Daycare Business Plan

As the number of dual-working parent households continues to rise, the demand for daycares is at an all-time high. A daycare business can be a lucrative opportunity that can set you up for your financial freedom journey as a business owner. 

If you've had to care for and raise your kids, perhaps worked as a babysitter in your teenage years and felt that you enjoyed the experience. A daycare business can be a rewarding business opportunity that is in demand and fulfilling! If you're wondering what it takes to create a child care business plan and how to start a daycare, then read on!

What is a Daycare Business?

Daycare businesses (also known as childcare businesses) care for parents who either have work or want to place their children in a stimulating and social environment. Typically, daycare kids have parents who work full-time jobs and need someone to look after their children for the entirety of the day. Daycare businesses usually accept children from a few months up to 6 years old, depending on the staff available to support the children. Some childcare businesses choose to accept kids on an after-school basis and statutory holidays.

Types of Daycare Businesses

If you're interested in the idea of a daycare business and feel that you have what it takes, it's worth exploring your options regarding the structure and arrangement of your business.

Family Daycare Business

A family daycare business is normally run from the comfort of your own home. However, you must meet the building code requirements and undergo an inspection process to ensure that your home does not present any safety risks to the children. Starting a family daycare business is a particularly great option if you live in a duplex or a two-floor home with extra space that is not being used. You can either be the business operator or choose to hire an employee who meets the requirement to work with kids (usually an early childhood education license).

Facility Daycare Business

The second and most popular daycare business structure would be a facility daycare. This is a great option if you have a larger budget to rent a facility. As a facility daycare business, you will need to find a suitable location and ensure that you equip it with toys, books, changing areas, and more, as well as employing daycare workers to meet your country's child-to-adult-caregiver ratio requirements. Although this might be more costly, the revenue potential is higher than a family daycare since you can register more children as a facility. 

How to Start a Daycare?

Now that you have a good understanding of the types of daycare businesses you can open, we'll now cover a foundational childcare business plan that you can use as a guideline when starting your business.  

Daycare Business Plan

The first step to starting your own daycare business is to structure it as a family or facility daycare. After you've done the research and critically evaluated your budget, choose the most suitable option given your resources while considering your local region as the baseline (if there are most facility daycare businesses, perhaps this is indicative of parents' preferences in your area).

Essential Business Structure 

Your daycare business's legal registration and structuring is the first step to formally set up your business. You may choose to register as a sole proprietorship, limited liability company (LLC), or a corporation. 

For tax structure, you will want to consult an accountant after registering your business to ensure that you're compliant by law. If you're located in the USA, you will need to apply for an EIN, a simple and free process.  

Lastly, it's time for business insurance. Business insurance covers your costs if your business causes material damage or harm to one of your daycare students. This is arguably one of the most important pieces of paperwork, so be sure to take your time when choosing your insurance package.  


To be a daycare business owner, most of the time, you or the person operating the daycare will need to be ECE (early childhood educator) educated. ECE is normally a 2-year or condensed program that teaches you to be an effective and safe daycare teacher. 

Legal Requirements

Depending on your country and state, you must meet your local governing requirements for setting up your daycare business. Most of the time, requirements regulate the square footage of space per child in your daycare, your plumbing, electricity, heating, and cooling systems, ensuring that they're up to par with the modern guidelines. Additional legal requirements include fire safety, food preparation, sanitary safety, staff-to-child ratios, and file keeping. To ensure you meet all the legal requirements, be sure to consult with your local governing body.

Licensing Requirements 

Licensing is a crucial component of setting up your daycare business. Most countries and states require daycare business owners to obtain daycare licensing, which involves paying an application fee and demonstrating that your chosen physical space meets the requirements through an application process. Your chosen space will often need to undergo a physical inspection to ensure safety requirements.


As part of your childcare business plan, purchasing the necessary supplies is a vital aspect of the process. Since children in the daycare age range tend to spend a significant amount of time playing with toys and reading simple books as they develop their cognitive abilities, common toys that daycare owners like to invest in are:

By purchasing the above equipment, you can ensure that the children will be entertained and satisfied throughout the day. 

How Much Does it Cost to Start a Childcare Business?

Starting a family daycare business is the most cost-effective option, as you eliminate the need to pay for a rental space. Aside from the rental fees, your costs will include paperwork fees, supplies, employee salaries, safety, and maintenance costs. You can start a daycare business with a couple hundred to a couple of thousand dollars, with a facility daycare costing you more in monthly fees. 

What Should You Charge? 

To figure out how much you should charge, analyze your closest competitors by looking at their websites and social media channels. Most daycares charge a monthly retainer if the children are enrolled full-time or enrolled in an after-school program by the hour.

How to Market Your Daycare Business

The best way to market your daycare business is initially through word-of-mouth. Start off by reaching out to friends and family who require a daycare center for their kids, and from there, ask them to recommend your business to their connections. If you're starting a family daycare business, you can print out flyers and mail them around your neighborhood, which is the most cost-effective yet strategic way to get the word out about your new venture.

Final Thoughts

Starting a daycare business is an exciting and rewarding process. Not only is there potential for large amounts of revenue, but this is a scalable business model where you can one day remove yourself from the daily operations and act as a true business owner. 

With the above childcare business plan and a healthy dose of persistence, you're well on your way to a successful and thriving business!