How To Start A Daycare

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How To Start A Daycare: Easy Way To $10K?

Today, the majority of parents work full time in addition to caring for their children. As parents struggle to balance work and parenthood, nearly four out of five parents employ some form of child-care.

These parents find daycares a valuable resource. A child care center helps children develop independence by engaging them in fun and educational activities alongside peers. They also teach children how to play with others their age.

This article will guide you through everything you need to know about starting your own daycare business and what you’ll need to succeed.

Towards the end of this article you’ll find answers for some of the most frequently asked questions on how to launch a daycare business…

But most importantly, you’ll be shown the exact system several others have used to build their own business to over $40,000 a month in mostly passive income.

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Table of Contents

Open A Daycare By Following These 10 Steps

This is a simple guide for starting your daycare. These steps will help ensure the business is legally compliant, properly registered, and well-planned.

Step 1: Plan Your Business.

For entrepreneurs to succeed, a clear business plan is crucial. This will allow for proper mapping of business’ details and uncovering some hidden opportunities. Here are some essential points to remember:

What Are The Costs Involved In Opening A Daycare?

Running a daycare from home is the most cost-effective business model for a start-up.

This scenario allows housing up to five children without the need to rent an additional facility. The only monthly expenses would include educational materials, food, and toys.

What Are The Costs Involved When You Open Your Own Daycare?

Expect to pay $300-$400 per child and $80-$100 per month for food for general supplies. Other devices may be required, such as a child lock gate and safety locks for cabinets and drawers. This should not cost more than $100.

Additionally, daycare owners usually spend on small-scale local advertising, including a custom-built sign at the front yard.

Legal fees for registering the business and creating contracts to protect it from liability claims are the final major start-up expense.

Start-up costs for a daycare in the home could cost anywhere from $1000 up to $4000.

These costs, however, can be higher if the goal is to open a separate daycare facility.

Two of the critical factors to consider when calculating the start-up costs of daycare, regardless if it is leased or purchased, are:

  • Required renovation works for the space
  • Number of staff needed to be hired

Who Is The Target Market?

The primary clientele will include working parents with young children who require help during the day.

Depending on the location of the service and the specific needs in the local area, daycare services can be tailored to a particular demographic.

Remember that the daycare charges and fees and the quality of the service will impact the types of clients the business will attract.

How Much Can You Charge Customers?

The following four factors affect the childcare rates:

  • The business location: urban, suburban, rural, or mixed
  • The type of childcare being offered and special services, if any
  • The child’s age
  • The hours that the child will spend at the center each week

The average monthly cost of full-time childcare in daycare centers across the United States is $350 to over $1000 per month. Average prices vary by state. New York, Massachusetts, Minnesota, and Minnesota are the most expensive states, while Mississippi, Kentucky, and Louisiana are the least costly.

How Much Profit Can A Daycare Make?

A smaller center can house thirty children and six staff members. The annual profit could be between $40,000 and $60,000. This assumes a monthly cost of $800 per child and allows for an ample budget of $180,000 to pay employees. Based on the business model, the net profit may change.

What Will You Name Your Business?

It is both crucial and challenging to choose the right name. Opening a business under a different name other than the owner’s personal name is possible under a sole proprietorship.

When registering a business name, experts recommend that you do thorough research on the following:

  • The business records of the state 
  • Registers of trademarks at the federal and state levels
  • Social media platforms
  • Web domain availability

Step 2: Form A Legal Entity.

The types of business structure that are commonly used are the following:

  • Sole proprietorship
  • Partnership
  • Limited liability company (LLC)
  • Corporation

A legal business entity protects the business against being held personally responsible if the daycare gets sued.

An LLC can be set up easily by anyone with only minimal state LLC fees. Alternatively, an LLC service provider can do the job for a small, additional fee.

It is necessary to choose a registered agent for the LLC. A free annual registered agent service is often included as part of any LLC formation packages. The owner can act as the representative or opt to avail of the benefits of a registered agent.

Step 3: Register For Taxes.

Before opening the business, the owner will need to register for various state and federal taxes. To register for taxes, an EIN is required, which is a straightforward process and completely free!

The EIN can be obtained free of charge through the IRS website, fax, or mail.

Small Business Taxes

There are many options available for taxation of the business depending on how it is structured. An example of this is an LLC that could be taxed as an S corporation(S corp).

Below are some guides about small-business taxes that are worth checking out:

  • LLC taxes
  • Sole Proprietorship vs. LLC
  • LLC vs. Corporation
  • S Corp vs. LLC
  • How to start an S Corp

It’s important to note that specific state taxes and franchise taxes may apply to the business.

Step 4: Open A Business Bank Account & Credit Card.

For personal asset protection, it is important to use dedicated business credit accounts and banking accounts.

In the event of a lawsuit, personal and business assets such as the home, car, and other valuables of the business owner, become at risk if they are mixed. Business law calls it “piercing the corporate veil.”

Additionally, building business credit can be a way to obtain credit cards and financing under the business name and better interest rates and credit lines.

Step 5: Set Up Business Accounting.

To better understand the business’s financial performance, it is essential to keep track of all of the expenses and income. It is also easier to file annual taxes if detailed, accurate records are kept.

Step 6: Obtain Necessary Permits And Licenses.

Failure to obtain necessary permits and licenses may result in heavy fines or even complete business closure.

State & Local Business Licensing Requirements

Every state provides its own licensing requirements for child care. Have a look at the state information to make sure that the childcare center is complying with state law.

The local health department will also require to pass a food inspection if the daycare center serves food.

For more information regarding local permits and licenses, you can:

  • Check with the county clerk’s or city clerk’s office.
  • Find local assistance through one of the US Small Business Association’s directory listings of local resources for business.

Service Agreement

Daycare businesses might consider asking clients to sign a service contract before they start a new project.

This agreement should be clear and concise. It should also address client expectations and reduce the risk of legal disputes.

Release of Liability And Medical Waiver

Parents will need to give written consent to childcare providers to protect themselves from any lawsuits if their children are injured or have an accident while they care for them.

It is vital to be aware of your legal responsibilities as a caregiver and the potential consequences of injuries sustained by children at the center or home.

Certificate Of Occupancy

A Certificate of Occupancy (CO) is required for businesses that operate from a physical address. A Certificate of Occupancy (CO) confirms compliance with all building codes, zoning laws, and government regulations.

  • If the owner is looking to lease a property:
  • It is usually the landlord’s responsibility to obtain a CO.
  • Check that the landlord can obtain a valid CO for daycare businesses before leasing.
  • A new CO is often required after significant renovations. It is good to add language to the lease agreement that states that lease payments will not begin until a valid CO has been issued if the facility is being renovated.
  • If the owner is looking to buy or build a property:
  • It is the owner’s responsibility to obtain a valid CO from the local government authority.
  • The day care business can apply for a CO to comply with all local building codes and zoning requirements.

Step 7: Get Business Insurance.

Like licenses and permits for businesses, insurance is necessary to ensure that any business can operate legally and safely. Business insurance protects the company’s financial health in the event of a covered incident.

Many types of insurance policies can be purchased for different types and types of businesses, with various risks.

General Liability Insurance can help determine the potential risks to the business.

This is the most widespread coverage small businesses require, so it’s an excellent place to begin for the daycare.

Workers’ Compensation Insurance is another crucial insurance policy that businesses will need. The state will likely require the company workers to have Workers’ Compensation coverage.

Step 8: Define Your Brand.

Step 8: Define Your Brand.

The brand is the company’s identity. It is also how the business is perceived in the eyes of the public. A strong brand will make any company stand out from the rest.

How To Promote & Market A Daycare

The size of the daycare business or the number of children being served will influence the scope of marketing.

If the owner is a newbie just starting out and plans to operate his own business with three to four full-time employees, he may not need to hire web developers or graphic designers for a billboard.

A website, however, is essential for any business that is aiming to expand, allowing potential clients to find the company online. It also lets them learn about its personality and core values and even share information about the people working in the company.

These details should be attractive and easily accessible to help parents feel more comfortable bringing their children.

Testimonials about past clients and current clients whose children loved spending time in the daycare can also be shared on the website to market the business.

Step 9: Create Your Business Website.

The next step after defining the brand and creating a logo is to create a website.

Though creating a website may be essential, others might fear it is too difficult because they lack the necessary experience.

Although this was a legitimate fear in 2015, the web has seen significant advancements over the years that make the lives of small business owners easier.

Step 10: Set Up Your Business Phone System.

Setting up a business phone is one of many ways to ensure that private and professional lives are separate.

This isn’t all. It can also help the business become more automated, increase the company’s legitimacy, and make it easier for potential customers and clients to reach the company.

There are many services available for entrepreneurs who want to set-up a business phone system. 

Is this Business Right For You?

Starting a daycare business is no small feat. In fact, this child care business model is not for everyone. An entrepreneur interested in opening one is often someone who loves to be surrounded by children whose company that person enjoys.

Daycare is a good business idea for parents who want to spend more time with their children but still help other parents provide quality care.

Child care providers should be responsible, kind, patient, and good communicators. Multiple children can be a daunting task. This requires a person who is capable of giving the appropriate attention to each child.

However, it’s understandable that a business idea like this can be overbearing with all these formalities provided.

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How Much Does A Child Care Provider Make In A Daycare Make?

The average daycare worker’s salary ranges from $13,000 to $50,000. Average total compensation falls between $21,000 and $30,000 annually. 

This means, according to the Bureau of Labor Statistics, that daycare workers’ average annual wages are about $25,500 less than the median worker wage in the United States (which was $51,168 in December 2020).

How Much Money Do I Need To Start A Home Daycare?

According to, a daycare center’s average startup cost is from $10,000 – $50,000. This may vary depending on whether or not it’s a home-based child care facility or rental center.

Are Day Care Centers Profitable?

A small business owner who runs a day care center can earn $37,000 per year on average. While some daycare owners make more than $60,000 a year, others earn less than $20,000 a year.

What Are Examples Of Child Care Businesses?

  • Babysitting
  • Rent Baby Stuff
  • Night Nanny
  • Children’s Party Service
  • Start a Creche
  • Baby Swimming Services
  • Kids’ Taxi Service
  • New Parents School

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