How to Start a Day Care (in 9 Simple Steps)

According to Move.org, infant childcare costs between 10.6% and 26.3% of household income. It’s no wonder that many parents decide it’s more beneficial for a parent to stay at home than to go back to work and spend a large portion of their income to pay someone else to watch their own children. That’s why we’re going to show you how to start a daycare.

Kristy Bickmeyer started Twinkle Toes Nanny Agency when she struggled to find placement in daycare centers and nanny agencies required a $1K-2K placement fee just to provide a list of nannies. She created a network that provides nannies and families better in-home child care. 

In less than 15 years, Twinkle Toes has grown to a franchise with more than $12 million in revenue and 20 locations across 5 states. We’ll share Kristy’s approach to the daycare business and how it’s revolutionized the daycare industry. Best of all, she’s done all this with word-of-mouth marketing.

Let’s start by discussing the future of the daycare business.

Should I Start a Daycare Business?

According to IBIS World, daycare businesses in the United States make $60.8 billion in revenue with a median profit margin of 9.3%. Business consistently grows with the birth of new babies which means it is virtually recession-proof. 

You can make even higher profits if you run a daycare like Kristy which is a nanny service. The median nanny service is approximately 51.7% profit because they provide at-home childcare. Kristy told us:

Check out the rest of our interview with her below.

How to Start a Day Care Business

Ultimately, your goal is to provide child care for parents. Whether you go to their home, they drop their kids off at your house, or you run a facility with multiple people, you’ll want to follow our 9-step process when starting a day care company:

1. Get Early Childhood Education (ECE) Credentials (Optional)
2. Research Your Location’s Daycare Licensing Requirements
3. Perform Competitive Analysis of Daycare In Your Area
4. Write a Daycare Business Plan
5. Research Childcare Tax Credits
6. Pursue Early Childhood Education Grants and Funding 
7. Create a Childcare Contract
8. Market Your Child Care Business
9. Provide Great Customer Service

Step 1. Get Early Childhood Education (ECE) Credentials (Optional)

This step is mostly for those running a child care facility or preschool, but if you’re running a nanny business, the early childhood education credentials could be a differentiating factor.

What Certifications Do I Need to Open a Daycare?

Some states may have certification requirements for daycare business operations, but it is always useful to have the following certifications. 

• CPR and First Aid: Current CPR certification is important for any daycare provider because it will teach you how to provide basic life support in an emergency. Find CPR training near you.
• Child Development: This certification will teach you about child development and how to care for children of different ages. It requires 120 hours of education and passing a test. Learn more.
• Early Childhood Education: This 180-hour certification will teach you about the principles of early childhood education and how to create a stimulating and educational environment for children. It is offered by the Childcare Education Institute.
• Food Safety: This certification will teach you about food safety practices and how to prevent the spread of foodborne illness. These are normally offered by your local health district.
• First Aid for Infants and Toddlers: This certification will teach you about the specific needs of infants and toddlers and how to provide first aid for them. You can take this with the Red Cross online.
• Trauma-Responsive Care Certification: This certification will teach you about the philosophy of responsive care and how to create a nurturing and responsive environment for children.
• Positive Discipline: This certification will teach you about the principles of positive discipline and how to use positive reinforcement and redirection to discipline children.
• Child Passenger Safety: This certification will teach you to be a child safety technician and install car seats properly.

These are just a few of the many certifications that are available for daycare providers. By obtaining these certifications, you can demonstrate your commitment to providing quality care for children. 

Some of these may apply to other daycares like adult daycare and home health assistants.

Step 2. Research Your Location’s Daycare Licensing Requirements

Childcare.gov states that a childcare business should meet these minimum requirements:

• Building safety standards
• Child and caregiver health standards
• Emergency preparedness
• Monitoring government regulatory environment for new health and safety requirements impacting child care providers
• Perform criminal background checks on all daycare employees
• Routine CPR, first aid, and safe sleep for infants training for employees
• Sanitation standards
• Business insurance requirements

Check out Childcare Aware for state-specific resources for early childhood education providers.

Kristy told us:

Requirements for nanny services are much easier to meet, but make sure you aren’t violating the laws. You’re taking care of other people’s children. It’s important they can trust you with their kids.

As Kristy said:

That’s why background checks are so important.

Keep reading to learn how to analyze the budding child care centers in your area.

Step 3. Perform Competitive Analysis of Daycare In Your Area

Research the daycare and nanny agencies in your location. You’ll want to know:

• How many daycare centers are there?
• Where is each daycare center located?
• What complaints and praise can you find about each child care center?
• How much does each profitable daycare business charge?
• Are there waiting lists for each daycare center?
• What services does the daycare industry have or lack?

This information will help you write your daycare business plans, which we’ll discuss next.

Step 4. Write a Day Care Business Plan

A business plan for a daycare service can be used to help you achieve your goals faster, get financing, and help employees make decisions based on the mission statement and values. Your business plan should include the following:

• Business Purpose: What makes your business different, how you’ll help customers, what your goals are. Make sure to include your mission and vision, too.
• Local Demand: Use the Census Bureau and your competitive analysis research to establish how many kids between 1-6 years old are in your area, how many need daycare, and how much they can pay.
• Financial Plan: A detailed budget of how much you’ll attempt to make and what you’ll spend it on. Be realistic. You should include both startup costs and ongoing expenses for up to 5 years.
• Insurance Policies: Day care facilities definitely need insurance. What happens if a kid is injured or dies?
• Standard Operating Procedures: Make sure to document rules and policies for everything you can think of. Make this a living document.
• Marketing Plan: Document exactly how you will market your daycare to find customers, nannies, and employees.

Kristy told us:

You’ll need $35K for the original franchise fee and an ongoing royalty of 3%. Learn more.

Keep reading for information on differentiating your own business from other local businesses when starting a daycare business.

Decide What Makes Your Daycare Business Unique

Your unique selling point for a daycare could be any number of differentiating factors. It might be the cleanliness of your facility, pricing, education, or in Kristy’s case:

Prepare a Budget

You can prepare a budget for your daycare startup and ongoing costs using the following percentages. Make sure to stay within your state limits for clients per caregiver.

Managing business finances by the numbers is the best way to build financial freedom over the long run.

Next, we’ll discuss the financial assistance available to families and small businesses opening a daycare center.

Step 5. Research Childcare Tax Credits

The federal government and some states offer tax credits to help people pay for child care. You can find information on the child and dependent care credit by going to IRS Topic 602.

Basically, it allows credits of up to $3,000 for one child or $6,000 for more than one child under 13 years old. If the child qualifies, they can claim between 20% and 35% of their income. The percentage claimable decreases as income rises.

A daycare owner should understand these tax credits to help people navigate them. The tax credits also impact how much people can realistically afford to spend. If you open a daycare for after-school care, you might want to charge the amounts in the table below.

Time Period	Amount to Qualify Assuming 180 Day School Year
Daily	$16.66/kid
Weekly	$83.33/kid
Monthly	$500/kid
School Year	$3,000/kid

Don’t forget to see if your state has any tax credits. I found the Keeper Tax write-off guide useful for common tax deductions during tax season.

Next, let’s discuss some unique opportunities a business owner has when starting a daycare.

Step 6. Pursue Early Childhood Education Grants and Funding 

There are numerous grants and funding opportunities when opening a daycare or other childcare location. Utilize as many as possible to improve your own daycare business and help children develop during their early years. 

Check out daycare center grants available at some of the following locations:

• Childcare Lounge: Site for finding grants for childcare facilities.
• Health and Human Services: Government department that provides aid for families and business expenses.
• Family Services: Offers assistance to families. A childcare center can accept funds directly from the agency, too. These are run by local agencies.

Next, we’ll discuss the importance of creating a daycare business contract before opening a daycare.

Step 7. Create a Childcare Contract

Your childcare contract is the basis for the services and payments exchanged between your daycare business and your customers. You’ll want to include the following sections:

• Parties: The names of the day care provider and the parents
• The Children: How many kids, names, and birth dates
• Duration: The beginning date, length of contract, and end date
• Child Care Services: What services will and will not be covered
• Schedule: Days of the week and times the daycare will watch the children
• Holidays: Any provisions for how holidays are handled
• Payment Amount: How much you’ll charge per period of time
• Payment Method: How often the parent needs to pay
• Deposit: Any charge for a security deposit
• Absences: How to handle absences
• Vacation Times: How to handle vacation periods
• Damages: How to handle damages
• Governing Law: The state the contract law is based on
• Severability: This is a standard contract term that makes it where one clause does not render the full contract useless
• Additional Terms & Conditions: Place to add additional terms
• Entire Agreement: Clause stating that the daycare contract is the primary contract and can only be superseded by contracts signed by both parties after the original contract

You should always consult with a licensed attorney to verify your contract is enforceable, but download our childcare contract template to get started.

In-home daycares should modify the contract because it is written for a daycare center where parents drop off their kids.

Next, we’ll discuss the importance of marketing when opening a daycare.

Step 8. Market Your Child Care Business

Marketing your daycare opening is crucial to help get customers to your business. Most daycares use a combination of several different marketing strategies including:

1. Paid and free social media
2. Search engine optimization
3. Word-of-mouth
4. Email marketing
5. Door hangers/mailers
6. Referral agreements
7. Create flyers and hang them on local bulletin boards

Keep reading for more advice on how to open a daycare.

Advice on Word-of-Mouth Marketing

Kristy told us:

Next, we’ll talk about how relationships with a child care center can be highly beneficial for in-home daycare providers.

Referral Agreements

One of the unique strategies that Kristy uses is trading referrals with childcare centers in her area. When there is a waiting list, the day care centers will refer their clients to her and Kristy’s company will provide nannies until the daycare center can admit the kids. She also explained:

Whether you run a home daycare or provide childcare in home, you can benefit by providing great customer service. Find out how.

Step 9. Provide Great Customer Service

Kristy explained that customer service is the primary driver of a successful daycare center.

Day Care Business Ideas

There are different types of day cares you can start including:

1. Doggie day care
2. At-home day care
3. In-home child care
4. Adult day care
5. Special needs day care
6. Day care centers
7. In-home preschools

How to Start a Dog Day Care Business

Dog day cares focus on providing a place for a dog to go play while the person is at work or on vacation.

1. Create a doggie daycare business plan
2. Decide where you’ll host the dogs.
3. Hire staff
4. Get equipment to care for dogs
5. Evaluate dog behavior
6. Market your daycare
7. Provide service

These care facilities are less profitable and consistent than other small businesses, but pet owners love their animals and are willing to pay a premium for good care.

Have Your Own Children? Consider How to Start an At-Home Daycare

At-home daycare is when you host day care services in your home. This is perfect for people with their own kids. You can make money and watch other people’s kids in your home. You’ll have fewer kids in an at-home daycare and you probably won’t have employees. 

There will be special rules you’ll have to follow if you choose to start a small business this way, but your business will pay part of your housing payment. Most parents would actually prefer for the more personalized care, but kids can get possessive of the stuffed animals.

How to Start an In-Home Child Care Business

In-home child care businesses, or nannies, go to people’s homes and watch their kids exclusively. Kristy described the difference between a nanny agency and the way Twinkle Toes works.

Effectively Kristy started a home daycare that is part daycare, part nanny service.

How to Start an Adult Day Care

An adult day care helps adults that can’t care for themselves. This may mean taking care of people with disabilities or health problems. You’ll probably need special licensing based on the type of patients you’ll be helping.

Providing adequate care is a big business, but you’ll want to make sure you follow all the laws, like the Americans with Disabilities Act and any other laws governing elderly care.

How to Start a Special Needs Day Care

Special needs day care facilities are specifically focused on helping kids or adults with mental, physical, or health issues. The care will normally be focused on a specific category of problems like Alzheimer’s patients or kids with Down’s syndrome. Because each health issue requires different care, you’ll need to research requirements for caring for their specific challenges.

How to Start a Day Care Center

Day Care centers have specific rules that have to be followed about:

• The ratio of children per adult
• Hiring standards
• Insurance
• Inspections

Start by researching your location’s laws about day care centers, and then follow the rest of this guide. 

How to Start an In-Home Preschool

In-home preschools are much like day care centers but have an added emphasis on learning. Education facilities will normally have additional accreditation processes like those from NECPA. Make sure to check with your school board to see what accreditations they require. 

How much does it cost to start a daycare?

A daycare is not the least expensive business to start, but it can be a rewarding career with lots of potential clients. You’ll also have plenty of professional development work as you start your own business 

It may be beneficial to understand the financial commitment you’ll make when starting a daycare. The cost to start a daycare business is between $10K and $100K, but most can start daycares for under $50K.

Overall, at-home daycares normally require lower start-up costs because there are no costs associated with buying or renting a space. 

The operating costs of running a daycare center include:

• Rent or mortgage
• Utilities
• Insurance
• Food
• Supplies
• Staff salaries
• Marketing
• Licensing and permits

Let’s look at the typical costs associated with daycare businesses.

Rent and Utilities

Most commercial spaces charge between $0.60 and $2.50 per square foot. Plus, you’ll need to pay expenses like electricity, water, heating, TV, phone, and internet.

Home-based daycare centers won’t have these costs, but you’ll still be able to deduct the expenses if you run an in-home daycare. If you go to other people’s homes, you’ll have costs of transportation.

Employee Compensation

The Bureau of Labor Statistics estimates childcare workers in the U.S. earn between $21K and $40K per year. The employee salaries will vary based on education, location, certifications, and years of experience. You can find detailed statistics about day care positions and their hourly pay on Payscale.com.

Licensing Fees

Every state has different daycare business licensing fees and requirements. Contact your state’s early childhood education department for more information. The licensing process can be quite challenging. 

We’ve provided a picture of Nevada’s process as an example. Don’t be surprised if you are spending $10K+ and 6 months to complete everything.

Insurance

Insurance normally costs $3K to $5K annually and varies based on location, credit, and state laws. Kristy told us:

You may have to buy the following insurance policies: 

• Liability Insurance
• Workers’ Compensation Insurance
• Property Insurance
• Errors and Omissions Insurance

Go to Simply Business to find the best quotes for childcare businesses.

Supplies and Equipment 

You will need furniture and equipment at your daycare. Indoor furniture can cost between $30K and $40K. You might need:

• Chairs
• Changing stations
• Computers
• Cribs
• Mats
• Playground equipment
• Tables

You might also want toys, books, craft supplies, cleaning supplies, diapers, and wipes.

Food

You’ll also need to calculate the cost of food and kitchen utensils if you provide meals. Most daycares follow USDA Child and Adult Care Food Program nutrition standards.

Advertising and Marketing

Expect to spend between $1K and $1.5K monthly on advertising. This includes expenses such as printed flyers, marketing materials, website costs, and social media ads.

If you are social, you might be able to get by without it. Kristy’s main marketing expense is sweat equity, or spending time instead of money to get the word out. She told us:

Resources for Daycare Owners

Take a look at some of the industry organizations in child care and nanny services.

• Department of Education: Government agency that governs education
• Health and Human Services: Offers assistance to low income families and other services
• National Child Care Association: Industry organization that provides advocacy and resources about child care and education
• International Nanny Association: Industry organization that provides advocacy and resources for nannies
• National Domestic Workers Association: Industry organization that provides advocacy and resources for people employed to work in others’ rooms

Ready to Start Your Own Daycare?

At this point, we’ve shown you how to start a daycare center. We’ve also provided all the resources you’ll need to help you open a successful day care. 

Which type of daycare business sounds best to you?