How To Start a Child Care Business

Before opening your child care small business doors, create a daycare facility business plan. It's worth considering expected business expenses and how to attract young children's parents to your new business over existing daycare centers.

You should address some essential issues in the contents of your business plan. You can use a business plan template or hire an attorney to help you.

Funding Your Business

 Will you pay for the startup costs with your personal money? Another option is to apply for a business loan from a bank. If you have difficulty getting a loan, you can also secure investors. If you need to remodel or pay licensing fees, include these costs as you plan your funding needs.

Creating Business Policies

You will need a plan for pricing your services and handling late payments, bad behavior, sick children, staffing issues, and cancellations. Formulating these policies in advance can help avoid customer disputes.

Working through your business plan will help you decide if you're ready to start your business. You may decide that you want to buy into an existing child care or daycare business franchise rather than create your own daycare business.

Obtain Child Care License

Licensing requirements for child care centers vary by state. You should be informed about these regulations before opening your child care center.

Contact your local licensing agency for a child care license.

Many child care laws and licensing requirements help ensure the health and well-being of children. To comply with these laws, you must meet specific minimum requirements.

Research your Local Zoning Laws

Find out whether child care centers are allowed in your chosen location before opening enrollment. You should also know the ratio of children to child care staff allowed by your local fire marshal and fire code ordinances. 

Check Emergency Exits

Child care facilities are busy and crowded. This makes emergency exits a critical safety issue. Here, it's also likely that you must comply with local regulations.

Laws and Regulations Specific to Child Care Businesses

Child care providers are mandatory reporters to local law enforcement and child protective services when they suspect abuse or neglect. Your state department of human services will usually have training on this topic.

If your staff prepares meals or food on-site at the business, you need a food service license. This requires commercial-grade kitchen equipment. There may be an exemption depending on the number on children on site.

Your state may have specific rules on health issues. These can include vaccinations, handwashing procedures, changing diapers, and preventing the spread of disease. This applies to staff and children.

Under federal law, you have to make a child's file available to a parent or guardian. A child's health information is protected by law and should not be available to anyone other than a parent or guardian. You're allowed to disclose the child's file or information to federal, state, or local enforcement or within a juvenile justice system like the department of children and family services.

If you transport children, even for field trips, federal law mandates that children are in car seats and wearing seat belts if needed. Drivers must have valid driver's licenses and no crashes or accidents in the last five (5) years. They also can't smoke while operating the vehicle.

There will also likely be inspections on your child care center as time passes. So, it's always essential to stay in compliance with the rules. Federal law requires the business to make these results available to the public.

Licensing Exemptions

Most states have certain exemptions from child care licensing regulations. A child care business that falls into the exempt categories won't need to comply with the child care licensing regulations strictly. But the regulations are good guidelines for the minimum standards you should aim for as a child care provider.

Relative providers that are over 18 years old and related to the child, such as nieces or nephews, siblings, grandchildren, or great-grandchildren

• Programs for school-age children run by public schools
• Summer camps
• Programs run by religious organizations and others

In some states, you need a license to care for two or more unrelated children. Other states will allow up to five unrelated children in an unlicensed child care center.

It helps to have a unique name that makes your business stand out against your competitors. You'll also want to ensure the name is not copyrighted or used by any other company.

Incorporating or forming a limited liability company (LLC) can reduce personal liability and offer potential tax benefits. You won't have personal asset protection if you run your child care business as a sole proprietorship.

You can do business as a child care center in a leased or owned building. You could also offer family child care by operating in your own home as an in-home daycare. Your state's licensing requirements may vary depending on your choice of location.

Child care providers usually need a few different types of business insurance. In addition to general liability insurance, you might need workers' compensation insurance, property insurance, and others. You should contact your local division of child care services to find out more. If you run your child care business out of your house, have home-based business insurance coverage.

Staff Member Requirements

State laws dictate how many children can be in a daycare for each employee (staff-to-child ratio). As you expand, you may need to hire more staff. Low staff-to-child ratios will likely improve learning outcomes and lower disease transmission, among other benefits.

Child Care Credentials

Staff members may need specific credentials or certifications. This could include CPR certification or minimum education levels. These training requirements will also depend on your state.

Background Checks

Your state may require you to run background checks on staff members. This is always a good idea. It helps you hire the right people for the job. Running comprehensive background checks may also be a state law and keep you from being liable for negligent hiring if that staff member harms a child.

You will need a good marketing strategy to help you reach out to local families who may need your services. This can include social media, a good website, or old-fashioned customer referrals.