Assess your position
Playing with children can be an exhilarating experience that reminds you of all the wonder and excitement of the world that we take for granted as adults. If you enjoy your time around little ones and feel you have the right skill set, you may have imagined what it would be like to start a career in childcare.
Before you research how to start an in-home daycare, it’s a good idea to get a realistic idea of how that will look. You’ll need stimulating activities to promote active learning, good communication skills to coordinate with parents and a willingness to manage the day-to-day business operations.
Ask yourself whether you’re prepared to tackle all that goes into running a reputable daycare. If you’ve considered all the work required to convince parents your home is the best place to leave their most precious family members, the first step to realizing your dream is to lay a solid business foundation.
How to start a home daycare parents can trust
Much of starting an in-home daycare comes down to the same steps needed to start any successful business. You’ll need to register your business, set up your operations, obtain relevant licensing and insurance and market your new daycare to parents who are looking for reliable childcare. However, before you do any of that, you should create a solid business plan.
Draft your business plan
Your business plan is a combination of your business goals and your guidebook to achieving them. It can help keep your company on track, allow you to measure your success as you grow and help you obtain funding when needed.
Because this document has such a large impact on your business, it’s important to be thorough. A business plan consists of nine parts:
- Executive summary: This is like the cover letter to your company resume. Briefly describe your company and why it will succeed. You should have a mission statement and any critical information, such as a list of employees, your business location and a financial overview if you intend to request funding.
- Company description: Describe your business in more detail. Explain what service you provide, what needs that service fills, your target market and any competitive advantages.
- Market analysis: Research your potential clients and your competitors. Find out what needs you can fill that aren’t currently being met, and explain your findings.
- Organization and management: Decide what legal structure you prefer to use, such as a sole proprietorship or a partnership. You should also list the names of those who will be managing and working at your company.
- Service description: Describe the service your business is operating. For example, are you just offering basic childcare, or do you have training in early child development that enables you to provide an enrichment program?
- Funding request (if seeking funding): Determine how much capital you’ll need over the next five years, and list out what that money will be used for. Mention any strategic financial plans, the collateral you’re willing to provide and the terms you’d like for the funding you receive.
- Financial projections: Since this is a new business, you’ll need to project your expected revenue for the first five years, with a breakdown of the first year’s projections. Be thorough and realistic in this section to prove you’ve done your homework and understand how to make your company a financial success.
- Appendix: This is where you’ll organize any supporting documents, such as business registrations, market research, licenses, certifications and financial documents.
Don’t worry if you later realize some of your projections were wrong or your company goes in a different direction than you originally envisioned. Business plans are an excellent tool to keep you moving forward, but they also need to be living documents that can be adjusted as your business evolves.
It’s also okay if you don’t yet have all the answers to complete the business plan. These can be added in as you work out your vision. Refer back to your business plan regularly to make sure you’re still on track and verify the information is still relevant.
Choose your legal structure
Any business that works with children has high liability potential, so you may want to consider this as you make the decision on your legal structure. You’ll need to choose a name for your daycare and conduct a search on your state’s business registry to see if it’s available. Once you’ve settled on a name, it’s time to choose your structure:
- Sole proprietorship: This type of entity has an individual owner, and there isn’t any protection of personal assets against legal claims. If you want to use a business name, rather than your own name, you must file a DBA (doing business as) with the business name of your choosing.
- Limited liability corporation: A limited liability corporation has multiple business members, requires an operating agreement and offers personal liability protection.
- Partnership: Partnerships have more than one business owner who can be equal partners or with limitations. However, there is no protection of personal assets.
- Corporation: A corporation is a significantly more complicated structure. It’s considered a separate entity and must file taxes separately.
These are the four most common subcategories, but there are more. Research your options, and choose the structure that best suits your needs. The legal structure isn’t set in stone, so you can alter it later if your business grows.
Assess your finances
Determine what you’re willing to invest in your business and see how that measures up against the amount of money you’ll need. Take your startup expenses into account, as well as your monthly operating expenses. Possible startup costs can include:
- Home modifications
- Toys and books
- Children’s furniture
- Cleaning supplies
- First-aid supplies
- Mats for floor play or nap time
- Office supplies
- Fees for licensing and registrations
Monthly expenses might include:
- Utilities
- Snacks
- Consumable activity items
- Cleaning supplies
- Office supplies
- Insurance premiums
There are a number of options for obtaining additional funding. You may want to consider bringing in an investor, which can be an angel investor or someone close to you who wants to help you succeed. You can also check with your bank to see if you qualify for a business loan. Depending on your situation, you may also be able to liquidate assets to get started.
Marketing foundation
Once you’ve decided on a company name, you can start developing your brand if you haven’t already done so. You’ll need a logo and a color scheme to help your brand stand out from the competition. There are a ton of online resources to help guide you in making these decisions.
Make sure to choose something you love. Changing your business name or logo later can take significant effort, and you’ll lose any brand recognition you’ve built up.
Prepare for your grand opening
Before you welcome your first tiny clients through the door, there are a few more steps you’ll need to take to ensure a smooth opening day and continued smooth operation.
Insurance
Speak to your homeowner’s insurance agent, and find out what your options are for covering your daycare. Some insurance companies offer daycare insurance policies that can simply be added to your homeowner’s policy.
For most policies, any liability coverage you have on your home should extend to cover the children in your care. If this isn’t an option with your insurance company, here are three alternatives you should consider:
- Liability: Liability insurance covers property damage, physical injury to any child in your care and personal injury, in case someone damages your professional reputation.
- Homeowners: If you’re still paying off your home, you likely already have this coverage. These policies cover liability, property damage, theft, vandalism and more.
- Errors and omissions: This policy specifically protects you against negligent claims. It can also be referred to as malpractice insurance or professional liability insurance.
Daycare insurance premiums are affected by the number of employees you have, as well as your daycare revenue, deductible options, coverage limits and any claims history.
Licensing
Depending on your home state, you may be required to obtain a childcare or daycare license. Each state has its own criteria for licensure, which sometimes only applies if the number of children in your care exceeds a certain threshold. Even if the number of children in your care is beneath the threshold, you may still want to obtain a license.
Obtaining a license can be a smart business move because it signals to potential clients that your facility meets the standards set by the state. Many childcare grants and professional perks require licensing to participate, so taking the time to get approved offers a number of benefits.
Learning systems
Young children will be spending significant time in your care, and their growing minds will need structured development to continue hitting their age-appropriate milestones. To ensure they’re getting the stimulation they need, you may want to set up formal lesson plans that cycle through the various styles of play and learning to keep them progressing.
If you’re educated in early child development, you can put the lesson plans together yourself. However, you may benefit from using one of the well-known systems already available. These systems are backed by research and years of success.
They also have the added benefit of brand recognition from parents who want to ensure their little ones are getting the best chance at development. The three most popular systems to consider, include:
- Montessori: A focus on self-directed activities
- Reggio Emilia: Self-directed activities based on individual interests
- Steiner/Waldorf: Sensory-focused play
Billing practices
Every business needs an efficient billing system, and daycares are no exception. There are hundreds of different financial software options you can choose from. Some programs are general invoicing systems, while others are tailored to specific industries. Prices may vary depending on whether you purchase a license or choose a monthly or annual subscription.
Employees
Most states have a limit on the number of children who can be cared for by one adult. Depending on how many children you plan to accommodate, you may need to hire additional help. Some common day care worker positions include:
Remember that any employee you hire will be a reflection on your business. You’ll want to require a minimum experience level and conduct thorough background and credit checks if applicable. Your staff members will be directly interacting with children, so it’s also important to assess the interpersonal and communication skills of all potential candidates during the interview process. Previous experience of potential hires may include past employment as a private nanny or caregiver, child care worker or teacher’s assistant. If you’re looking to hire someone to assist with the financial or administrative side of your daycare business, you may wish to consider applicants with past experience in accounting, business finance or similar areas.
Safety
Ensuring the safety of the children in your care as well as your employees is essential, so it’s important to seek the proper training to ensure you know what to do in a medical emergency. It’s also imperative to have first-aid supplies stationed throughout the daycare areas of your home. Specific safety regulations for home daycares can vary by state. Safety considerations include:
- Safety training and certification programs in pediatric first aid and CPR
- Emergency preparedness for natural disasters
- Prevention and response training for food allergies
- Training to recognize signs of child abuse
- Safety training for transporting children
- Handling and disposal of hazardous materials (i.e.: medications, soiled diapers, etc.)
- Medication administration training
- Training on safe sleeping practices
Parent relationships
Many parents will want steady communication with you to feel comfortable trusting you with their children. Establish communication standards now, so parents will know the appropriate methods for contacting you when they have concerns. You should explain what information you’ll be communicating to them and how often.
You can also consider installing cameras in daycare areas to maintain the safety of the children and protect yourself from unfounded abuse claims. If you choose a system that can be set to stream online, parents can have the option to check in on their children during the day.
Grand opening
Once you’ve set up your home daycare, you’ll need to plan for your grand opening. Set a date, post on social media and advertise the big day. It’s the perfect opportunity for you to put your best foot forward while meeting the children who may be placed in your care, along with their parents.
