to ensure that you'll provide the best care.

In addition to caring for children, you will need to take care of basic business processes including allocating time for communicating with parents and guardians, marketing your business. Depending on the size of your business, you may also need to hire and train employees.

Overseeing multiple children is a challenge. You will need to provide adequate attention to every child in your care. In the United States, every state has a specific requirement for the ratio of care providers to children at any given time.

Common state requirements:

• Daycare facilities must have a building maintenance schedule in place, emergency exits, and be systematically cleaned to limit the spread of diseases.
• Daycare employees should be well-versed on immunization, nutrition, handwashing, safe sleep practices, and diapering.
• It's advised that all daycare employees complete a pediatric first-aid and/or CPR course.
• All employees should complete training in managing storage and the disposal of hazardous waste.
• Employees should be able to demonstrate emergency preparedness and know how to respond in the event of a natural disaster.

Ask parents or guardians what type of child care they would benefit from and if they're receiving this from local businesses.

For an optimal outcome, research the number of working families with children of a fitting age, the number of recent marriages, and the income distribution of those families.

Working parents who have young children will be your main target when opening your daycare. However, depending on your business location and the needs of your community, you may also have the opportunity to cater your services to a specific demographic.

Because good child care is a high priority for American families, there'll always be room for growth. However, if your location is already overpopulated with daycare opportunities or if your business plan is not properly prepared, you could fall short.

Opening a daycare business is a huge responsibility. Even if you've managed children before, it's wise to consider studying further. An early childhood education degree is a great place to start.

Your research should be more than just numbers and statistics. You will need to adjust to the daycare industry and learn about daycare practices. Read through the different books available. These will give you insights about how to turn your daycare ideas into a profitable business.

Best books to read before starting a daycare business:

1. From Babysitter to Business Owner: Getting the Most Out of Your Home Child Care Business by Patricia Dischler.
2. Dollars & Sense: Planning for Profit in Your Child Care Business by Janet Bush.
3. Family Child Care Marketing Guide, Second Edition (Redleaf Business Series) by Tom Copeland.
4. How to Open & Operate a Financially Successful Child Care Service by Tina Musial.
5. How To Start A Quality Childcare/Daycare Business by U.S. Small Business Administration.

There are three main types of childcare businesses: childcare centers, family child care homes, and preschool programs. Each business has its own system, offering young children of different ages specific programs and benefits.

Your name needs to be memorable, catchy, and accurately describe the type of service you will be providing. Consider the type of daycare services you're offering and look for any keywords that best describe them.

Before you settle on your name, check with the Secretary of State's (SOS) office in your state to ensure that your business name is not already registered with the SOS.

Conduct a few Google searches to find out if your desired domain name is available or if it clashes with local businesses in the area. Once complete, conduct a trademark search with the United States Patent and Trademark Office (USPTO).

After conducting the necessary searches, you can start registering your business name with the local SOS and on the USPTO website.

A business plan is a key strategic tool for entrepreneurs, ultimately forming the foundation of their business. A well-researched and detailed business plan will help you focus on your short and long-term goals, plan strategies, and list your financial expectations.

Your business plan should include:

• Executive summary.
• Company description.
• Description of products/services.
• Market analysis.
• Strategy.
• Organization.
• Financial plan and projections.

There are different business structures available, each with its own advantages and disadvantages. Your ideal business structure should provide you with the best liability protection, and tax and financial benefits.

There are four popular business structures:

• Sole Proprietorship: Owned and managed by one individual. No legal distinction between the owner and the business.

• Partnership: A legal agreement between two or more individuals who share management and profits.

• Limited Liability Company (LLC): Offers the protection of a corporation but only the owners pay taxes on business profits.

• Corporation: The more formal structure available, which includes offices and board of shareholders.

With a partnership or sole proprietor, you will have an easier time filing your taxes. However, if you choose a corporation or LLC, you are able to limit your liability for anything that happens while you operate your business.

In addition, specific versions of some of these structures, such as limited partnerships and S corporations, are available.

If you plan on hiring employees for your daycare service, your business will need a federal Employer Identification Number (EIN) from the IRS. Also known as Federal Tax ID Number, the number is used to recognize taxpayers who are obligated to file different business tax returns.

To get an EIN, you can complete an online application on the IRS website. There is no filing fee. If you are unable to apply online, you can also get an EIN by mail, or fax.

It is vital that you keep your business banking separate from your personal banking. Simply keeping separate records may not be enough. This will help keep clean and accurate bookkeeping records, help with clear audits, and present professionalism.

It's essential that you research the different insurances suitable for your specific business and industry. Every business is different, therefore every business will require different insurances.

There are various types of insurance to consider, including:

• Business interruption insurance.
• Liability insurance.
• Property insurance.
• Health insurance.
• Cyber insurance.

For child care business owners, liability insurance is essential. Your job is to take care of other people's children, therefore you must be able to provide the best care and attention. Liability insurance will help provide peace of mind to parents and the business owner, ensuring that the business is protected financially for any situation that may occur.

In order to legally care for children, you will need to study and understand the state and local licensing laws that oversee child care businesses. Failure to obtain certain permits and licenses can result in substantial fines, or even force you to shut down your business.

Each state has its own laws and regulations regarding child care business licensing. Check out your state’s information and make sure your daycare service is legally operating according to the state's law.

This licensing process will include:

• Attending an orientation session where you will learn about state and local requirements.
• Filling out applications.
• Paying licensing fees.
• Undergoing reviews of your business plan, and inspections of your facility.
• Taking classes on CPR and first aid.
• Background checks for you and employees.
• Undergoing medical examination/immunizations for you and employees.

Local municipal government and state licensing offices should also be able to tell you about the different licenses you will need to operate your child care business.

Depending on the type of legal business structure you choose, you will have to manage differing tax responsibilities. When selecting your business structure, you should have learned about the forms you will use and the types of taxes you must pay.

With a corporate structure, your personal tax returns will not be affected as your business is seen as a separate legal entity that reports revenue and expenses with a Corporate Tax Return, Form 1120. Your business will have to pay the tax on profits, which are taxed at special rates that only apply to C-corporations.

With a sole proprietorship or single-member LLC, your business will have to file business taxes as a sole proprietor. Sole proprietors use a Schedule C to separately report revenue, deductible business expenses, and the net profit.

With a partnership, S-corporation, and multiple-member LLC, owners must report a share of the business taxable earnings on their personal returns. They are also responsible for paying the income tax on it.

It's important to note that partnerships and S-corporations will first need to prepare information returns, Forms 1065, or 1120S, which includes all of the daycare's revenue, deductions, credits, and all other business-related tax items.

To guarantee that your daycare business is operating in the best financial state, you must establish a solid accounting system. To do this, you may need to obtain accounting software or hire an accountant.

Accounting software. It's a good idea to research the various accounting software available that will meet your business-specific needs as a daycare service. This software will help simplify processes, such as expenses, tuition, payment processing, and reporting. There is a range of free accounting software.

Hire an accountant. The idea of working with finances can be daunting for many. You do have the option of hiring a trained professional to help you with your finances. However, this option can be costly. It's wise to research the benefits of this option. Besides giving you more time to focus on your business, hiring an accountant may work in your favor. They allow for fewer mistakes and less time worrying if your taxes were in order.

Opening a child care center can be quite costly. If you're unable to afford the initial startup costs, consider starting small by offering at-home daycare services. This eliminates the cost of location space and major supplies needed for large groups of children.

Make a list of your startup expenses, such as labor, supplies, equipment, and rental space, and determine how much capital you will need. Remember to include your marketing costs, which should make up between 15% and 20% of your budget.

This is a great first choice when looking at all your financial options. Prepare a presentation and present your business plan. Ask family and friends if they're willing to invest in your business goal.

This is a popular choice, especially if you need more funding than you or your family and friends are able to afford. Find out more about small business loans.

Your location should be in the budget, situated in a great location, and possess the proper spacing to host multiple children and employees. Depending on your funding, you will also need to consider whether you'll buy or rent a space.

If your location is outside of your home, consider the following factors when making your choice:

• Is the location accessible for parents?
• Is there public transportation?
• Is the location safe?
• Is there enough space to run your business?
• Does it have sufficient kitchen/bathroom facilities?

Once you've chosen the appropriate location, it's time to start setting up your business. You will need to purchase furniture and supplies, as well as safety equipment, such as fire extinguishers, disaster supplies, first aid equipment, etc. It's best to research the safety requirements of your business. You will need to be ready for any situation that may arise.

Your layout should include:

• Adult and children restrooms.
• Staff facilities.
• Meeting space.
• Kitchen.
• Clinic.
• Outdoor and indoor playroom.

A daycare center requires a host of different supplies and equipment, including mats, sheets, blankets, child-sized utensils, plates and cups, high chairs, step stools, and kitchenware. Your costs for supplies and equipment will depend heavily on the number of children in your care.

The size of the daycare business you wish to operate will determine if you need additional staff to help you with the daily operation of your facility. If you plan on starting a family child care home facility, you don't need to hire new employees.

Your employees will be working in close contact with the children in your care and, as the employer, you will be accountable for their behavior on the job. Therefore, you'll want to thoroughly vet your staff and ensure they meet the standard job requirements.

Consider using an applicant tracking system or similar software to help you streamline the recruitment process.

An important part of your budgeting process is establishing your tuition. How much you charge for services will largely depend on the type of business you run and how many children you take care of.

Another factor to consider while setting up tuition is how and when you will expect payment. You’ll also need to establish a deadline for payment and penalties for late payments, terms that should be stipulated in your service agreement.

Your contribution margin is an important metric you'll need to understand. The contribution margin is the money generated for each child under your care after subtracting the variable prices of the business's costs. Ultimately, it will help you to determine tuition prices, what kind of discounts you can offer, and what it costs to take care of multiple children.

Step 1: Establish your unit sales price. This is the price you'll charge for one child on a weekly, monthly, or yearly basis.

According to the National Association of Child Care Resource & Referral Agencies (NACCRRA), daycare services for babies and toddlers average between $300.00 to $1,564.00 a month and preschoolers average between $371.00 to $1,100.00 a month. While in-home care averages between $300.00 to $995.00 a month.

For this example, let's assume you charge $350.00 per month for one child at your daycare center.

Step 2: Calculate your variable cost or your expenses for taking care of one child. This is the additional costs for food, supplies, arts and craft materials, and in some cases, insurance. This will heavily depend on your type of business and your service agreement.

To make it simpler, let's only calculate the variable cost for a month of daycare. For this example, let's say it cost $120.00 a month per child for all expenses.

Step 3: Subtract the variable costs from your unit sales price.

$350.00 - $120.00 = $230.00

$230.00 is your contribution margin for your daycare business.

To create awareness, you should begin advertising about three months before your daycare business is scheduled to open. If you have room in your budget, newspapers, radio stations, and television ads will give you the biggest exposure. However, these advertising formats do not come cheap.

Distribute your business brochures and business cards at libraries, church meetings, PTA meetings, neighborhood get togethers, etc.

Your future clients are online, searching through the different daycare businesses in your area. Therefore, it's important to have a visible online presence.

Get a website. Your website will be your business hub of information. Potential clients will research your business and your website should contain all the information they need including cost, location, policies, values, mission statement, services, contact details, and more. You can create a website with a website builder.

Start by creating social media pages including X, Facebook, and LinkedIn. Instagram is also becoming a popular platform. However, be careful with a photograph-based platform since a lot of your business will include working with children. Parents will not want their children advertised on social media.

When clients search for "the best daycare center near me," your business should appear in the search results. To do this, you will need to invest in a proper SEO strategy and register your business with Google.