How to Start a Home Daycare Center

Co-authored by Mel Shipman

Last Updated: January 20, 2023 References Approved

Childcare is an essential service in today's economy, and it is something that many parents worry about quite a bit. Starting an affordable, reliable daycare center fills an important need by alleviating some of this worry. At the same time, childcare is sometimes so prohibitively expensive that it makes more financial sense for one parent to stay home. Sometimes it even costs more than college tuition!^{[1]
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Research source} If your family has made this decision, starting a home daycare center can be a way to bring in some extra income while taking care of your own children.^{[2]
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Part 1

Part 1 of 3:

Crafting a Business Plan

1
Understand the need. In this respect, think like an entrepreneur—understand your customer base and what they're looking for. Then, identify why you're the best person to offer your particular service. There are many reasons why starting a daycare center is especially economically viable today. Are you a person who can help families adjust to these realities?^{[3]
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- The majority of families today do not fall into a male breadwinner-female homemaker model.
- Shift work is an increasingly prominent feature of the new economy, with more and more people working nights and weekends.
- In some two-parent households, one person works the day shift, and the other works the night shift
- People are waiting longer to retire, which means that grandparents are less available to take care of children.
2
Evaluate your strengths and weaknesses. If you are thinking of starting a daycare center, you probably like working with children and are familiar with the tremendous amount of energy and commitment that this work requires, but that is not enough to run a successful business. There are a number of other qualities you will need:^{[4]
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- Professionalism and business acumen
- Willingness to take risks
- Ability to supervise staff
- Access to financial resources
- Organizational and record-keeping skills
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3
Think about your particular community. Once you have established a need for daycare in your community, think more specifically about the kind of services you want to provide. You've already decided to establish the center in your home rather than in a commercial space, but there are many other considerations to address.^{[5]
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- Look at demographic data. How many children are there under the age of five in your area? You can get this and other important pieces of information from the U.S. Census Bureau or local municipal centers and school systems. Also consider conducting a focus group of parents in your area.^{[6]
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  U.S. Small Business Administration
  U.S. government agency focused on supporting small businesses
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- How many childcare centers already exist to serve these children? You can find this information through your municipal center's licensing office, local daycare referral agencies, or the phone book/Internet. Once you've established a comprehensive list, contact each center to find out how much they charge.^{[7]
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  U.S. Small Business Administration
  U.S. government agency focused on supporting small businesses
  Go to source}
- Is there a need that these centers are not currently serving? Perhaps an age group or time frame is being neglected. If so, this could be your niche. You might want to consider the following options:^{[8]
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  - Care during the traditional work day
  - Before or afterschool care
  - Evening, overnight, or weekend care
  - Care for a specific age group
- Consider other features that could set you apart from other childcare centers in your community as well, such as a focus on education, upgraded facilities, community engagement, a state-specific certification or highly-qualified staff.
4
Put aside start-up cash. How much money will you need, and how long will it take you to save it? Alternatively, if you take out a loan, how long will it take to repay it? You will need to calculate both costs and revenues to determine the financial viability of your plan.^{[9]
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- What supplies will you need to purchase? Keep in mind that this is not a one-time cost. You will need to replenish supplies regularly. These include toys, games, books, arts and crafts, playground equipment, and more.
- What alterations, if any, will you need to make to your house to make it safe for children?
- What are the licensing and insurance fees in your state?
- How much will it cost to provide meals and snacks for the children in your care?
- How many children can you care for in your home?
- Will you need to hire extra staff, and, if so, how much will you pay them?
- How much will you charge parents for your services? Will it be enough to balance out costs? Conversely, will it be so much that it drives parents away?
5
Choose a name and legal structure. Your name should be simple, catchy, and memorable. Your legal structure will depend on the kind of center you hope to operate.^{[10]
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Trustworthy Source
U.S. Small Business Administration
U.S. government agency focused on supporting small businesses
Go to source}
- Many home daycare centers are sole proprietorships. While this is the easiest and least expensive structure, it means that you will have to file both business and personal taxes together.
- Consider becoming incorporated if you employ other people. You will likely need to pay attorney's fees and higher taxes, but your own property will be protected. Becoming a Limited Liability Company (LLC) is also an option, but the parts of your home, furniture, materials, etc. that you use for the daycare will not be protected.
- Choose a partnership if you and a trusted colleague have complementary skill sets and wish to divide the labor. While this will allow you to participate in business decisions and receive any profits equally, you are also both responsible for any losses.
6
Look into funding opportunities. Federal, state, and local governments provide a number of grants and affordable loans for people looking to start childcare businesses. See if you qualify for one of these programs to mitigate your start-up and operational costs.

Part 2

Part 2 of 3:

Getting Licensed

1
Research the requirements for home daycare center licensing in your state or locality. The process will not be the same everywhere, but it will have many common elements. Most states will have an office specifically dedicated to licensing childcare centers, most likely located in a division or department of family and/or child services. The U.S. Small Business Association can help you find your state's licensing requirements.^{[11]
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Trustworthy Source
U.S. Small Business Administration
U.S. government agency focused on supporting small businesses
Go to source}
2
Get the necessary orientations. In some states, you cannot even fill out an application until you have taken an orientation. This will often be free and available online. The orientation serves the following purposes:
- Helping you decide if you want to start a daycare center
- Determining if you are qualified to start a daycare center
- Informing you of what is required before you can open your center
- Going over rules and safety requirements
- Providing information about adult-child ratios and staffing issues
- Introducing best practices in the care of children
3
Fill out and submit your application. Your state's licensing requirements will tell you where to submit this, although in many cases it will be your county's licensing office. Along with basic identification and residential information, you may need to provide any or all of the following:^{[12]
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- Character references or recommendations
- Medical information, including testing for tuberculosis
- Information about any criminal convictions
- Forms allowing background checks for anyone living in your house (and any staff) who is older than fourteen
- A fee
4
Receive training. There are a number of areas you will need to know about to run a daycare center successfully. Before you become licensed, you will need to demonstrate your understanding of several different things:^{[13]
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- First aid, CPR, and emergency preparedness
- Developmentally-appropriate discipline and activities
- Child health, nutrition, and development
- Making sure your home is safe for children
- Communicating with parents
5
Purchase required insurance. Home-based daycare centers will need fire, theft, and liability insurance. You will also need to make sure that your homeowners' insurance covers the materials you purchase for your business.
6
Get your home inspected. Before you can open your business, inspectors will need to make sure both that your home is safe and healthy for children and that you have considered their educational, recreational, and disciplinary needs.^{[14]
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Part 3

Part 3 of 3:

Running Your Business

1
Keep detailed accounts. This is where your organizational acumen comes in. You'll need to keep track of every expenditure and form of income, both for your own solvency and for when it comes time to do taxes.^{[15]
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Trustworthy Source
U.S. Small Business Administration
U.S. government agency focused on supporting small businesses
Go to source}
2
Maintain affordable prices. In certain states, infant care is more expensive than college tuition. This situation forces parents to weigh very carefully whether or not they can afford to send their children to daycare, or if it makes more sense for one parent to stay home.^{[16]
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- Grants and loans can allow you to keep your prices down.
- You may also be eligible for tax credits.^{[17]
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3
Stay up-to-date on the latest developments in child psychology, educational theory, and health and safety. Even with stringent licensing requirements, there is no guarantee that daycare centers provide high-quality care. Set yourself apart by establishing yourself as an expert in children's developmental, educational, and nutritional needs. Consider taking classes at a local community college, which will usually come with a modest charge.^{[18]
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4
Communicate with parents. Parents will not know what makes your center special if you do not let them know. Consider a weekly or biweekly newsletter that highlights the activities their children have been engaging in. It is even better if you can provide pictures!
5
Don't neglect marketing. Many childcare providers say that demand is so high that they often have a waiting list without doing any marketing. However, if you are just starting out, you want to establish your reputation as a professional business.^{[19]
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- Look into graphic design and writing professionals in your area.
- If you are working with someone who has children, you may even be able to trade childcare services for their services.
- As you are designing your marketing plan, think about the same questions you considered when deciding what kind of service to provide (and make sure that your materials describe these specific services to avoid any confusion).
  - What audience are you trying to reach?
  - How will your service be different from, and better than, the one they are currently using or others they might be considering?
  - What characteristic(s) do you want to emphasize? Caring? Flexibility? Affordability? Choose the most important ones, and use them to craft a consistent and appealing image.

Expert Q&A

Question

Do I need to be a good businessperson if I plan to open a daycare center?

Mel Shipman
Certified Life Purpose Coach, Owner of NextLevel Life, LLC
Mel Shipman is a Certified Life Purpose Coach & Mindset Coach. With over seven years of experience, she specializes in helping women leaders and entrepreneurs achieve their goals by shifting their mindsets and self-limiting beliefs. Mel holds a BS in Biology from Bowling Green State University, two master’s degrees in Business Administration and Health Administration from Webster University, and is a doctoral candidate in Professional Coaching from The Monarch Business School Switzerland. She has also received her Life Purpose Coach Certification from the Rhema International Training Group and is credentialed through the Certified Coaches Alliance.

Mel Shipman

Certified Life Purpose Coach, Owner of NextLevel Life, LLC

Expert Answer

In a sense, yes. Anyone who wants to pursue a new business venture and attract more clients to a space should be knowledgeable about their target demographic and how to market to it. On top of that, you'll need your own budget for start-up costs and marketing. As long as you're passionate about what you do, it'll definitely shine through. When you're an entrepreneur in any industry, you'll have to make a lot of calculated business decisions, but being detail-oriented will pay off in the end. Good luck!
Question

Can I do a daycare in my apartment?

Community Answer

You could. It might be a struggle, depending on how small or large your apartment is.
Question

How do I find out the rules and regulations for starting a center in my area?

Community Answer

Go to your town hall or courthouse, or look up the rules and regulations for your area online.