Embarking on the journey of starting a #daycare business is both rewarding and impactful. It requires careful planning, dedication, and a genuine passion for child #development. This comprehensive guide will take you through the essential steps of starting a daycare, shedding light on the research and planning, legal requirements, facilities, curriculum design, staff hiring and training, safety measures, marketing, and financial management aspects.
Step 1: Research and Planning
Thorough research is crucial before starting a daycare. Understand the demand in your area, local regulations, and the competitive landscape. Identify your target demographic, assess their needs, and craft a detailed business plan outlining goals, target market, services offered, and financial projections. Factors like proximity to schools, transportation, local economics, and the average income in the area influence success in a daycare business. Understand the desires of families regarding daycare based on work situations, and whether they prefer centers or family care. Comprehensive location study and due diligence are crucial for long-term success.
Step 2: Legal Requirements and Licensing
Compliance with local regulations is paramount for the success and legality of your daycare. Contact your local childcare licensing agency to understand specific requirements, including background checks, safety inspections, and staff-to-child ratio guidelines.
Step 3: Location and Facilities
What type of daycare are you interested in starting? Will this be a family child care run out of your home or will you be opening a child care center that requires its own location? Design the space to include play areas, classrooms, and outdoor activities, fostering a welcoming environment for learning and creativity. Choose locations that are safe, accessible, and suitable for childcare.
Step 4: Design a Curriculum
Developing a well-rounded curriculum tailored to different age groups is essential. Focus on age-appropriate activities, learning materials, and playtime. Incorporate art, music, physical activity, and #language-development to provide a holistic learning experience.
Step 5: Hiring and Training Staff
Your staff plays a crucial role in creating a positive environment. Conduct thorough background checks, interviews, and reference checks. Ensure staff is trained in CPR, first aid, and #early-childhood education. Cultivate a team #culture that prioritizes open communication and collaboration.
Step 6: Safety and Emergency Preparedness
Child safety is paramount. Implement thorough safety protocols, childproof the environment, and educate staff on emergency procedures. Clearly communicate these plans to parents, ensuring a secure environment for their children.
Step 7: Marketing and Outreach
Build awareness through a robust marketing strategy using social media, local events, and partnerships. Develop a professional website outlining services and staff credentials. Encourage word-of-mouth referrals by exceeding expectations and creating a positive reputation within the community.
Step 8: Financial Management
Establish a financial management system based on operating costs, competitor rates, and the value provided. Keep detailed records, monitor expenses, and plan for unforeseen costs. A well-managed budget ensures the long-term viability and growth of your daycare.
What is a Profit and Loss Statement?
A Profit and Loss (P&L) statement is a financial document that summarizes the revenue, costs, and expenses incurred during a specific period, typically a month or a year. It provides a snapshot of a business's profitability and financial performance.
Starting a child care center means that a lot of money is invested. Not every provider is going to see their child care program succeed within the first month or two, or even the first year. It takes time to start and expand a business as more and more families hear about the availability of a child care program.
Capital expenditures are an unfortunate aspect of business that child care providers must address regularly, whether it is paying leasing fees and wages, repairing the facility, or purchasing supplies for the program. Children of differing ages have different needs: for instance, infants need diapers, cribs, towels, toys, wet wipes, and all other necessary equipment and tools. Toddlers and young children need stimulating materials such as crafting supplies, games, curriculum materials, and appropriately sized furniture.
Starting a daycare also involves choosing between running the businesses out of your own home, leasing a space, purchasing a building, or building your center. Each option impacts the Profit and Loss statement differently. Lease costs should be added to the P&L, while purchasing or building involve additional complexities such as mortgages and contractor payments.
Leasing
If a provider is planning on leasing a property to open their child care program, they should find out if they could negotiate a few months' worth of free rent with the property owner. Providers must understand that not all secure buildings are necessarily suitable for child care programs: there are build-outs and permits to obtain, as well as figuring out licensing and regulations. These procedures can sometimes take up to a year. Providers can propose signing on for a longer lease or an investment in exchange for having to pay for rent. A property owner can also collaborate with new providers by requesting a higher security deposit or additional payments in exchange for deferring rent payments.
Salaries and Expenses
According to the U.S. Bureau of Labor Statistics, childcare workers had a median pay in 2021 of $27,490 per year, or $13.22 per hour.
The costs of running a child care program, whether it is a family child care business or a center, begin with the salaries of the staff involved. Without these teachers, programs are unable to operate. Providers should recognize the need to hire more staff in the event of more enrollments to keep to the state's mandated teacher-child ratios.
Salaries and wages are just one factor in the costs of running a daycare center. You also have fixed and variable expenses. Fixed expenses include things like your physical space and daycare insurance. There are variable costs, like your utilities, transportation, food, cleaning supplies and activity materials.
One-time fees may include licensing fees, facility setup costs, and initial furniture expenses. These are essential investments for establishing a safe and conducive environment for children. In addition to one-time fees, recurring expenses such as teacher salaries, food, resources, utilities, and marketing costs are part of the ongoing operational costs for a daycare.
Example budget
Use ChildCareEd's FREE Resource, Daycare Business Budget Template to help you configure your budget.
Creating a budget for a home-based childcare business involves estimating both income and expenses. Keep in mind that these figures are hypothetical, and actual costs may vary based on location, specific business needs, and other factors. It's essential to conduct thorough research and consult with professionals when necessary. Here's a sample budget for a home-based childcare business serving four to six children:
Monthly Income:
- Tuition fees from enrolled children: $2,000 per child (assuming 5 children enrolled) = $10,000
- Additional income (e.g., extra programs or services): $500
- Registration fees: $300 (assuming 3 new enrollments per month)
- Wait-list fees: $100 (assuming 2 families on the waitlist per month)
Total Monthly Income: $10,900
Monthly Expenses:
- Initial license fees (one-time): $500
- Insurance: $100
- Construction cost: $0 (assuming the facility is already set up)
- Furnishings: $500 (tables, chairs, cribs, etc.)
- Equipment: $300 (toys, educational materials, etc.)
- Supplies: $200 (diapers, wipes, cleaning supplies, etc.)
- Water and trash: $50
- Phone and electric: $100
- Food and beverages: $300
- Transportation: $50 (if applicable)
- Software costs: $50 (childcare management software)
- Accountant and legal costs: $150
- Bank service charges: $20
- Advertising and marketing: $100
- Teacher's salary: $4,000 (assuming one full-time teacher)
Total Monthly Expenses: $6,420
Net Monthly Income: $10,900 - $6,420 = $4,480
This is a simplified budget, and you may need to adjust the figures based on your specific circumstances. Additionally, it's crucial to consider any local regulations, licensing requirements, and other factors that may impact your expenses. Keep in mind that this budget does not include potential unexpected costs or savings for future investments and improvements. Regularly reviewing and adjusting your budget as your business grows and evolves is essential for long-term success.
Breaking Even on Expenses:
The break-even point is achieved when total revenue equals total expenses. In our example, the break-even point occurs when monthly income of $5,500 matches total monthly expenses of $5,500. This is a crucial milestone for financial stability.
Initial Investment:
The recommended initial investment for a home-based childcare business serving four to six children would include costs associated with setting up the facility, obtaining necessary licenses, purchasing equipment, and covering initial operating expenses. Here's an estimated breakdown:
- Initial license fees (one-time): $500
- Insurance: $100 (for the initial month)
- Construction cost: $0 (assuming the facility is already set up)
- Furnishings: $500 (tables, chairs, cribs, etc.)
- Equipment: $300 (toys, educational materials, etc.)
- Supplies: $200 (diapers, wipes, cleaning supplies, etc.)
Total Initial Investment: $1,600
This is a basic estimate and can vary based on factors such as the condition of the existing facility, local licensing fees, and the specific needs of your childcare business. It's important to conduct a thorough assessment of your space, research local regulations, and consider any additional costs that may arise during the initial setup phase. Keep in mind that the initial investment is a one-time expense, while the monthly budget covers ongoing operational costs. Regularly reviewing and adjusting your budget is essential to ensure the financial #health-and sustainability of your childcare business.
Myths:
It's a myth that opening a daycare costs nothing. As demonstrated in our example, there are initial and ongoing expenses that require careful planning. The numbers provided are examples, and costs may differ based on location, regulations, and specific business decisions.
Funding
Providers can receive funds to start their child care business using these three methods:
Bank loans
Possibly the most popular of funding options, providers can obtain a bank loan for their new child care business based on another of the provider's incoming. An exception to this would be a standalone loan through the Small Business Administration (SBA).
Investor funding
Another way to secure funding to open a child care business is to pull in investors. While most providers rely on family, friends, (present and former) colleagues, providers may be better off seeking third-party investors who do not have a personal relationship with the provider, as opening any kind of business runs a risk of not succeeding Providers are highly encouraged to document everything so that there is evidence left behind.
Business partnerships
Partnerships occur in which a provider teams up with a party who is not interested in getting directly involved with the child care business, but shares the same goals and ideas. Also known as passive partnerships, these collaborations occur in which one partner provides the funds while the provider operates the business.
ChildCareED Business Brokers: The Experts in Selling and Buying Child Care Businesses
At ChildCareEd we are pleased to offer the added benefit of Child Care Business Broker services. Our team of experts has over 40 years of experience in the child care industry and have been part of many child care business sales and transactions.
A child care business broker is a professional who specializes in the sale and purchase of child care businesses. At ChildCareEd we can help you with every step of the process, from valuing your business to finding a buyer.
Looking for more information on building and managing your business? ChildCareEd offers several training courses designed to support #early-childhood- #educators in #how-to-start-a-daycare.
Conclusion:
Practicalities involved in opening a daycare vary based on location, the availability of child age groups, and the economic demographics of the area. Whether families are predominantly stay-at-home or working class influences the demand for external childcare. This guide emphasizes the importance of thorough planning, legal compliance, curriculum development, and financial management to ensure a successful and fulfilling family childcare venture. ChildCareEd offers additional resources and training courses to support educators in navigating the complexities of starting and managing a family childcare business.
References:
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Small Business Administration (SBA). (2019). Investopedia. https://www.investopedia.com/terms/s/small-business-administration.asp