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How to Open a Day Care Center: Step by Step Business Plan

November 7, 2019 by Marsha Kelly, Serial Entrepreneur

Open a daycare center if you love working with kids and want to lend a hand to busy parents with a lot to do. Childcare centers can be profitable and are increasing in demand.

Not only will you be caring for children, but you will joining an increasingly lucrative industry in the U.S. According to Sageworks Analyst, Kevin Abbas, the day-care industry is seeing higher profit margins each year.

how to open a day care center childcare

Quick Overview of the Day Care Service Industry

“As the economy continues to improve and more people head back to work, the demand for childcare services increases, which also allows providers the ability to raise prices and pad their margins,” he writes. Now is your time to get started profiting from you own day care center.

Love babies? Read about my best baby & kid business ideas here

Why the Child Care Industry is a Good Bet

2019 data from Market Watch shows that the global market for child day-care services “is expected to grow from $339 billion in 2018 to $520 billion in 2022 at a CAGR of around 11%.” That’s an astonishing and highly attractive growth rate.

If you want to get a foothold in this market you’ll need to know what the business consists of and what your work day will look like. Once this information is clear, you can start working on your business plan right away! Keep reading for the next steps to take.

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Daily Activities in a Day Care Center

When you open up your own childcare center, a large portion of your day will go towards caring for children. According to Shelley Frost at Chron, the type of care depends on what the children’s ages are and your daily routine will vary accordingly.

Frost writes that typically, you will be in charge of “changing diapers, potty training, helping the kids eat, putting them down for naps and comforting the children.” You might also have to interact with the children’s guardians and/or parents to tell them about their child’s day.

Skills Needed to Start a Childcare Center

Do you have what it takes to start a daycare? According to Lois M., who now has six child-care centers in Ohio, you need to be “energetic, business-minded, a competent leader, have a pleasant personality, be professional, be willing to take calculated risks,” and “be consistent” in your actions and expectations.

Additionally, Kristine Tucker at Career Trend asserts that you need to be able to “clearly communicate what you want students to do” if you want to set up and expand your home daycare. In short, you should like kids, know how to talk to them, and be able to handle organizational logistics, and you’re good to go!

Helpful Experience for Entrepreneurs

There are two categories of experience that will come in handy. The first kind is the optional experience, i.e. it’s great if you have this because it will be useful when you’re dealing with children. According to Ivory Adams at Career Trend, you should have basic knowledge of First Aid and CPR training. This will ensure that you “feel confident in handling a child choking or providing assistance to wounds,” she writes.

Asides from safety experience, your local government will have some licensing requirements that you’ll need to fulfill, depending on which state you live in. You can find out what your state requires by visiting the Division of Child Care Services the government licensing agency. According to Caroline Goldstein at Fundera, if you’re the head of a child-care facility in New York, you need at least one of the following childcare licensing requirements:

  • An associate degree in early childhood education or its equivalent
  • A Child Development Associate (CDA) credential and two years of experience working with children
  • A high school diploma and at least 3 years of caring for children

Who to Target: Your Ideal Consumer

Generally, your target market will be working parents or families that are living on one-income, according to Denise Brandenberg.

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Usually, clients seek out day-care centers that are close to their day jobs or homes. They normally don’t want to travel far to get there and hence, you will want to concentrate your marketing efforts on gathering places like recreational or business parks. But more on that later.

How Day Care Centers Make Money

Here’s where your street smarts should step in. There are many ways that day-care centers make money but perhaps one of the smartest ways is how Victoria Sopik did it.

The 49-year-old entrepreneur “co-founded Kids & Company Ltd., a Toronto-based childcare provider in 2002,” and hasn’t looked back since. Her secret? She markets to companies, asking them to become “corporate clients” and her daycare becomes the official and legitimate one for all parents that work at the aforementioned company.

Not only that, but Kids & Company set up various before and after school programs for children, including professional constructed fitness programs and language classes. Sopik gets her stellar profit margin from both individual parents and also benefits from being on several companies’ corporate payrolls.

Growth Potential for Day Care Centers

According to the Care.com 2019 Cost of Care Survey, “two-thirds of parents say they’re spending more on childcare than they did last year.” What’s more, with child-care services becoming more expensive, the childcare service industry has become a political issue recently and this is beneficial to the industry overall.

Senator Elizabeth Warren of Massachusetts brought forth a “universal childcare proposal” recently, according to The New York Times. If the plan titled ‘Universal Child Care and Early Learning Act’ comes into play, it will push for more day-care facilities and a larger childcare network. Therefore, if you’re waiting to get into this industry, now is a good time to jump in.

Startup Costs for Day Care Centers

According to Karen Gardner at BizFluent, the average costs for starting a home-based day-care business range from $10,000 to $50,000. These costs can be dramatically reduced by opening your day care center in your home.

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On a bigger scale, i.e., if you want a franchise startup, you’ll be looking at anywhere between $60,000 to $3 million.

These costs vary depending on the location and the condition of the building you will be using. You could always finance a larger business with a business loan if you’re in need of capital.

How to Promote Your Day Care Center

A large part of marketing your day-care center will be through word of mouth tactics. Spread the word through social media and traditional WOM (word of mouth) techniques.

Additionally, BizFluent recommends that you should “organize holiday celebrations at your daycare center.” Bank on all the holiday spirit around you and go full out on Halloween, Christmas and more! This will give parents the sense that you’re involved with the community.

When to Hire Day Care Employees

According to Neil Patel, Co-Founder of NP Digital, you should never hire someone when you’re “desperate.” You should only consider hiring staff when your daycare center is making a substantial profit and you can afford to provide competitive workers compensation.

Fresh Books advises only hiring employees during a period of “strong growth.” Additionally, make sure you review basic interview tips and techniques for when you choose your future staff. Don’t be afraid to conduct background checks either. You can never be too safe when choosing childcare providers.

Tips from Successful Day Care Center Owners

According to Lois Mitten Rosenberry, Childcare Provider and Business Owner, you should invest in yourself and your company most. “I knew no one else had as much invested in this company as I did, so I decided I would invest in me,” she writes.

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She advises spending your budget on childcare conferences and learning opportunities as these will enable you to grow successfully.

On the other hand, running a daycare center can actually be simpler in terms of logistics and daily operations. According to Janet Hale, owner of Gingerbread House California, the trickier thing is to say emotionally detached from the children you’re working with.

“You may love the kids and the parents, but you need to keep a professional distance,” she advises, “Children will come and go, things happen in families, and while you want to be there to support the family, you can’t let them devastate you.”

Check out my guide on how to start your business right with tons of useful tips I learned by successfully starting, building, and selling multiple companies.




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