Starting a home daycare business is not as easy as it sounds. You probably have a million questions going through your head after you figured out that you want to start a home daycare. There’s so much to do that’s why it can be confusing to figure out where to start. It's not easy finding all the information you need in one place, and it can be hard to keep track of everything on your own.
You're not alone. A lot of people who plan on opening an in home daycare find themselves overwhelmed and confused about how to open a home daycare. That's why we've created a guide for starting a home daycare business that covers all the steps. The goal of this post is to make sure you’ll feel confident before opening up shop. This opening a daycare checklist gives you the guidance you need on how to run a successful in home daycare.
Paperwork
If you are considering starting a home daycare, it's important to make sure all your paperwork is in order before opening for business. This may be the most tedious and boring part of the process but unfortunately, it’s also the most essential. You don’t want to spend your time working on the other parts of the business only to find out that you cannot legally operate. Below are some common paperwork essentials to work on when opening your home daycare business.
Licensing
Depending on what state you want to open your home daycare business, there are different regulations that may apply. Knowing all the rules beforehand can help you structure how to set up your business. Being licensed also makes you more marketable to parents. Check with the local office of the Department of Children and Family Services (DCFS) in your state regarding in home daycare licensing requirements.
Zoning Regulations
If you are planning to use your home for your daycare business, check the zoning regulations in your neighborhood. The zoning regulations specify whether a certain area can be used for commercial, residential, or industrial purposes. As you will be in a residential neighborhood, you need to make sure that you can put up a commercial daycare business in your area. Try to contact your city hall or local zoning office to gain information regarding the zoning regulations in your area.
Business Setup
You will have to think up a name for your business when you register it. Your business name has to be unique. You don’t want your home daycare to have a similar name with another daycare and cause confusion for your clients.
In terms of legal structure, many daycare businesses operate as a sole proprietorship business but you can also open your company as a partnership, corporation, or LLC (Limited Liability Company). If you open your home daycare as a corporation or LLC, this could protect you from personal liability in case any issues arise in the future. It is best to consult with a lawyer or a specialist on the best way to go about your business registration.
Certifications
You will have to think up a name for your business when you register it. Your business name has to be unique. You don’t want your home daycare to have a similar name with another daycare and cause confusion for your clients.
In terms of legal structure, many daycare businesses operate as a sole proprietorship business but you can also open your company as a partnership, corporation, or LLC (Limited Liability Company). If you open your home daycare as a corporation or LLC, this could protect you from personal liability in case any issues arise in the future. It is best to consult with a lawyer or a specialist on the best way to go about your business registration.
Insurance
Even if your home is already insured, you have to get a separate insurance for your daycare business. You can get a General Liability insurance to protect your business in case of physical injury, personal injury (reputational harm), and property damage. You can also look into getting an Errors and Omissions Insurance that can protect you in case of unforeseen mistakes in the future regarding the terms of your business.
Contracts and Waivers
Babysitting for your neighbors once in a while is different from operating a home daycare business. When you operate as a business, you have to make sure you have clear agreements with your clients. Having contracts and waivers ready for parents to sign ensures that they understand your business policies and can protect your business. Check with your local child care licensing office if there are ready waivers that you can use.
Financials
In any business, getting your finances sorted out is non-negotiable. After all, one of the primary reasons why you’re opening a business is to make profits. You’re probably not doing this just out of the goodness of your heart- you want to make money too. By keeping track of all the money matters early on, you’ll have a clearer view of whether your business will be profitable.
Start-Up Costs
Just because you’re opening your home daycare in your own house does not mean there are no other costs involved. You have to take into consideration all the expenses involved in setting up your business including sorting out all the paperwork and preparing your house to start receiving clients.
How much money do you need to start a daycare? According to Entrepreneur, the average cost of opening a childcare center ranges from $10,0000 to $50,000. However, the cost for opening an in home daycare could be on the lower spectrum. This will depend if you already own the house you’re living in, paying a mortgage, or if you’re just planning to buy a house. Other factors that will affect the cost include the size of your daycare, the activities you plan to offer, and the requirements in your state.
A good guideline to determine how much money you will need is to use this checklist and see whether there is a cost involved to complete each item. Add up all of these costs to arrive at an estimate of how much money you need.
If you don’t have enough money for your start-up capital, consider checking out grants or loans from the Small Business Administration.
Capital Expenses
Capital Expenses (CapEx) are business expenditures that are for long-term use. In a home daycare, some examples of capital expenses include house renovations and the purchase of fixed assets like computers, software, furniture, and toys.
Operating Expenses
Operating expenses (OPEX) are different from capital expenses. These are the daily expenses necessary to run your business on a day-to-day basis. Examples are utility costs, salaries, activity supplies, food, maintenance, etc.
Fee Structure
How much money do you make running a home daycare? This will depend on your fee structure. Are you going to charge per hour or per day? Is there a monthly, quarterly, or annual fee? To help you decide, perform a competitive analysis of all the nearby daycare facilities in your area. By doing this you will be able to determine the average rates and come up with your own pricing.
Billing
You have to determine how you’ll charge your clients and accept payments. Will you send an invoice at the end of each month or require advance payment? Or perhaps you’ll accept payments on a per day basis and provide a receipt? Will you have the ability to accept credit card or PayPal payments? You need to set up these payment platforms for your business prior to launch.
Business Financial Accounts
It is imperative to have separate financial accounts for your business to protect your personal assets. Open a business bank account, credit cards, PayPal/Venmo, and other financial tools exclusive for your business.
Taxes
You will have to apply for an EIN or Employer Identification Number so you can file for taxes for your business. An EIN is a unique number assigned by the IRS to businesses operating in the United States for identification purposes.
Business Facility
You will have to prepare your house to make sure that it will be ready to receive clients. But do conduct sufficient research to be confident of the viability of such a business before you start spending a lot of money. Below are some facility considerations.
Location
If you already have a home, you have to consider whether there is a need in your neighborhood for a home daycare center. For example, it will be pointless to open a home daycare if you don’t live in a family-saturated neighborhood or if there are already several home daycares in your area. If you are still looking to buy a house, take these factors into consideration when looking for a location.
Construction
If you are going to use the existing home that you are living in to run your home daycare, you may have to perform renovation or construction in order to make it child-friendly and more attractive to parents. Examples of renovation work include painting the walls, changing the flooring of the daycare area, installing doors and fences, adding more lighting, landscaping or yard improvement, adding windows, etc.
Safety
Aside from improving the aesthetics of your home, you will also need to make sure that your house is safe for children. Examples of safety features include non-slip floors, handles on staircases, indoor fencing, door and window locks, securing sharp corners, CCTV cameras, etc.
Business Assets
You will have to purchase several things in order to start your home daycare. Your business assets will be a combination of long-term and short-term assets. We listed some examples of common assets for home daycare.
Equipment
Computers, touchscreen tablets, childcare software or app, CCTV software for parents who want to monitor their kids, TV monitor, air conditioning unit, CCTV cameras, air purifiers, first-aid kit, refrigerator, kitchen appliances (microwave, water heater), vacuum cleaner and other cleaning equipment.
Furniture and Fixtures
Shelving, cots, high chair, sleeping mats, rugs, tables and chairs, teaching easels, strollers, buggies, changing tables, room dividers.
Supplies and Consumables
Books, toys, art supplies, activity supplies, food, purified water, eating supplies, hand sanitizer, cleaning supplies, toiletries.
Business Operations
As the owner of a home daycare, it will be up to you to decide how you will run your facility. Before opening, make sure that you and your staff are clear on how you will operate the business.
Policies
You must have your business policies written down and included in the contracts or waivers that your customers will sign. This will include all the important information that your clients need to know about your daycare such as business hours, age of children accepted, fees, payment terms, etc. If you have special rules include them as well. It is recommended to provide parents a policy handbook before they admit their child to your daycare.
Operational Workflow
Your operational workflow will outline the daily schedule and how you will run the daycare from the time children are admitted until the time they are picked up by their parents. If you employ other staff in your daycare, your workflow will also indicate who will be responsible for every activity or task.
Staffing
Most home daycare businesses are one-man operations with the owner handling everything. Some, however, employ support staff especially if state regulations require this. Depending on the size of your business, check if you will need to hire additional employees.
Activities
Children have short attention spans so you have to keep them interested. You have to plan many different activities to rotate.
Marketing
Last but not least, you need to market your business to gain clients. Here are some marketing essentials for home daycare businesses.
Digital Marketing
Using digital marketing is one of the most cost-effective ways to market your business. Putting up your own website does not need to be expensive. There are many free online web tools available that you can explore. It’s also important to have a Google page and Facebook page to make it easier for clients to find you.
Local Marketing Tactics
As you are targeting local clients, you need to use local marketing platforms to attract clients. If you have a local newspaper or radio station, check if you can advertise. You can sponsor and participate in local events as well. If the budget is tight, you can also put up posters or distribute flyers in local schools, community centers, or churches.
Open Your Home Daycare With Confidence
Starting and maintaining a successful home daycare can seem like an intimidating task for anyone. However, with the right information and help on how to start your own business, running your own home daycare is no longer as daunting as it may seem.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
