How To Write a Daycare Business Plan

In the US, demand for high-quality child care outpaces supply, reflected in its steep cost: Most families spend anywhere from 6% to 20% of household income on child care.

That means if you’ve ever considered starting a child care business, there is an overwhelming need for what you have to offer and a target market ready for solutions. It also means launching your own daycare center or family child care business can be a way to make a meaningful impact in your community.

Read on to learn more about creating a comprehensive daycare business plan to ensure you’re setting up your business for success.

Types of daycare businesses

Child care services and daycare business models typically fall into four categories:

Group child care

Group child care takes place in a private residence or private daycare center. These locations are subject to regular compliance checks to ensure they’re meeting essential requirements for licensing. These include physical space guidelines, which require a certain square footage per child.

School-based

School-based daycares take place in, or as part of, an established school, providing either a hybrid of toddler and preschool-aged education, after-hours care, or activities for younger students. These activities typically occur off or near campus, and may require an extra hourly fee, even if the school itself is free.

Summer camp

Summer camps provide seasonal child care in between school calendar years. Sessions may run for one or two weeks at a time, either operating locally throughout the day or at destination locations for overnight sleepaway camps.

Nature-based

Nature-based early childhood educational institutions, also known as nature schools or forest schools, provide child care in an outdoor environment. These programs place an emphasis on activities and learning in natural settings year-round. Some nature schools function as an alternative option to traditional schooling and cater to slightly older children, aged 5 to 12 years old, but other programs operate more like a daycare or camp model, and accept younger children as well.

3 common child care business models to consider

There are a few common child care services that are sometimes discussed interchangeably: daycares, nanny services, and preschools. Each model has different licensing requirements for operation and associated overhead costs

Daycare

A daycare refers to a physical location where child care is provided, either in a private residence or commercial building. Though the exact numbers vary by state, there are mandated ratios of caregivers to children. Daycares accept children from newborn to school-going age and generally offer flexible attendance options.

Nanny services

A nanny share is considered an “unregulated” or "license-exempt” daycare program in which two or three families employ one caregiver between them. This usually involves two to four children, and the care takes place in the families’ homes. The families split the cost of care and associated expenses. Each family must act as an employer to the nanny, obtaining an employer identification number (EIN) and paying their share of wages, payroll taxes, insurance, and workers’ compensation. Alternatively, families can work with a nanny agency, and the agency owns the employer relationship with the nanny.

Preschool

A preschool takes place in an established school or center, and involves more direct preparation for the learning environment of kindergarten, with regular daily schedules and more structured lessons. Preschools typically accept toddlers and younger children, aged 2 to 5, or offer a combination of daycare and preschool on-site for a wider range of ages. Staff-to-children ratios still apply. Additionally, some preschools choose to follow the school year, and teachers typically need a BA or associate’s degree.

Qualifications needed to open a daycare business

In general, the best qualification to open any kind of daycare business is experience itself, either through long-term babysitting, experience working for an established daycare, or a background in early childhood education. There are a few key certifications that many states, like California, require you to have in order to operate.

• A high school diploma (or GED)

• A successful background check

• Up-to-date immunizations (and completed TB test) 

• Safety trainings (e.g., CPR and pediatric health and safety training)

How to write a daycare business plan

1. Draft an executive summary
2. Write a company overview
3. Conduct a market analysis
4. Address state regulations
5. Describe services
6. Build a marketing plan
7. Map out logistics and operations
8. Create a financial plan

You’re qualified, you have a vision, and you’re ready to turn your daycare business dreams into a reality for you and the families you hope to serve. A business plan can help you stay on track and organize your tasks and goals. It’s also a necessary document if you need to apply for external funding, like a small business loan or an investment.

Here’s a breakdown of a daycare business plan template that you can tailor and adapt.

1. Draft an executive summary

Your executive summary provides a high-level overview of your business, charting the goals, target audience, and essential funding you’ll need to get things off the ground. It contains the most important details that an outsider would need to understand your vision and does so in a way that compels them to invest in your business.

Some business owners prefer to write the executive summary last, once they’ve had a chance to iron out all the details in the following sections. You can always start with a broad, aspirational summary, and edit as you go along with more concrete information. 

2. Write a company overview

Your company overview is an opportunity to go deeper into your unique value proposition as a business. Start with the basics: What type of daycare will you offer?

Then, fill out the picture with the details: How will it be better than the competition? What is the key differentiating factor—whether that’s your experience, focus, or caregiving philosophy—that distinguishes your business from everything else out there?

3. Conduct a market analysis

There are many aspects to a market analysis, including a study of your target audience, industry, and competitors. A SWOT analysis—to determine your business’s strengths, weaknesses, opportunities, and threats—is also useful to measure your business against other offerings in your market.

Some important data you’ll need includes:

• Demographic information on the number of working families in your target market, average income levels, and the number of daycare–aged children in need of care. You can typically find these numbers through your local library or census office.

• Economic indicators from your local chamber of commerce around the number of businesses opening and closing, and how many people work remotely versus in-office.

• Market saturation data, including the current state of the child care market in your area, operating privately or through churches and schools, and what the demand for those programs is. Get granular, outlining the number of service providers that have a waitlist, their staff size, and more.

• Pricing data to understand what competing businesses charge for their services. This will help inform your own pricing decisions.

4. Address state regulations

To be licensed as a group child care provider, you must meet a state-regulated “teacher-to-child” ratio. In California, for example, children 0–2 years old need an adult-to-child ratio of 1:3, or 1:4 in combined age classrooms. For 2- to 6-year-olds, the ratio is 1:8, or 1:12. Exact ratios depend on whether the program is subsidized or not, and vary by state. Each child must also have access to a specific square footage of both indoor and outdoor space, which may impact attendance.

Make a list of the certifications, licensing, and business insurance your state requires for daycare businesses, any associated costs or paperwork you’ll need to secure them, and the timeline you plan to acquire them by. Daycare centers have regulated square footage-per-child requirements (typically 35 square feet per child) for both indoor and outdoor spaces, and require up-to-date food handling and food safety certifications, and standard safety certifications, like CPR and first aid.

5. Describe your services

Decide the ages you’ll accept, the hours you plan to be open, whether you’ll be providing meals or require children to bring their own, and how many kids you anticipate caring for at one time—which you can estimate based on the space you have, the staff you plan to hire, and your state’s licensing requirements.

This is a great place to include pricing details: what you’ll charge for full or part-time enrollment, and whether you’ll offer additional services like after-hours or weekend care. This should reflect the competitive pricing you found in your market research.

Then, describe any service styles that your potential clients should know. Maybe you plan to emphasize academic standards like counting and letters, or value play-based learning, or are trained in a particular early learning approach like Montessori, Reggio Emilia, or Waldorf. If you’re a staunch advocate for screen-free environments, say so, and describe as best as you can, the ideal flow of the day.

6. Build a marketing plan

The daycare industry faces slightly different marketing challenges than traditional retail or other service business ideas. While a presence on social media may be useful, many parents may not consent to their child’s image being used for promotional purposes or posted on social media at all. Your business website will be especially important for your marketing efforts.

When building your website, lean into organic search or paid search engine marketing. A strong local search engine optimization (SEO) strategy can help you gain visibility in your community. A few ways to improve your local SEO results include:

• Use local keywords. Incorporating the right keywords or phrases into your business descriptions and content, particularly ones that local families might use in their searches, like “best daycare in Chicago,” “Montessori schools near me,” or “child care options in Bay Area.”

• Prove your authority. Google favors authoritative content written by experts possessing firsthand experience. Tout your credentials and your background with an in-depth bio, and make it clear that any editorial content (like blog posts) is written by you and informed by your expert knowledge.

• Create a local business profile. Creating a Google Business Profile allows you to manage how your business shows up in searches, list important information like hours, pricing, and customer reviews, and incorporate strong keywords like “outdoor play” or “parent-teacher community”—whatever you feel best describes your approach and general atmosphere.

You can also focus on building a strong offline presence: advertising in local media and putting flyers in local gathering spots popular with parents of young children. You can participate in school fairs, street cleanups, and cultural events, and host open houses for prospective parents. These, along with word-of-mouth marketing via happy clients, can help cement your reputation as a trusted part of the community.

7. Map out logistics and operations

Now, it’s time to identify everything that needs to happen from inception to opening your doors. This should include:

Securing a physical space

Describe the size and type of space you are seeking, and how you plan on securing it. That might include leasing a commercial space, outfitting your own home, or renting a second residence from which you’ll base your business.

Establishing a staff pay rate and budget

Outline how many staff members you’ll need to hire, and the budget you’ll need to pay them.

Map out policies

All daycare businesses have a handbook that defines expectations for parent-caregiver communication, rules around attendance, behavior, and more. How will you deal with emergencies, for example? What will your sick policy look like? How will you schedule and pay staff members? Write down, as best you can, the policies and procedures you intend to use in daily operations.

8. Create a financial plan

Your financial plan should illustrate what you need in order to open your daycare center doors, show how you would use funding to support your operations, and provide a path toward profitability. That might include:

• Startup costs. This should include the costs of acquiring a space (and any anticipated repairs or retrofitting), completing all the required licensing certifications, and furnishings and equipment like play structures, craft supplies, food (or infant formula), diapers, and first-aid supplies.

• Ongoing costs. Ongoing costs include things like rent, staff payroll, activity supplies, and food costs.

• Projected income. Project what you anticipate making each month based on your pricing and the assumption of full attendance.

• Budget and cash flow projection. What you expect to make, based on operating expenses and tuition payments, and what your month-to-month cash flow will look like. Some daycares require monthly payments upfront, while others are OK with a week-by-week payment plan or require annual tuition paid in full prior to attendance.