Opening a daycare business comes with a lot of financial demands. According to Freshbooks, the average cost to start a daycare business or open a childcare center or daycare is $10,000 to $50,000. Of course, costs depend on the location, enrollment, and type of daycare you open. But before blindly investing in various daycare costs, you should know what to expect.
Here are some ideas on how to budget for a daycare business plan.
Daycare Business Expenses You Need to Consider
At the end of 2021, a public health survey from NPR and Harvard showed that nearly 40% of parents face challenges finding adequate childcare. Opening a daycare for young children is a good, essential deed in today’s society (and a profitable business venture), as there are more families in need of childcare than there are licensed providers.
But what exactly does it cost to start a daycare business, and how should you budget for these? Here are some of the main financial variables:
- Administrative costs
- Daycare equipment
- Hiring and paying staff
- Daycare management software
Let’s dive into each of these sections further so you can begin effectively planning your daycare business!
1. Daycare Location
Daycare centers are often located either in someone’s home or at a childcare facility. There are unique expenses associated with each, so we’ll break down the most important ones for both.
Cost to Start a Daycare Business: In Home Daycares
When you open an at-home daycare center, you skip having to pay monthly rent for a commercial space. But you still need to cover the spike in your utility bills, proper licensure, and any renovations required for your daycare operation.
For home-based daycare, note that you may be limited in the number of children you’re allowed to enroll. So if you hope to scale your childcare business, finding a rental may be ideal.
Cost to Start a Daycare Business: Rented Location
If you open a childcare center at a rented or owned facility, costs increase. You cover rent, loan payments, and maintenance/repairs. Childcare center rent tends to cost $1,000 to $5,000 per month, depending on size.
2. Daycare Administrative Costs
There are a handful of administrative expenses you can’t avoid as a childcare provider. Primary admin requirements include:
- Licensing and certification fees
- Liability insurance (home daycare vs a facility)
- State and federal business fees
- Professional development (staff training, leadership materials, etc.)
- Remote activities (field trips, transportation, etc.)
- Legal fees (lawyer, trademark, etc.)
Factor in every license and certification you and your employees need to operate legally. Keep track of how often each must be renewed, as you’ll likely pay for each renewal. If you don’t know what forms you need to get fully up and running, contact your State Department of Children and Family Services for guidance.
3. Childcare Equipment & Supplies
What supplies do you need at a daycare center? From furniture and safety equipment to snacks and art supplies, you can expect to pay several thousand dollars at startup. For ongoing inventory, you’ll likely pay anywhere from $100-$600 per child every month.
Here’s a list of basic necessities when it comes to childcare supplies and equipment:
- Tables and chairs
- Cubbies and storage
- Toys and electronics
- Arts and crafts supplies
- Gates or room dividers
- Housekeeping materials (trash bags, baby wipes, etc.)
- Cribs or cots for naptime
- Office supplies
- Kitchen materials
- Changing tables
- Safety equipment (fire alarms, first-aid, PPE)
The investment it takes to get all these supplies might seem overwhelming but remember: your tuition will start to cover all these expenses and leave you with a profit once you’re operating smoothly.
If you need extra support when starting your business, read the 6 Key Elements of a Daycare Startup Business Plan.
4. Hiring Daycare Staff
You can’t run a business at scale without quality staff. Even if you run solo for now or only need to hire one assistant, eventually you’ll want to recruit and hire employees to work at your daycare business. You deserve help, your staff deserves a fair wage, and the kids you care for deserve the extra attention. This is a worthy investment.
The cost of hiring employees includes paying for job listings, hourly wages, benefits, training, and background checks.
5. Marketing Your Daycare Center
These days, it’s uncommon to not need some sort of marketing strategy for a new business. If you have a wide network and already serve in the childcare industry, it’ll be easier to reach customers word of mouth. But if you’re new to setting up a daycare, advertising can help get you found by your community.
You can choose one or all types of marketing for childcare:
- Local self-promotion: Print flyers, business cards, or brochures. Post promo materials at libraries, schools, coffee shops, medical offices, and wherever there’s a local bulletin board.
- Digital marketing: Use paid Google ads, your website, or social media to market your daycare business. Paid ads vary from $10-$100 per listing, depending on competition and the platform. If you’re clueless about marketing but want the best results, hire an expert.
- Network marketing: If you’re not into direct advertising, you can join community forums and local online directories. You’ll want to create a profile showcasing your service, mission, and contact information.
6. Accounting and Payment Processing Fees
To organize your finances properly, you’ll have to spend a little bit of money. Hiring an accountant to cover your bookkeeping and tax preparation is a smart choice— this can cost a few hundred dollars.
Another cost to consider when opening a daycare center is payment processing fees that come with online billing. Most payment processors charge a set amount (usually something like $0.35 per transaction) plus a percentage of the incoming payment. They do this to cover their operation costs.
7. Childcare Management Software
Running your daycare business gets a lot easier when you have some sort of digital management system to keep you organized. A childcare software provides you with every tool you need to receive tuition payments, organize your curriculum, track children’s learning assessments, and even communicate with parents.
Daycare management platforms are often charged based on their subscription tiers plus a one-time setup fee. The average cost ranges from $49 to $199 per month, depending on the company and your enrollment size. Fortunately, there are some great, affordable management apps designed specifically for daycare centers, such as Daily Connect.
Learn more about childcare software here: The 10 Best Childcare Software Platforms for Daycare Centers.
Is the Cost of Starting a Childcare Center Worth It?
Anything worthwhile requires a significant investment. But if you’re committed to serving the families in your area with the childcare they desperately want and need, managing the daycare startup cost is worth it. When done right, you can ensure a profitable return on investment.
If you’re new to the childcare business— or if you’re already operating from home but want to grow— you can start using a childcare management app to help you organize your expenses. Daily Connect exists to help daycare providers like you achieve business goals and support the kids they care for. Reach out to learn more about daycare startups or start a free trial today.