How to start a daycare: a business owner’s guide

Key takeaways 

• Running a daycare is a great small business idea if you’re an entrepreneur with a passion for early childhood education and expertise in childcare
• When starting a daycare business, analyze state and local regulations to ensure your business will be in compliance
• Requirements for launching a childcare business vary from state to state

Child care is more than just a career. Helping children grow, learn, and discover new things at such a formative age is both personally fulfilling and a big professional responsibility, If you’re passionate about early childhood education and have childcare expertise, opening a daycare center can be a great way to contribute to your community. 

The field is also growing rapidly, as there’s an even greater need for child care workers in the workforce: According to the United States Bureau of Labor Statistics, child care worker employment is expected to grow by 8% through 2030, accommodating the third of U.S. children—6.7 million kids—who go to daycare. 

As an aspiring child care provider, there are specific requirements you must meet before opening a local child care center. Learn how to start a daycare so you can be a part of this rewarding and essential industry.

Benefits and challenges of running a daycare 

When starting your own daycare business, carefully weigh the advantages and the obstacles.

The benefits of starting your own daycare business include: 

• Being a part of children’s formative, early education
• Setting your own schedule and potentially working from home 
• Taking care of your own children as part of the daycare program 
• Hiring and training a trustworthy team for staff roles 
• Setting your own rates for daycare services
• Becoming a vital part of a small town community

On the other hand, some of the common challenges for daycare owners include: 

• Exposure to higher rates of sickness 
• Cleaning and organizing most of the day
• Burnout from long hours and spending so much time in “childcare mode”
• Wear and tear to furniture (especially if using your own home) 

Your personality, education, goals, previous experience, and financing options all help you determine whether starting a daycare is the right fit.

How to start a daycare in six steps 

As with any small business, starting a daycare business requires research and preparation. Take the following steps to launch your daycare center.

1. Create a daycare business plan 

Creating a small business plan takes time and thoughtfulness. A well-written business plan provides a roadmap for your daycare center and how you’ll achieve your goals. 

Crafting a business plan is your chance to identify crucial details, such as anticipated enrollment and whether there are enough clients who may need daycare services in your area. 

Your daycare business plan should also highlight the following:

• Legal business name
• Business structure (such as sole proprietorship or LLC)
• Mission statement
• Market analysis of your competitors and how you’ll stand out
• Sources of funding and expected business expenses (e.g., startup costs, fees for different types of insurance)
• A strategic timeline for launching
• How you’ll recruit, train, and hire staff

2. Research and obtain the necessary licenses

One of the most important—and restrictive—aspects of starting your own daycare is meeting local and state child care licensing requirements. Make sure you understand the regulations in your state and local area since the licensing process can take anywhere from a few months to over a year. 

State and local licensing requirements include: 

• How many adults must be on staff in relation to the number of children 
• Building safety issues, such as emergency exits and overall cleanliness 
• Immunization for children and staff 
• Food serving safety
• Training mandates for staff

Visit the National Database of Child Care Licensing Regulations to learn more about your local area and what to expect from a licensing agency. 

3. Choose your location 

You can run your daycare business from your own home or from a separate location. Each option comes with pros and cons. Running a daycare business from a separate location gives you better proximity to your target market while running a daycare in your own home eliminates commuting costs, time, and additional rent or mortgage payments. 

As you make your decision, consider: 

• Whether your home has enough space to accommodate the maximum number of children you’d be able to care for or that is allowed by law
• Whether you want to use part or all of your home to support a daycare business 
• Whether your daycare center is in a central location that makes dropoff and pickup easy
• How your location will impact business insurance fees and any other local or state requirements

4. Budget for start-up costs

Weekly or monthly payments from parents can bring in a steady cash flow once you’re up and running. But before you launch, you need to budget for startup costs. If you’re planning to open a daycare center at home, you must bring your house up to compliance standards in order to operate. You’ll need to cover any expenses for renovation or other requirements prior to launch, typically through personal savings or small business loans.

According to the Bureau of Labor Statistics, the median pay for a childcare facility director is a little over $49,000 per year. However, it might take you longer than a year to hit that level of take-home pay depending on the number of children and staff you have. 

One helpful resource is the U.S. Small Business Administration (SBA) microloan program, which helps small businesses with loans up to $50,000. According to the SBA, the average microloan is about $13,000.

5. Hire staff

When it comes to staffing your child care center, safety is key. Requirements vary from state to state, but a responsible business owner requires background checks, proficiency in first aid, and verified references. 

While entry-level daycare providers don’t need more than a high school diploma and a few years of experience, daycare owners may need a degree and more formal training or certifications related to early childhood education. Each state has its own specific licensing requirements, so be sure you know what is necessary for your child care program.

6. Launch and implement your marketing plan 

For long-term success in the daycare business, marketing can help you go above and beyond the basic licensing requirements. You need to let parents know that your daycare center is providing quality service. Try some of the following marketing ideas to promote your childcare business: 

• Place advertising at the front of your daycare center, such as a large sign with easy-to-read contact information 
• Hang flyers in churches, post offices, and other locations around town that parents of young children frequent
• Create a small business website and feature testimonials from parents as you build your clientele
• Create company profiles on social media platforms like LinkedIn to share information about your business or offer useful tips about childcare
• Claim your Yelp Business Page to add your business information, photos, and services so you’ll be more likely to appear in search results when someone in your area is looking for a daycare 

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Start your own daycare business now 

Starting a daycare involves significant research in order to meet—and ideally exceed—local requirements for safety and quality of care. However, if you’re an entrepreneur who is passionate about early childhood education, it could be an ideal opportunity to connect with your community and make a difference in a growing field. 

As you explore the pros and cons of running your own daycare center, consider these six questions that everyone should ask when starting a small business.