How to Create a Daycare Business Plan
High-quality child care services are in high demand right now. Opening up a daycare is a great way to test your entrepreneurial skills and serve local families in the process. But just like any other venture, you need to have a solid business plan in place well before opening your doors to the public.
Thankfully, you don’t need an MBA to run a successful business—just some careful planning and a lot of patience. We’ve put together some tips on creating a daycare business plan that will help get your center off the ground.
Who Should Have a Child Care Business Plan?
Unless you’re planning on starting the next Amazon or Nike, your business plan can be relatively simple. Business plans are simply to help you solidify your goals, and to create a roadmap on how you’re going to achieve those goals for your new business.
Our business plan roadmap tips will be most helpful to those starting brand new daycares, but the topics we touch on can be helpful for other types of child care businesses. This includes centers who have been operating for a while but need to rethink their business strategy, preschools, or people who want to invest in a daycare franchise.
Before we get down to business, let’s remember that your daycare business plan doesn’t have to be the most professional-looking document in the world. They are mainly for you to help wrap your head around everything you need to do before opening. As long as the business plan is helpful for you, it’s doing its job.
The first part of your business plan should be to nail down the description of your business. Seems easy, but it takes a lot of introspection. This is where you will talk about your motivation for opening a daycare, a mission statement, and any goals you have for your new business. Is there a number of customers you want to hit your first year? What will motivate you to keep going when enrollments take a dive? Putting these things on paper will help make your business more tangible, and help guide your more granular business decisions going forward.
Daycare Licensing and Accreditation
Before getting too far into your research, you need to check what the daycare licensing and accreditation rules are in your state. This will set rules for your business such as the amount of children you’re legally allowed to care of, the required ratio of child-to-staff, and staff training requirements. Accreditations also show parents that your daycare meets certain quality, safety, and academic standards.
The National Association for the Education of Young Children (NAEYC) and the National Association for Family Child Care (NAFCC) are the most common accreditation organizations in the U.S. Once you have a better understanding of what standards are set for daycares in your state, you use that as a guide for other parts of your business plan like pricing, staff needs, and health and safety measures.
The next part of your child care business plan is to do some research on the daycare market. You probably already know that starting a business is always hard, but what does the daycare industry as a whole look like? What is it projected to look like in the next few years? Right now in the middle of a global pandemic, child care centers are struggling to stay open—but they’re still an absolute necessity for many families. What does that mean for opening a daycare center right now? The market research guide from the U.S. Small Business Administration is a great place to start. You’ll want to look at factors like:
Pricing. What enrollment rates and pricing models are common for daycares in your area?
Location. Will you be competing with a lot of other child care centers in your preferred neighborhood?
Demand. Are there lots of young families in your area? Or are you living in a child care desert?
Economic Indicators. What does the average income and employment rate look like in the community?
Part of your market analysis will be to do some research on your competition. Daycare services across the country are in high demand, but does your preferred neighborhood already have a successful center you’ll have to compete with? Do some research on the other child care centers in your preferred area of operation (and maybe a little further) to see who you’ll be up against.
You’ll want to look at their pricing model, the services they offer, and anything else that makes them stand out. Maybe you’ll find a service they’re not offering that you can use to your advantage in your own center. You’ll also want to look at the demographics in your preferred area of operation. What’s the median income bracket? Are there a lot of young families close by? Are your competitors offering services you can’t yet compete with yet?
You have two main options for where to set up your daycare center: inside your home or renting out a space. Which one you decide to do will depend mainly on your business goals, but here are some other factors to consider:
Cost. Renting out a daycare facility will cost more than simply setting up shop at home.
Commute. You’ll save time and money from not having to commute to work every day.
Home life. It’s difficult for home-run daycares to separate home life and work life. It can also be a strain on other members of your family.
Size. Home daycares limit how many kids you are legally allowed to care for, which limits your revenue.
Taxes. You may receive more tax benefits from combining your workplace with your home.
Now is the time when you need to be brutally honest with yourself about your finances. Your child care business plan needs to include a section about how it will be financially run:
Are you expecting to receive or apply for any outside funding like grants, community assistance, or donations?
What types of insurance will you need as a small business and employer?
What taxes will you need to pay as a small business?
What tax benefits can you receive?
What one-time startup costs do you have to cover before opening?
After you figure out your one-time and recurring expenses, you’ll start to get a better picture of what your pricing structure should look like.
Part of your financial analysis should include your daycare’s pricing structure for customers. How much you charge for your services will depend on a number of factors. You’ll need to take into account the cost of operating and maintaining your business, the pricing of other daycare services in the area, and what the market can reasonably afford. You can get more information about the average annual and monthly cost of child care in your state at the Economic Policy Institute.
Included in your pricing structure strategy should be how often you’ll be billing customers. Make sure you keep a regular schedule with an automatic billing system to help your own bookkeeping and to make it easy for families to pay you on time.
Don’t forget to look into the tax benefits you can receive for running your own business. Especially if you’re operating your daycare from your own home, you can often write-off business expenses like food, internet, and even portions of your mortgage. You’ll want to keep a detailed log of all personal and business expenses, and maybe even talk to a tax professional to make sure you’re safe from a legal perspective, and getting the most out of your tax benefits.
If you’re planning on opening a daycare inside your own home with just a handful of children to care for, you probably don’t need to hire a staff. But if you are opening a full daycare facility, you’ll need reinforcements. Hiring qualified employees takes a lot of time. You want to make sure they’re (of course) good with kids, have the proper child care certifications, and have a child care philosophy that aligns with you and your center. Along with their base salary, you need to figure out how often you’ll pay staff, any benefits you’ll offer, and how to decide work schedules.
You can’t expect people to automatically start enrolling as soon as you open your doors. In order for parents around the community to hear about you and want to sign up, you need a solid marketing plan. At the very least, part of your business plan needs to touch on how you’re going to approach these parts of marketing your daycare:
Social media. Instagram and Facebook will be your best bets for connecting with young families. Make sure to allot some time every week (or every day if you can swing it) to promote your center on social media.
Networking. Connecting face-to-face with parents is crucial for daycares. See what events are happening in your local community and be there to get the word out.
Online ads. You’ll want to set aside part of your marketing budget on social media ads and Google ads. This will bring more people to your business and (hopefully) sign up.
Website. Every business today needs a professional website. You’ll most likely need to hire a web designer/developer to create your site. Take a look at other daycare websites to see what you want yours to look like.
The Bottom Line
Putting together your daycare business plan before you start buying toys in bulk and stocking up on Clorox wipes will make your day-to-day work run smoother. That way, you’ll be able to focus more of your time on the children—and isn’t that why you want to open a daycare in the first place?
Once you have your child care business plan fleshed out, you want to make sure the everyday operations will run smoothly for you, your staff, and your customers. Smartcare’s child care administration software makes running a daycare simple. Learn more about our services by scheduling a demo or calling our customer service team today.