How to craft an effective daycare business plan

Key takeaways

• Keep licensing requirements in mind as you create a staffing and enrollment plan for your daycare
• Explain your business and management structure to show how you’re minimizing risk and why you’re uniquely fit to run a daycare
• Create a thorough financial plan to avoid unexpected expenses, and set financial benchmarks for your business to meet

Childcare is a top priority for parents. However, work and family priorities can often clash. More than 66% of married couples with children under 18 are dual-income households that juggle work and child care each day. 

When duty calls, many parents seek out high-quality child care services to keep their kids safe and engaged. With a daycare business plan, you can build a company from the ground up to meet families’ most important needs and attract (and maintain) satisfied clients. Here’s what to include in your plan.

7 sections of a daycare business plan

Working families with young children spend close to 10% of their income on child care expenditures, indicating that it’s a top priority for parents. However, 50% of U.S. families struggle with finding the child care they need, due in part to the limited availability of services. 

Because the demand for providers far outweighs the supply, it’s the perfect time for you to enter the child care industry and start a daycare. Get started by writing a business plan that can guide your decision making and impress any investor or lender you pitch.

1. Executive summary

A traditional business plan template always begins with an executive summary. This one-page introduction gives a brief overview of what your daycare offers, how it will operate, and even why it’s a worthwhile investment for investors and lenders. A comprehensive and engaging executive summary will entice readers and encourage them to read the rest of your plan.

Although it appears first, write this section last to include the most impressive details from the rest of your daycare business plan. These details can include strong staff credentials or financial projections that indicate big profit margins in the future.

In your summary, also be sure to identify the type of daycare you’re running—for example, an in-home daycare or a commercial daycare center.

2. Business description

This section of your business plan is your chance to offer a more thorough description of what your daycare does. You can provide details, including:

• Which age groups you’ll accept
• How many children you’ll be able to enroll in your daycare at once
• How many child care providers (full-time and part-time) you’ll have on staff

Make sure your staffing plans align with licensing regulations in your state. You’ll usually have to follow a specific child-to-staff ratio and ensure all your team members pass background checks, have references, provide immunization records, and meet other local requirements.

Your business description should also include logistics, like where you’re located and when you’re opening, and your mission statement, which is a brief description of your company’s purpose and what it hopes to achieve.

3. Market analysis

A great way to show your readers how your new business will succeed is by including a market analysis in your daycare business plan. Understanding the child care industry and your position in your local market will uncover opportunities for you to stand out while helping you counteract risks. Perform market research to identify:

• Industry trends
• The type of customers your competitors are targeting
• Opportunities, like underserved demographics (such as low-income parents) or rising demand for older children daycare services
• Challenges, such as a rising number of daycares near your business location

Providing details on how your daycare will serve a unique need, take advantage of opportunities, and overcome challenges will help your business stand out.

4. Business and management structure

Your daycare center business plan should mention your company’s legal structure—for example, if you’re an LLC or C corporation. If you haven’t chosen your business structure yet, keep in mind that running a daycare can inherently come with more risks than a graphic design or bookkeeping business since you’re responsible for children’s safety. 

Avoid forming a sole proprietorship or partnership, as these two legal structures won’t shield you from personal liability if your business is sued or goes bankrupt.

In addition, explain who owns your business and who’s on your management team—even if it’s just you. Explain your child care and business management experience and any relevant certifications you hold.

This is also a good section to detail how your management team will ensure your business meets licensing requirements, like passing background checks and state health and safety standards.

5. Daycare services

Even if you only offer one general daycare service option—perhaps with hourly, daily, and age-based rates—you need to provide insight into what’s included in that service. Explain what activities you’ll lead and how many hours are included in a work day. 

If you plan to provide meals and snacks, explain how you build your nutrition plan and accommodate allergies and food sensitivities. Include if parents need to pay additional fees for meals.

6. Marketing plan

Before you start enrollment for your daycare, you need to get the word out about your child care business. Prepare a marketing strategy that outlines the channels and tactics you’ll use to reach your target market. For example, you can:

• Create a Yelp Business Page up to a month before you open, updated with daycare center photos and accurate business information
• Run Yelp Ads to reach parents who are actively searching for daycare centers
• Use social media marketing and advertising to reach parents in your area
• Send direct mail with early enrollment discounts to households in your ZIP code

Be sure to include a marketing budget to better track your return on investment and avoid overspending.

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7. Financial plan

Opening a childcare center can involve a number of startup expenses. Whether or not you plan to apply for funding, creating a financial plan will help you avoid unexpected costs. Outline all the expenses you’ll need to cover when opening your daycare, which may include:

• Furniture, such as safety gates, cribs, kids’ tables, and chairs
• Educational equipment, including books and arts and craft supplies
• Play supplies, such as stuffed animals and puzzles
• Business registration and licensing costs

Then, outline your monthly operational expenses, which may include rent or mortgage, liability insurance, phone bills, cleaning supplies, and food costs.

Along with outlining your expenses, include accurate financial projections for the next five years, which should be created with the help of an accountant or financial analyst. 

Include mockups of cash flow statements, income statements, and balance sheets. This will help lenders determine your daycare’s profitability while creating financial benchmarks for your company to meet.

Bring your daycare center to life

Writing an effective daycare business plan is the first step to launching your center or accessing the financing you need. Including these seven sections allows you to clarify what you do and how you’ll succeed. This can align your team members and help you win over potential lenders.

As you prepare for your first year of enrollment, implement our online marketing tips for small businesses to reach as much of your target audience as possible.