How To Start A Daycare At Home

Is an At-Home Daycare Easy to Start?

In the 1950s, traditional gender roles meant that many women stayed home with the children while the men went to work each day. Many men stay home with the children these days, and many fewer women fulfill these traditional roles. Overall, however, most parents spend at least part of the week in the office, which means they cannot care for their children. Additionally, although much has been said about our lower birthrates across the US, there are still millions of children across the country who need daycare services.

Research tells us that as of 2010, only a third of children remained home with a parent during the day. Also, over 65% of mothers and 90% of fathers are gainfully employed. These statistics imply that there are a lot of children in daycare these days, perhaps more than ever before.

Those who start daycare centers at home are not simply enjoying playing with children. Instead, they offer a desired, trusted service to many parents without options. As a result, daycare companies are some of the fastest-growing businesses in the country, and all signs indicate that their growth is not slowing down.

Many early-childhood educators, retired parents, and young entrepreneurs want to know: are daycare businesses difficult to start? What does the process entail? Others assume that even though they find the idea attractive, there are too many legal issues to consider to make starting an at-home daycare feasible.

While starting any new business is challenging, establishing a vibrant new daycare in one’s home is relatively easy. Yes, there are specific fees to pay, licensing agreements to sort out, and legal affairs to get in order. However, the startup process is not overly challenging overall, provided the new owner enjoys spending time with toddlers. For example, many think that daycare owners must have a specific degree when they do not.

This article will outline every vital aspect of starting an at-home daycare, from costs and fees to legal hurdles, to choosing a name for the new business. So we have you covered if you are debating whether starting a daycare is right for you or already writing a business plan.

What Are the Benefits of Starting a Daycare at Home?

The advantages of starting a daycare at one’s home encompass personal satisfaction and finances. Helping youngsters mature, learn, and grow in the way they see and experience the world is inspiring for many people. The level of personal fulfillment people get from working with children and helping to shape their young minds is unparalleled.

Of course, the caveat for this benefit is that the business owner must enjoy spending time with small children, which is not for everyone. However, daycare is an excellent place to be for those who love spending hours with a group of toddlers. However, what about the financial picture?

The daycare industry in America is a profitable market that also offers owners flexibility. For example, some daycares that operate at home are only open a few days a week, and others stay open for only half a day. However, after the owner does their due diligence and establishes that their daycare is desirable for parents, they have more freedom with scheduling since demand remains high.

Entrepreneurs can count on solid profits if the business is well-run, safe, and reputable. For example, out of over 50,000 commercial daycare centers in the country, there is a reported yearly direct revenue of over 20 billion dollars.

Additionally, daycare owners do not have to deal with too much overhead cost because rent, for example, is taken care of. Initial costs for supplies, advertising, and equipment exist, but the overhead costs for at-home daycares are relatively low.

Daycare owners can also take advantage of tax benefits that allow owners to deduct some of their home-based expenses, such as utilities, as business costs. For example, food costs may be helped by the Federal Food Program, and rent may be tax-deductible.

All of this adds up to a cost-effective and profitable opportunity, not to mention mentally and spiritually satisfying. Will run an at-home daycare be trying and even difficult at times? Probably. Are children inherently unpredictable, funny, and sometimes boisterous? Yes. However, an at-home daycare might be a perfect idea for those who love children, enjoy a challenge, and want to create a profit. Plus, constant physical exercise from chasing children around is guaranteed.

How Can Individuals Create a Business Plan for an At-Home Daycare?

All successful businesses begin with an organized plan, and daycare in one’s home is no different. A business plan is an excellent place to start a business venture because it allows entrepreneurs to establish what they need to start the business successfully. For example, what supplies does the individual need to purchase, and what useful items do they already have?

Additionally, business plans help new daycare operators figure out how the company will operate and the factors that may determine their success. Business plans also force entrepreneurs to establish important guidelines, anticipate problems, and examine competitors’ operations to see what works and does not.

A business plan helps individuals interested in starting a business to ask important questions and attempt to answer them. Finding answers to challenging questions is a significant part of the brainstorming process, and it helps people visualize the business and decide if it is viable.

What Specifics Should Entrepreneurs Include in a Business Plan?

• Clear goals with timelines
• Licensing requirements
• Business structure
• Tax information
• Methods to measure progress
• Potential problems and potential solutions
• A plan or curriculum for day-to-day operations
• Marketing ideas
• Startup costs
• Overall costs
• Projected revenue and timelines
• Employee hiring practices (if applicable)
• Safety protocols

Business plans should be written and coherently ordered. Begin by introducing the business to the reader, and then create logical bullet-pointed categories that explain the daycare’s overall strategy. Details are important, but business plans are more about big-picture concepts, so do not feel you have to go over everything.

After finishing the business plan, have a colleague or friend read it. Did they know what the business hopes to accomplish, how it will do so, and what the concerns or anticipates are? Are there solutions offered? If not, revise the business plan before moving forward with the business.

What Business Structure Should At-Home Daycares Use?

Typically, at-home daycares form limited-liability companies or sole proprietorships. Before we outline the choice between options, here is some quick background information the different business structure types of corporations.

All small businesses must choose a business structure for legal and tax reasons and then register the business with the IRS.

Limited liability companies (LLCs) offer at-home daycare centers tax flexibility and liability protection. LLCs are not difficult to establish, but they require more work than other structures.

Sole proprietorships are more inexpensive to set up and easier to establish overall, but entrepreneurs should be aware that sole proprietorships do not offer as much legal or financial protection.

At-home daycares involve a level of risk since the individual opens their home to young children. Parents place enormous trust in daycare owners, and because of these risks, most at-home daycare owners decide to form LLCs.

Why is an LLC the Best Structure for a Daycare?

When running a daycare, the health and safety of the children are the top priority. However, daycare owners are also business owners, and they must anticipate legal problems that could not only plague the company but damage their finances.

While no one wants to imagine a scenario in which a parent takes legal action, daycare owners must protect themselves, and that is the main reason owners typically choose LLCs. If a lawsuit occurs, no one wants their assets to be vulnerable, and an LLC protects peoples’ assets from legal action.

Additionally, daycares structured as LLCs avoid the double taxation corporations must contend with. First, corporations pay taxes on their business profits, and again, the profits flow to shareholders and owners. Lastly, single-member LLCs pay taxes as sole proprietorships, so this structure creates a helpful combination of the two structures.

What is the Process of Forming an LLC?

Initially, individuals interested in structuring their daycare as an LLC must obtain a business license and the state’s family childcare license. These usually take a few weeks to receive for planning purposes, but individuals can pay for fast filing if needed. Different states have different processing times and fees, but once the licenses are set, the entrepreneurs can file for an LLC via the web.

What Are the Costs of an At-Home Daycare?

To turn one’s home into a safe learning environment for toddlers, one has to afford the supplies, equipment, licensing fees, and more. While it is difficult to estimate how much a specific at-home daycare will cost since they are all very different, we can provide a quick guide to figuring out costs.

To estimate daycare costs, entrepreneurs should begin with a list of questions. Here are some of the most important questions one should ask themselves when considering this venture:

• What is the size of the space, and how much, if any, remodeling is needed?
• What are the licensing fees in the state?
• What business structure is being used, and what fees does it come with?
• How many children will be in the class?
• Is there a plan to hire staff? How many and at what salary or hourly rate?
• What are the equipment costs?
• What is the cost of supplies?
• Are there legal fees?

Remember to differentiate between one-time expenses, such as toys, equipment, or safety gear, and ongoing expenses when calculating expenses.

Ongoing expenses may include food and drink, cleaning supplies, payroll costs, rent payments or a mortgage, accounting services, and more.

Lastly, businesses have fixed expenses to consider, including utility payments, leases, insurance, and administrative fees.

Entrepreneurs should also remember to add in excess costs, just in case emergency expenses arise. Also, speak with a licensed accountant about possible tax relief or local or national grants, which can help cut costs and save money in the long term.

We recommend making a list of costs before starting the business or including an itemized list in the business plan. Some entrepreneurs start a new venture without realizing they do not have enough funding, quickly leading to problems.

However, the good news is that if there isn’t enough capital to start the business, there may be additional ways to find financial assistance.

How Can Daycare Professionals Find Financial Assistance?

Entrepreneurs should not be dismayed when they do not have enough money to sufficiently pay their startup costs, as this is a normal issue many businesses deal with when starting up.

If an individual wants to start an at-home daycare and has an organized plan, they may need some financial assistance to help them begin.

Most entrepreneurs can start their daycares for approximately $10,000, depending on their needs and the business size.

How Can At-Home Day Care Centers Raise Money?

Here are a few legitimate ways entrepreneurs can find capital for their daycare centers.

• Friends and family: some small business owners try crowdfunding and find it successful, and others go the traditional route of asking friends, family, and colleagues to make small investments in the business. While repayment terms might appear flexible, for example, if one’s sibling writes them a check, it is important to establish documented agreements. Paying the money back correctly will help avoid disputes since lending money to friends and family can become complicated.
  
  
• Government Help: Some government resources were created to help small business owners, from loans to grants to fellowships. Check to see what category the business fits into and local and national options.

• Credit cards: Using credit cards is a popular option for small businesses, and building up business credit is a smart idea. Some credit cards offer unique values to small businesses, such as discounts or advantageous interest periods. While we’re on the topic, it also makes sense to open a business checking account. When using credit cards, make sure that there is a strict repayment schedule because businesses with credit trouble do not last long. Try to avoid high-interest rates, too.

• Loans: Loans exist for small businesses at the local and national levels. For example, the Small Business Administration (SBA) provides loans to some small businesses, so check to see if your business fits the criteria. Banks also provide small business loans but pay attention to the repayment terms. If the business cannot afford the loan, it should not take it.

How Can Entrepreneurs Register the Daycare and Open Accounts?

One of the most important tasks to check off the list before opening an at-home daycare is to take care of all the licensing and legal necessities. Here are the most important licensing and legal requirements:

• Opening a bank account designated to the business is an important step and helps the daycare keep its funding and assets clear of any personal accounts.

• Licensing the daycare business with the state

• Selecting and filing for a business structure (LLC or sole proprietorship)

• Register for EIN, Employee Identification Number. This EIN is used on tax forms, and the IRS provides all businesses in the US with a unique EIN.

• Procuring a general liability insurance policy. Insurance is essential when working with children.

• Getting insurance that is appropriate for a daycare

• Getting a local business license; a general license should be available by contacting the town or city.

• Procuring a license specifically for family childcare

• Fulfilling all local requirements since every state has unique laws and provisions for daycare businesses

Where Can Daycare Owners Purchase Equipment?

Even when daycare owners are veterans of working with children and have worked in daycares, they may not know exactly what supplies and equipment they need to establish a safe facility in their homes.

First, entrepreneurs should make a list of the supplies they already have. For example, it may not be safe to use the old playground slide in the backyard, but if people have art supplies like paper and crayons in the attic, they can use them. Owners can save money by using their supplies; just be careful of liability issues. However, it may make sense to do some cleaning or repairs if, for example, you have toys or equipment that are still in great shape.

While recycling old equipment and supplies is helpful, the daycare will need its equipment, too, and some things should be brand-new for the children. Daycare owners may need to purchase the following:

• Mats for the floor
• First-aid kits
• Cleaning supplies
• Markers and paper
• Additional art supplies
• Computer software
• Furniture such as small chairs and tables
• Outdoor equipment
• Fencing for the yard
• Food and beverages
• Plates and silverware (safe for children)
• Assorted toys and games
• Books/bookshelf
• Clock

Each daycare is different and may require different supplies. Entrepreneurs also wonder where they can find daycare equipment. People can find these supplies in big-box stores such as Target or Walmart. However, would-be owners can also order the necessary supplies through Amazon, OfficeMax, or eBay.

What is the Best Way to Market a Daycare Business?

Marketing is vital for all small businesses because even the best daycare facilities will not survive without exposure and advertising. Some daycare owners start small and find children based on friends and family, but most home daycare centers rely on strong marketing.

Fortunately, social media provides an excellent and cost-effective way to promote a daycare business. One can create accounts on websites such as Twitter and Instagram, post-high-quality content, and attract followers. Pictures, videos, and other interesting content attract the most views and remember to always be professional. For example, a video of the daycare, its toys, and its shelves of books might inspire a busy mother or father to get in touch.

Posting on these networks is free, but some daycare owners find that creating professional ads works more quickly and effectively. Entrepreneurs can pay the rates they are comfortable with and choose the frequency with which to display the ads. From Twitter to Facebook to TikTok, a wide range of social media networks provide an inexpensive way to market a new business. One way to target local markets is to join Facebook groups, so look for groups that feature children, new parents, babysitting, education, childcare, and more.

Another helpful aspect of marketing is registering the daycare in online listings such as Google and Google Business. Encourage “satisfied customers” parents to leave reviews and establish the company on LinkedIn, Yelp, Bing, and more. The key here is to widen the business’ reach and become visible to people other than your neighbors. Also, word of mouth will help, so allow some time to deliver your quality daycare service. If parents love the services provided, they will network for you by telling their friends, free of charge!

Some businesses use print media and place ads in newspapers or childcare/education magazines, and others seek out community bulletins. One could also bring flyers to a local school or sports field or hang them in coffee shops with the owner’s contact information.

Finally, your website must be appealing to parents. If your marketing efforts are successful, that’s where they’ll go to find out more. Consider printing your curriculum and enacting an SEO strategy that helps your business pop up in search engine results for local daycares.

Marketing strategies are typically individualized and based on the business, so why not try a mix of a few different ideas first? Then, see what works, and go from there.

Does an At-Home Daycare Need a Name?

All viable companies need a suitable name. Why are business names so important? First impressions are essential, and a business name is a large part of that. Like it or not, people remember names; we also judge companies based on their names. For example, “High Danger Childcare” would not set parents at ease, but “Gentle Soul Childcare” might work slightly better.

The name of an at-home daycare should be easy to digest and interesting enough to stand out within the busy networks of social media profiles and print ads. The name should be unique, not strange, and simple enough without boring.

Above all, the daycare’s business name should be original. Try thinking about the reason for starting the daycare or playing off something important to you. Some people link names to location or even memories of childhood. However, before deciding on a name, ensure no other daycare owns it. Run a scan through local business registration websites and ensure that it is not in use when searching for the chosen name.

Do not underestimate the power of a company’s name, especially an at-home daycare. Instead, establish trust and competency early with a careful name choice.

What Are Examples of Home Daycare Companies?

Home daycare businesses come in different forms. One of the most important questions an entrepreneur can ask themselves is: what type of childcare am I interested in running?

Many daycare centers operate from home in the US, and these different iterations require unique tasks. For example, summer care daycares usually involve playing outdoors, so owners need to look into outdoor equipment, fencing for safety, bees nests, and more. In addition, each schooling format brings different advantages and unique challenges, from startup costs to licenses and taxes.

Here are a few of the most popular home daycare formats in the US:

• Summer care: Summertime facilities open when school ends, but working parents still are occupied. Summer daycares constantly sell out, and usually, there are multiple local options in each town or city. Plus, taking the kids outside to play is fun, and the weather usually permits this.
  
  
• Independent schools: Independent schools do not operate under local rules, so daycare owners enjoy more freedom from government rules and policies. Typically, independents include children of childcare age but can also include children up to age 4. Some independent schools are also eligible for local funding, so if this appeals to you, check on local financial opportunities.
  
  
• Childminding: At-home daycares where children under age 8 spend over two hours per day are known as childminding facilities and allow for flexible schedules. For example, some childminding facilities are open Monday, Wednesday, and Friday and closed the rest of the week. Others are open only on weekends.
  
  
• After-school care: Some daycares are specifically intended for children who attend school and then need a safe place to go while their parents continue to work. The typical schedule for these facilities is Monday to Friday.

How Can a Attorney Help?

More and more entrepreneurs who enjoy spending time with children are starting their daycares from their homes. Starting a daycare is challenging, but many say it is also very rewarding.

From figuring out licensing fees to debate business structure, most people who take on this challenge have questions. At Nakase Wade, we provide legal support for your new business. Our business lawyers and corporate attorneys in California have helped many small companies establish themselves successfully and prosper. We want to ensure that our clients understand the risks involved in starting a home daycare, but we also realize it is an excellent business opportunity.

At Nakase Wade, we know that business owners have clear goals, and we want to help them achieve their desired outcomes. We aim to help you start a successful business you can be proud of and enjoy longstanding success. Please contact us for a free consultation, and good luck with your new business.