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…
This is a simple guide for starting your daycare. These steps will help ensure the business is legally compliant, properly registered, and well-planned.
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:
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:
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.
The following four factors affect the childcare rates:
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.
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.
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 types of business structure that are commonly used are the following:
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.
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.
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:
It’s important to note that specific state taxes and franchise taxes may apply to the business.
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.
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.
Failure to obtain necessary permits and licenses may result in heavy fines or even complete business closure.
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
If you want a business that you can start without the stress of watching someone else kids…check out our #1 recommendation!
You’ll find that the profit margins are much higher!
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).
According to bizfluent.com, 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.
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.
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