These days, more parents and guardians are seeking help with childcare. There are fewer stay-at-home parents. In general parents are leading more hectic lives and often require more help taking care of their kids. That’s good news for anyone who is interested in starting a daycare business. But what exactly are the requirements to open a daycare? Let’s walk you through what you need to know. 

How Much Does it Cost to Start A Daycare?

The cost of starting a daycare will depend on a number of different factors. The cost to start a daycare starts around $10,000 but can be cheaper if you already have space or equipment or are able to thrift or find that equipment for cheaper than normal. One of the largest expenses will be renting a space, so a lot of the cost will depend on whether you intend to start a home-based facility or one that’s on different premises. 

We understand that most people who wish to start a daycare don’t just have $10,000 or more dollars sitting in their bank account. Fortunately, child care businesses are able to apply for several grant and loan programs. There are a number of businesses and organizations that offer financial incentives to promote and support budding child care centers. It’s also worth considering asking for financial support from your community, such as through crowdfunding.

Costs Associated with Starting a Daycare

Consider the cost of purchasing or renting the following in order to start your daycare. These are just the basics, it’s likely there will be several other costs associated with starting a daycare, so be prepared. Of course, over time, you can invest in better equipment and supplies by using the revenue you earn to help cover these expenses. When you start a daycare center, keeping things simple in the beginning and then purchasing more once you’re able to is also a good option. 

  • Renting a daycare space (if you don’t intend to have a home-based daycare)
  • Toys and play equipment
  • Art supplies
  • Child care supplies (like diapers and wipes)
  • Cleaning supplies
  • Business supplies such as a computer 
  • Licensing fees
  • Snacks or meals 
  • Utensils, plates, cups, bottles, etc.

What You Need to Open your Own Daycare 

Get Your Daycare License

First and foremost, licensing is important and is a step you simply can’t skip out on. You should review your state’s Department of Children and Family Services website or call them to see what licensing and registration requirements they have. It’s possible that you won’t need any licensing at all, but contacting DCFS helps ensure you aren’t exposing yourself to potential legal issues.

Licensing requirements will likely vary depending on the area in which you intend to open your daycare, so it’s crucial that you check the laws where you live and plan to operate. Providing quality childcare will also require you to possess current CPR certification and other documents attesting to your commitment. Ask your local agency questions to ensure you meet all requirements.

Get Insurance

Of course, just as with so many other businesses, you need to protect yourself and your daycare by attaining the proper insurance. Getting proper insurance is one of the biggest requirements to open a daycare. You’ll want to make sure you have good liability insurance coverage, as well as property insurance if you intend to have a separate facility outside your home. Check to make sure that you fulfill all necessary insurance requirements for your area before you accept any children into your daycare.

Consider getting a Certificate in Early Childhood Education

It’s highly encouraged that you have the best possible knowledge of early childhood development if you intend to start a daycare business. Of course, this isn’t necessary, but it’s certainly very helpful, and can also make parents feel at ease with who they’re leaving their children with.

A degree in early childhood education can help you to acquire a greater understanding of children’s behavior, thoughts, and needs. Try checking local colleges or looking for degrees or certificates that are available online. Moreover, you’ll be in a position to set your business apart from your competitors. By doing so, you’ll be better equipped to offer parents the services they need.

Get Funding or Grants

The costs of setting up a daycare aren’t always cheap, as we’ve already mentioned. Since many people don’t have the necessary start-up funds sitting around, it may be necessary to get creative when it comes to funding your daycare. Start-up costs can usually be partially or fully covered with funding or grants. It’s also worth considering crowdfunding options, as well as looking into SBA loans. You may even consider providing services for cheap to get cash flow generated that can be put back into the business to help you expand and offer more services for the children.

Create a Business Plan

In order to get funding, investment, bank financing, and ultimately run a successful business, you need to start with a business plan. Your plan will detail all aspects of your business, from your general concept to financial information and even SWOT analyses. 

A good business plan will help you to understand exactly what your own goals are. It will also help you determine other factors such as how competitive the environment is and how the market as a whole is fairing. To create your business plan, it can help to search for resources online on how to write a business plan or seek help from others who have been through a similar process before.

Prepare a Contract 

Having a contract that details the ins and outs of your business is essential for daycare owners. As a childcare facility, you are essentially catering to the needs of the parents you welcome to your facility, so you must have an appropriate contract in place. Depending on your business needs and particular specifications, it’s recommended you seek the services of a professional attorney to help you draft your contract. Using this contract, you will specify what you expect of your clients and their children. Contracts will also help to protect you from potential legal problems down the line.

At the very least, you should provide parents an overview of what they can expect for their children, along with your expectations of them as parents such as drop off and pick up time, child behavior, items they should bring, or extra clothes they should pack.

Find a Location for Your Daycare 

If you don’t intend to run your daycare out of your home, you’ll need a designated facility. Renting an entire space or facility out might not be necessary. Many local churches, offices, or community centers have spaces for rent available specifically for childcare services for a monthly fee. You can do a quick online search to see what’s available near you.

Just make sure to do your due diligence and check that whatever space you find for rent is compliant with laws and regulations. Look specifically for a location that’s child-friendly and easily accessible. 

Establish Rules, Policies, and Procedures

In order to run your daycare safely and successfully, you don’t just need a legal contract. You also need to establish certain rules, policies, and procedures such as an emergency plan, safety procedures, privacy protocols, and rules for your particular facility.

Such procedures won’t just protect your business, but they will also protect the children you care for. Once again, check local laws and obligations to make sure you’re in compliance.

Get a Business Bank Account

Every business needs a business bank account unless you are just operating as a sole proprietor. You need to have a place where all of your business finances, expenses, and earnings can be easily funneled through. A business bank account will ensure you’re able to keep your day care’s finances separate from your personal finances, which will be critical when it comes to doing your taxes. If you know you need a business bank account but aren’t sure where to look, check out NorthOne’s small business bank account.

Hire Staff as Needed

Hopefully, your business will be successful and start to grow, which may mean that eventually, you need to hire help.

Be sure to review local licensing and regulations to make sure you have enough staff for the number of children you plan on caring for. Also, make sure all child care staff undergo criminal background checks and provide references to ensure the safety of the children. Make your hiring decisions carefully to keep your facility safe and maintain a stellar reputation.

Market Your Daycare

There are numerous options for marketing your daycare. You could try conventional approaches such as putting up flyers in community areas. But the most successful marketing approach will likely be utilizing social media and Google or Facebook advertisements.

It’s also worth building a website in order to establish your business as a professional. 

Create Financial Goals and Manage your Business Finances

Unfortunately, even if you manage to get your daycare up and running successfully, poor money management and account keeping can cause it to quickly fail. In order to be successful in the long term, you need to know how to manage your business finances correctly. 

It’s not just about managing what you spend and what you bring in, you also need to plan for taxes, as well as make sure that you’re correctly managing and allocating funds. This requires some accounting and bookkeeping knowledge

In order to make smart financial decisions regarding your business, you also need to make sure you create (and stick to) a budget. This will be crucial to prevent you from spending funds you don’t actually have available and making sure you’re able to purchase everything you need for your business without getting yourself into financial hot water.

When figuring out how to start a daycare center, there’s a lot of hoops you have to jump through. Although it may seem overwhelming, take things one step at a time, and before you know it, you’ll be ready to start taking care of children and run a successful daycare business.

Free insights to help you take control of business finances.
Discover the best tips, tricks, and tools for better money management.