If you are a teacher, former teacher, or simply have years of experience caring for children and an entrepreneurial streak, then you might consider starting your own daycare center, either from home or in a dedicated facility. And at an expected job growth of 7% more than the next decade, working in childcare is a stable career choice. So, if you are seriously wondering how to start a daycare center, you have come to the right place.
As in the case of starting a business in any industry, however, your passion for your craft alone—or, in this case, your students—isn’t quite enough to ensure that your daycare business is completely satisfactory, either financially or legally. You will have to do a good amount of due diligence when looking into how to start a daycare business, paying special attention to legal licensing requirements for starting a business and ensuring that your facility and program align with your state’s health and safety codes.
That said, if you are a professional and/or experienced at educating, training, supporting and generally corralling large groups of small children, you should be pretty unperturbed by the work it takes to start a daycare business. Here is what you need to know all about starting a daycare business with this simple and fruitful step-by-step guide.
Even though every path toward starting a business seems distinct for every business owner, there are a few steps that every aspiring daycare owner needs to consider or keep in mind when it comes to how to best start a daycare.
Before you can even get to writing a business plan for your daycare business, first, you need to decide what kind of daycare you want to start. Look into whether you want to start a daycare business at home, or whether you would like to have more commercial facility.
There can be a different permit required in your municipality depending on which you desire to choose. Also, you need to decide what age groups you want to focus on. You will have to decide on a business entity, which will have huge effects on the way you are taxed and how you operate your daycare business.
Furthermore, you will want to consider whether you want a business entity that offers you some protection. And making your daycare center a limited liability company might be a good move since the business will take on liability should anything go wrong.
Once you narrow down this information about your business, you can move on to the next step in starting a daycare business: writing a business plan.
Prepare your daycare business plan is the very first step that you need to take when it comes to starting any business and it can be quite a bit of work, especially for anyone looking to get moving quickly on their business. When you start writing a business plan, start with an outline and highlight all the important things you would like to include.
For instance, your business plan should include a summary, an overview of the company, a market analysis that includes an assessment of the need for a business like yours, a marketing and sales plan, a financial plan along with financial projections and much more.
Do not worry, though, you can always add more requirements to your business plan as your business grows over time. However, one thing you should include, though, is market research. The last thing you will want to do is go through all of these “how to start a daycare business” steps, only to find that there is not a market for one or that there are already many daycares in that area to make it an interesting and viable business.
Your business plan should also include a budget. The costs and money is associated with opening and running your daycare center can never be accurately final and totaled, but nailing down a budget will give you some parameters to work within (and some peace of mind).
And also know the fact that daycare centers can claim certain tax deductions, which can ease your annual financial burden.
You will also want to include a marketing plan. If you are seriously researching how to start a daycare business, it is likely that you have already been caring for children in your area for some time and have built up a network of local parents. That is one valuable method of attracting customers.
Still, implementing even a basic marketing plan can help define and legitimize your business and, if you need to implement a wait-list as a result, that is going to be great, too! Your marketing practices and efforts can be relatively easy and low-cost. For example, you can start by creating a Facebook page for your daycare center and building a business website, making sure to include your contact information and a little bit about your business.
Just plan to include pictures of your facilities and testimonials from happy and satisfied customers. If you are a fan of social media, you can also create an Instagram, LinkedIn and Twitter account to keep both current and prospective customers updated on your business.
Just be sure that once you do, you receive a permit and permission from parents or guardians before posting pictures of their children, of course, it is obvious.
Analog marketing techniques would work well here, too. If possible, ponder and think about distributing flyers or brochures to nearby libraries, schools, places of worship, or any other local gathering spots.
Here for daycare, you don’t need a master’s degree in education to be a daycare teacher, but each state does require some combination of licensing and certification when it comes to how to start a daycare. Visit your state’s Division of Child Care Services to find out the training, experience, and credentials you need to legally operate a daycare facility. Let’s learn how to get a business license to open and initiate a daycare business.
For instance, in New York State, the head of the daycare facility must have one of the following
You will probably find that there are some other requirements that usually come up when you are looking up how to start a daycare business at home or in another facility. Your state may need and require any staff you hire are CPR-certified, for one. Another point of safety to remember is that you should be trained in at least basic first aid for children.
You and your staff might also need to be fingerprinted and undergo background checks before being cleared for work. Even if your state does not require that you obtain a license, you should consider doing so, as your licensing course will go over all the boxes you need to check to operate your daycare in your state, including meeting health and safety regulations, proper food preparation, the required child-to-adult ratio and so on.
In certain states, in order to attain and acquire the proper licenses or registration to start your daycare business, you will first need to show that your daycare facility meets your state’s health and safety requirements.
So, whether you choose to open your daycare facility in your own home, or buy or lease a new property, you will need to make sure your facility meets zoning, fire and other health and safety laws.
When it comes to how to start a daycare at home, you may need to make alterations to your house in order to comply with daycare requirements in your state.
Another requirement for obtaining your license is getting insured. In certain states, you will need to get a license by the Department of Health and Human Services to run your daycare center, but to do so, you will first need liability insurance.
However, the exception is home-based daycare centers, which do not have a requirement of insurance by the DHHS. Still, those who have opened daycare at home must seriously think about obtaining small business insurance.
You always run the risk of a lawsuit when you are running your own business, but that risk increases when caring for other people’s children. So, protect yourself whenever possible.
There are various types of insurance that cover daycare businesses. These are general liability insurance, workers’ compensation, property insurance, abuse, and molestation insurance and others. You may contact an insurance broker to help you decide which coverage is best for your business.
The next thing is to get a business credit card and a business checking account early on to help you keep your business expenses separate from your personal expenses when first starting a daycare business. Why? It is prominent to separate your personal and business expenses for many reasons, not the least of which is to reduce your (or your accountant’s) burden come tax season.
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It is simply the most professional way to conduct your business, too. Set yourself up for success now by signing up for a business credit card and opening a business bank account and be diligent about using both solely for financing your daycare business.
Also, having a business credit card can help you increase your business credit score, too. By paying the card off on time, or early if you can, you can boost your score, which will help you late on when you need a loan or other financing for your daycare business.
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Most entrepreneurs bootstrap their businesses at the beginning, as it is difficult for brand-new businesses with limited credit history to secure a business loan, either from a bank or from an alternative lender. Your financing options are not limited to your own purse strings.
Although most SBA loans are available only to businesses with a few years of experience under their belts, SBA Microloans are actually assisting start-ups to get off the ground. They are especially accessible to women, veterans, minorities and business owners in low-income areas. And unlike most other SBA loan programs, SBA Microloans are disbursed by non-profit lenders, rather than banks.
SBA Microloans are on the smaller side, with amounts, capped at $50,000, but they may be as low as $500. For more context, the average Microloan amount was $14,000 in 2017. And because Microloans are pop up in the market for new businesses, business owners with average or even challenged credit may still be accepted, as long as other aspects of their SBA loan applications are in good shape.
The SBA community advantage loans from the SBA have all of the pros that come with SBA Microloans, but the community advantage loans are specifically for businesses that are serving traditionally underserved communities. These loans are generally for a higher dollar amount than the Microloans and can go a bit further for your daycare business.
Here you can be able to obtain financial assistance to start and run your daycare through state or federal funding programs for early childhood education providers. For example, you can contact your state’s Child Care and Development Fund Plan (CCDF) to look into start-up funds, or your state’s school meal contacts to seek funding for your daycare center’s meals.
You also can visit the Administration for Children and Families Office of Child Care’s website for a more comprehensive overview of federal and state financing programs for child care centers.
It is important to use a business credit card to keep your daycare business’ expenses separate from your own. Of course, using a credit card is the most convenient and easy-going way to pay for your daily expenses. And since credit limits for business credit cards tend to exceed those of consumer cards, you can spend more liberally without worrying about maxing out your card.
Using your business credit card responsibly (by which we mostly mean paying off your balance in full and on time, every month) can help you build business credit. And with a healthy business credit score, you will be in a better position to secure business loans with great terms down the line.
If you select and choose for a card with a long 0% intro APR period, you can essentially use that introductory grace period as an interest-free loan. For instance, the American Express Blue Business Plus card, which, at 15 months, carries one of the longest interest-free introductory periods in a business credit card right now.
After your 15 interest-free months are up, though, a variable APR kicks in at a rate depending on your creditworthiness and the market. Also, do not forget to check the issuer’s terms and conditions for the latest APR information.
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You may be planning on running your daycare facility solo, but depending on your state and the number of children you are looking after, that might not be an option. Every state sets and regulates a required ratio of staff to children to ensure that every child receives adequate care.
They also dictate the maximum number of children permitted in a group. Adult-to-child ratios and class sizes rely on the age of the children, but they might also depend on the size of the daycare facility, or face further restrictions based on municipality.
For example, for starting a daycare center in New York state, the state requires one adult for six children under school age. However, in New York City, there are certainly two teachers or one teacher and one assistant to every six children that come under 2 to 3 years, with a maximum of 12 students in a single group. Probably there are chances that your own children can also be a part of that count, too.
So, while hiring certainly dependent on your state’s requirements, it makes sense to leave room for hiring staff in your business budget. That way, you will be preparing for growth, without worrying about your operation shutting down because you are not properly ready for it. Just keep in mind though, that any staff you hire needs to be appropriately licensed or trained for it and potentially undergo a background check. Let’s learn about the background checking websites
To further legally protect your business, it is crucial that you draw up a contract, write out your daycare policies and require that potential clients (or, more likely, the parents of potential clients) review and sign both documents before accepting their patronage.
If you are just starting to read up on how to start a daycare business, you might not be clear on the distinction between these two documents. To clarify, your contract is the document stating that you will provide childcare, compensated for providing care according to the payment terms you specify and have the right to terminate providing care.
Your policies, on the other hand, provide parents with important logistical information regarding how you will run your daycare center. There, you can also highlight and mark protocol regarding vacation, illness, inclement weather, drop-off and pickup times, curriculum, field trips and anything else you believe is important for your clients to understand and agree to about your daycare center.
When it comes to how to start a daycare business, you can tell that it is clearly not for everyone. Opening your own daycare facility means becoming equal parts childcare provider and small business owner and taking on the duties attendant to both.
Opening and running your own daycare center can be incredibly rewarding and prestigious. Just be sure to take the proper steps, especially in regards to licensing and insuring your facility, in order to make sure that your daycare center operates safely and of course, legally. Also, remember that you, your charges and (certainly) parents of those children will thank you for your hard work.