Are you thinking of starting a daycare business from your home? Day care is one of the heavily regulated businesses – and with good reasons. The government wants to make sure that you are qualified and equipped to take care of other people’s children. As a result, there are a myriad rules and requirements to follow before you can start the business, more than other types of businesses like starting an online business.
Here are the things you need to open a home-based daycare business:
Planning Your Daycare Business
- Decide what type of daycare business you will operate, as rules may be different for different types. Most states have different rules for a home-based daycare business as compared to a daycare center with its own facility.
- Think of how many children you want to care for in your daycare business. Some states do not require a license if you are only going to watch over a few kids.
- Prepare a business plan. If you are not going to apply for a loan or look for an investor, you don’t need to prepare a formal 80-page document. However, the process of creating a business plan can help you think through many aspects of your business, including financial, marketing, and operations. Just going through the process of understanding what you need to do to start and run the business can help set up your new daycare business for success
- Start thinking how you will market your business (better yet, prepare your marketing plan)
Getting your General Business Requirements
- Decide on the best legal structure for your business. Consult with a lawyer or inform you of the differences between sole proprietorship, partnerships, LLCs or corporations. Given that there is a high probability in getting sued in a daycare business, consider choosing a legal structure that separates your business from personal assets.
- Register your business. Depending on the legal structure you choose and depending on your state, you may either register your business with your local county (for sole proprietorships), while business registration for corporations, LLCs, and other types are usually done at the Secretary of State.
- Register a fictitious business name. If you will be doing business using a name other than your own, you will be required to register a fictitious business name statement (D.B.A. or “doing business as”). Check with your state the process and where to file – some states allow you to file your DBA at the county level. Also check if your state will require you to file your fictitious business name with the Secretary of State’s Office.
- Get an Employer Identification Number from the Internal Review Service. Not all businesses are required to get an EIN, and for some businesses, the Social Security Number of the business owner can suffice. You will need an EIN if you have employees, or if you will operate the business as a corporation or partnership. EINs are issued for tax administration, and may be required for opening a bank account, or applying for business licenses. can be filed online, by fax or by mail.
- Register your business trademark – e.g. your logo and your business name
- Register for business taxes, if required in your state given your selected business structure.
Financing Your Business
- Determine all the costs in starting your new daycare business. Get the help of an accountant in preparing cost projections to give you a clearer perspective of your financial picture.
- Line up your possible sources of fund. It would be best if you have personal savings to cover your startup costs and at least 6 months of operating the business.
- Use your credit cards wisely, and consider the interest you will be paying when looking at the total cost.
- Check if your state offers grant monies. Note though that even if there are grant monies available – and that’s a big IF for a home-based daycare business – the grant will not cover all of your expenses. It may cover some supplies for the kids, or your business licensing costs, but not all your startup and operating costs.
- Use crowdfunding platforms – but only if you have a highly compelling story to provide.
- Forget about venture capitalists; they’re not going to be interested in a home-based business unless you have developed an incredible new technology that they can make millions from.
- Consider angel investors, but they may be the people in the community or close to you.
Getting Your Daycare License
- Connect with the daycare licensing agency in your state. Use our State by State Licensing Requirements for Daycare Businesses
- Check the requirements to get a license in your state. Daycare requirements in Arizona, for example, specify that you need to be 21 years of age, a U.S. citizen or legal resident alien, a resident of the state, with a high school diploma or equivalent. You may be asked to provide proof of your legal status.
- Submit fingerprints and other requirements for a criminal history check. If you have staffs, they may be required to undergo criminal history checks as well. Note that in some states such
- Submit your daycare license fees and application forms
- If required, attend orientation sessions or training that the state may require
Preparing Your Home for Your Daycare Business
- Ensure that your planned area for your home daycare business meets the state guidelines.
- Check the square footage requirements for both indoor and outdoor spaces.
- If you are providing an outdoor area, be sure to fence the area. Check with your homeowner’s association for the type and height of fencing you can do for your property if there are any requirements.
- If you have a swimming pool, be sure to follow the guidelines on fencing as well as the gates. Some states require that swimming pools have self-closing, self-latching gates with a lock.
- Check if you will be required to contact your County Health Department for a kitchen plan review.
- Check with your homeowner’s association about guidelines and requirements for operating a business from your home
- Set up security and safety measures in the home
- Check out zoning requirements, including the installation of signage from your home.
- Get a permit from the local zoning office
- Start looking into daycare insurance. If you run a childcare facility, insurance is vital, especially if you run a daycare in your own home. Many new business owners mistakenly assume their homeowners insurance provides all the coverage they need, this is a mistake.
Getting Your Daycare Business Ready
- Get a general commercial liability insurance. In fact, some states will ask you to show proof that you actually have insurance for your business
- Find staff to help you with your daycare business and fulfill your state’s staffing requirements, if any
- Start spreading the word about the daycare business that you will open – and get your first clients
- Line up your marketing strategies. Write your press releases; start thinking how to advertise the business; develop your online presence and create your website for your daycare business
- Purchase all the equipment, materials, toys, and supplies that you will need for your business
- Check to make sure that the cribs you will use are in compliance with U.S. Consumer Product Safety Commission
- Plan the opening day event of your daycare business
- Develop your daycare curriculum
- Plan your daily activities for the kids
- Set up your policies and contracts, and package them into parent information manuals and kits.
- Develop your record-keeping systems; data management; financial software and business reports. You will need to systemize and set up for easy retrieval information such as family and child data, family accounting, payment processing, time and attendance; menus and meal counts; employee data (if any); payroll software; and other types of information.
Recommended Books on Opening a Daycare Business:
- How to Open & Operate a Financially Successful Child Care Service: With Companion CD-ROM
- How to Start a Home-Based Day-Care Business, 6th (Home-Based Business Series)
- The Ultimate Daycare Starter Workbook (Volume 1)
- Daycare Building Blocks for a Highly Profitable Childcare Business: How to Boost your Enrollment and Your Profits
- Family Child Care Contracts and Policies, Third Edition: How to Be Businesslike in a Caring Profession (Redleaf Press Business Series)
Originally published on April 20, 2014 and updated on December 21, 2020.
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- Starting a Family Child Care Business
- Types of Insurance for Your Home Business
- How to Start Your Own Daycare Business
- Why You Cannot Get a Daycare License