Why You Need a Daycare Business Plan
A solid childcare business plan is essential whether you're opening a home daycare or a commercial childcare center. Beyond securing financing from banks or investors, your business plan becomes your roadmap for the first 3-5 years of operation.
- Required for SBA loans and bank financing
- Helps you understand true startup costs
- Identifies your target market and competition
- Creates accountability for growth milestones
1. Executive Summary
The executive summary is the first section of your daycare business plan, but you'll write it last. It should be 1-2 pages that summarize your entire plan for busy investors and loan officers.
What to Include:
- Business concept: Type of childcare (home daycare, center, preschool), ages served, capacity
- Mission statement: Your philosophy of care and what makes you different
- Market opportunity: Local demand, waitlists at competitors, underserved demographics
- Financial highlights: Startup costs, projected revenue, break-even timeline, funding needed
- Management team: Your qualifications, key hires, advisory board
2. Market Analysis
Your market analysis proves there's demand for your daycare. This section requires local research — census data, competitor analysis, and community demographics.
Local Demographics
- Number of children under 5 in your area
- Percentage of households with two working parents
- Median household income
- Population growth trends
- Major employers nearby
Competitor Analysis
- List all daycares within 5-mile radius
- Their capacity and current waitlists
- Tuition rates by age group
- Hours of operation
- Reviews and reputation
Pro Tip: Finding Local Data
Use the U.S. Census Bureau's American Community Survey for demographic data. Your state's childcare resource and referral agency can provide data on childcare supply and demand in your area. Many have free business planning resources.
3. Licensing Requirements
Licensing requirements vary significantly by state. Your business plan should detail the specific requirements for your state and how you'll meet them.
Facility Requirements
- Square footage per child
- Outdoor play space
- Health & safety standards
- Fire safety compliance
Staff Requirements
- Director qualifications
- Teacher certifications
- Background checks
- CPR/First Aid training
Business Requirements
- Business license
- Zoning approval
- Liability insurance
- Workers compensation
Operational Requirements
- Parent handbook policies
- Emergency procedures
- Record keeping
- Regular inspections
State-by-State Licensing Guide
We've compiled licensing requirements for all 50 states, including staff ratios, certification requirements, and links to official licensing agencies.
View your state's requirements4. Staffing Plan & Ratios
Staff-to-child ratios are mandated by your state and directly impact both your costs and the quality of care. Younger children require more staff, which affects your revenue model.
Typical Staff-to-Child Ratios
These are common ranges — check your state's specific requirements.
| Age Group | Typical Ratio | Notes |
|---|---|---|
| Infants (0-12 months) | 1:3 to 1:4 | Most states require lower ratios for infants |
| Toddlers (12-24 months) | 1:4 to 1:6 | Ratios increase as children get older |
| Twos (24-36 months) | 1:5 to 1:8 | Check your state requirements |
| Preschool (3-5 years) | 1:8 to 1:12 | Higher ratios allow for more revenue |
| School-age (5+ years) | 1:10 to 1:15 | After-school programs |
Key Staff Positions
- Director (required in most states)
- Lead teachers (classroom leads)
- Assistant teachers
- Floaters (ratio coverage)
Staffing Costs (Budget)
- Director: $45,000-70,000/year
- Lead Teachers: $30,000-45,000/year
- Assistant Teachers: $25,000-35,000/year
- Benefits: Add 20-30% to salaries
5. Financial Projections
Your financial projections should include startup costs, monthly operating expenses, revenue projections, and break-even analysis for at least 3 years.
Startup Cost Estimates
| Category | Home Daycare | Childcare Center | Notes |
|---|---|---|---|
| Facility | $5,000-15,000 | $50,000-200,000 | Renovations, playground, safety upgrades |
| Furniture & Equipment | $3,000-8,000 | $15,000-50,000 | Cribs, tables, chairs, storage |
| Educational Materials | $1,000-3,000 | $5,000-15,000 | Books, toys, curriculum, art supplies |
| Licensing & Permits | $500-2,000 | $2,000-10,000 | State license, business permits, inspections |
| Insurance | $1,000-3,000/yr | $5,000-15,000/yr | Liability, property, workers comp |
| Technology | $500-1,500 | $3,000-10,000 | Check-in system, cameras, software |
| Initial Marketing | $1,000-3,000 | $5,000-20,000 | Website, signage, advertising |
| Working Capital | $5,000-15,000 | $30,000-100,000 | 3-6 months operating expenses |
Revenue Model by Age Group
| Age Group | Weekly Rate | Monthly Rate | Profit Margin |
|---|---|---|---|
| Infants | $350-500 | $1,400-2,000 | Lowest (labor intensive) |
| Toddlers | $300-400 | $1,200-1,600 | Low-Medium |
| Preschool | $250-350 | $1,000-1,400 | Medium-High |
| Pre-K | $225-300 | $900-1,200 | Highest |
Sample Revenue Calculation
A 50-child center with 80% enrollment:
- 40 enrolled children × $1,400 avg monthly tuition = $56,000/month
- Annual gross revenue: $672,000
- Typical net margin (10-15%): $67,000-100,000/year
6. Marketing Strategy
Your marketing plan should detail how you'll attract families to fill your enrollment. Most parents find childcare through word-of-mouth, online searches, and local community networks.
Pre-Opening Marketing
- Build website with enrollment forms
- Claim Google Business Profile
- Create social media presence
- Partner with local businesses
- Host open house events
Ongoing Marketing
- Referral program (existing families)
- Google reviews management
- Local SEO optimization
- Community event sponsorships
- Parent testimonials/case studies
7. Operations Plan
Your operations plan details the day-to-day running of your daycare, from daily schedules to administrative processes.
Daily Operations
- Hours of operation
- Daily schedule/curriculum
- Meal planning
- Parent communication
Administrative
- Enrollment process
- Billing & payments
- Staff scheduling
- Record keeping
Health & Safety
- Illness policies
- Emergency procedures
- Cleaning protocols
- Incident reporting
Frequently Asked Questions
How much does it cost to start a daycare?
Startup costs range from $10,000-$50,000 for a home daycare to $50,000-$500,000+ for a commercial childcare center. Major expenses include facility, equipment, licensing, insurance, and working capital.
What should be included in a daycare business plan?
A complete daycare business plan includes: executive summary, market analysis, licensing requirements, staffing plan with ratios, financial projections, marketing strategy, and operations plan.
How do I calculate revenue for a daycare business plan?
Multiply your capacity by tuition rates, then factor in realistic enrollment (70-85% for new daycares). Example: 50 children × $1,500/month × 80% enrollment = $60,000/month gross revenue.
What licenses do I need to start a daycare?
Requirements vary by state but typically include: childcare facility license, business license, zoning approval, background checks, CPR/First Aid certifications, and liability insurance.
How long does it take to open a daycare?
Opening a daycare typically takes 6-12 months. Key milestones: business plan (1-2 months), financing (1-3 months), location (1-2 months), licensing (2-4 months), hiring (1-2 months).