Full Guide to Starting Your Own In-Home Daycare

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If you’re an aspiring entrepreneur with a background in early childhood education, starting an in-home daycare can be a fulfilling career path. 

There are plenty of benefits to starting your own in-home daycare business, including low start-up costs, no daily commute to work, and more time spent at home. You’ll also enjoy a sense of satisfaction as you support the children in your care through their critical developmental years. Many young mothers start in-home daycare centers so they can spend more time with their own kids while still earning money for the family. 

If you’re interested in starting your own in-home daycare business, this is the guide for you. We’ve created a step-by-step roadmap that will help you:

  1. Make sure an in-home daycare business is right for you
  2. Create a business plan
  3. Open your in-home daycare
  4. Manage your in-home daycare business

We’ll also explain the central role that technology and software play in child care businesses today and how a software solution like Procare can give you a competitive advantage over other daycare centers.

By the end of this guide, you’ll have all the information and resources you need to get your in-home daycare business set up and start earning money – so let’s dive in!

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Imagining Your In-Home Daycare Business

Starting a business is a big decision, and it’s worthwhile to spend time thinking about your new business will change your life. 

From a financial perspective, think about how much money you could earn by operating an in-home daycare center. How will that income change your life? How will you use it to take care of yourself and your family? If you’re not sure how much you could earn, we’ll help you figure that out – so keep reading!

You should also think about the lifestyle implications of starting a new business. What will your daily routine look like? What activities will you be doing? How will you feel? How will you make time for everything that’s important?

If you’re excited by the idea of spending each day caring, educating and providing for kids in your community, then you’ll probably feel happy and fulfilled operating an in-home daycare center.

Starting an In-Home Daycare? Ask Yourself These Key Questions

As you get ready to start planning your in-home daycare business, here are a few key questions that you should be asking yourself.

Why Do You Want to Start a Home Daycare?

Everyone planning to start a business needs to understand the core motivations that are driving their actions. There are several different factors that can motivate someone to start a home daycare business:

  • Desire for a lifestyle – ability to stay home with kids
  • Financial motivation – desire to make money
  • Passion for childcare – enjoyment of working with children
  • Desire to contribute to the community – making the world a better place
  • Passion for childhood education – giving young people the best start

Understanding your motivation is a crucial step. This will help you create branding and business processes that reflect your core values.

Are You Dedicated to Excellence?

Regardless of what your motivations are, your responsibility to the children in your care, their parents and the wider community remains the same. 

You will care for children in the most important developmental years of their lives. Your guidance will affect their personal development and outlook on the world. You’re also responsible for giving them healthy food, keeping them engaged with age-appropriate toys and activities, and keeping them safe. 

If you’re ready to accept those responsibilities and do your best each day, that dedication to excellence will help you succeed in operating your in-home daycare center.

Where Do You See This Business in 5 Years?

What is your long-term vision for your in-home daycare business?

Is your business a short-term income source until your kids get older, or a long-term business venture that you’d like to expand to additional locations?

Do you plan to do everything yourself, or start hiring staff once you have enough customers?

Developing your vision for the future of your business can help you make strategic decisions now that set you up for success.

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Create an In-Home Daycare Business Plan

By now, you should have some idea of the type of in-home daycare business you would like to operate. The next step is to develop a business plan that describes how your business will function and generate a profit.

Writing a Business Plan

There are several ways to do business planning, but we’re going to walk you through a 10-step business planning process that’s based on the Lean Canvas model:

  1. Problem
  2. Solution
  3. Unique Value Proposition
  4. Unfair Advantage
  5. Customer Segments
  6. Channels
  7. Revenue Streams
  8. Cost Structure
  9. Key Metrics
  10. Technology

Lean Canvas is a tool that start-up businesses use to create and document business models. This model has been used by companies in all industries, and it’s perfectly suitable for in-home daycare centers as well.

Below, we explain each step of the business planning process and what questions you should be asking as you plan out your in-home daycare business.

Problems: What Problems Will Your Business Solve?

Businesses exist to solve problems for their customers. 

For an in-home daycare center, the basic problem is that parents need someone to care for their kids while they go to work. 

To get even more specific, focus on the immediate area where your daycare will be located. What problems will your daycare solve for the local community? Is there high, unmet demand for child care in your area? Are there issues with cost and convenience for parents?

Solution: What Solutions Will Your Business Offer?

Once you have identified the most important problems, make a list of how your business can address those problems. 

If there is a high unmet demand for childcare in your community, simply opening a childcare center with new space for kids helps solve the problem.

If other daycares are under-serving the community, maybe yours can offer extended hours or more competitive pricing that would benefit parents.

Unique Value Proposition: What Sets Your Business Apart?

A unique value proposition (UVP) is your best attempt to explain what makes your daycare both different and better than any other option.

Your unique value proposition should be tied to the solutions that your business provides.

Examples:

  • “We are the most affordable and best-value daycare center in the west neighborhood.”
  • “We offer the most books and educational resources to help kids do better.”
  • “We have the most square-footage per child in the neighborhood and the safest environment.”

You will use your UVP to describe the value of your business to potential customers, so make it positive and appealing to your target audience.

Unfair Advantage: What about Your Business is Difficult/Impossible to Copy?

Spend time thinking about what will make your in-home daycare unique. If you have something that your competitors can’t copy, you can lean into that and build your business around it.

Examples:

  • Location: “We are the closest daycare to the public school, making us the most convenient for kids and parents.”
  • Location: “We are right next to a park; your kids will get the most outdoor recreation and physical activity at this daycare.”
  • Quality of Service: “I’m an amazing early childhood education teacher. I can make sure your child gets the best start in education.” 
  • Nutrition: “I know a lot about nutrition — our daycare makes the healthiest meals for kids every day.”

Customer Segments: Who is Your Target Market?

If you’re thinking about operating an in-home daycare, your target customers are going to be the parents that live and work in the community where your daycare is located.

You may want to look up community demographics, education and income for your local area to learn more about your customers and their needs.

Channels: How Will You Acquire Customers?

The most important thing any new business must do is acquire customers. As a new business owner, you will need to develop a plan for getting the word out about your services, connecting with your target market and generating sales.

Revenue Streams: What are Your Anticipated Revenue Sources?

Parents will pay you a daily or weekly fee for taking care of their children.

To calculate that fee, you should account for:

  • Morning Drop-off Time
  • Evening Pick-Up Time
  • School Pick-up/Drop-off Required?
  • Morning Meal Provided?
  • Lunch Provided?
  • Dinner Provided?

Cost Structure: What are Your Anticipated Costs?

To understand the costs associated with opening your daycare, you want to look at two categories: fixed costs and variable costs.

Fixed costs are the same regardless of how many kids you care for each day. Commercial property insurance and playground equipment for your backyard are examples of fixed costs.

Variable costs grow as your business grows. With more children at your daycare, you’ll spend more on things like food, water and educational/activity supplies.

You should document both the fixed and variable costs associated with starting and operating your business.

Key Metrics: How Will You Measure Success?

Metrics are measurements of business success. Without metrics, it can be difficult to determine whether your business is performing at its full potential and bringing you closer to your goals. 

You may want to keep track of financial metrics, such as:

  • Total revenue
  • Total expenses
  • Total profits
  • Average profit per child
  • Average profit per hour of operation

In addition to measuring your business performance, you may want to collect feedback from parents to measure customer satisfaction

Technology

How will you leverage technology or software to help your business operate more efficiently?

A software solution like Procare Connect runs directly on your mobile phone and helps you manage your most important daycare administration tasks. You can create and schedule lesson plans, keep track of safety-critical parent and child information, manage billing and payments, organize staffing, engage your customers with regular communication – and lots more.  

You’ll need to do all these things anyway, but the right software will help you keep everything organized, centralized and up to date. As a result, you’ll save hours of time every month and stay in control of your business.

Name & Brand Your Business

Now that you’ve completed your business plan, it’s a great time to think of a business name and a brand that communicates your core values. 

The best way to come up with a name for your business is to think about what makes you unique and construct a brand or business name around that. Therefore, we recommend naming your business after you come up with a business plan – not before.

Your customers will use your business name to talk about your business, so make sure it’s memorable and says something important about who you are. Incorporate additional information if possible, such as your unique value proposition or the location of your in-home daycare center.

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Setting Up Your In-Home Daycare Business

Once you’ve got your business plan organized, you should have a clear idea of what exactly your in-home daycare will offer, how you will acquire customers, and how you will profitably deliver on your unique value proposition.

Your business plan should guide you in the direction of your long-term vision for your business while informing the actions you take in the short-term to grow and succeed..

When you’re ready to move forward, it’s time to set up the legal and financial groundwork for starting your business, secure licenses and insurance, and develop a safety policy.

Legal Structure

When you register your business with local authorities, you will need to decide on a legal structure for your business. Each one has advantages and disadvantages associated with it, so it’s important to know the difference.

Types of Entities Suitable for Home Daycare

  1. Sole Proprietorship – The most simple, low-cost option for starting your own business.
  2. Partnership – The best option for starting a business with partners.
  3. Corporation – The costliest option, but may provide tax and liability advantages.

If you are planning to grow your in-home daycare into a larger business with multiple locations, you will likely want to incorporate at some point. If you are focused on generating personal income, a sole proprietorship might be the most straightforward option for you.

Options for legally structuring your business differ by region, so check with your local business authority to find out what options are available in your area.

Joining a Daycare Agency

Depending on where you live, you may be able to partner with a home daycare agency. Home daycare agencies help connect parents with home childcare providers in the community that can meet their needs. Partnering with an agency can help you find customers more quickly, but you’ll lose out on some profit, as the agency takes commission on sales they help generate.

Funding

There are numerous costs associated with opening an in-home daycare center. Before you invest your life savings into this business, make sure that you have enough funding to get everything you need – otherwise you could run out of money before you even open! 

Think about how the following types of costs can add up when opening your in-home daycare center:

  • Daycare licensing fees
  • Insurances
  • Legal fees
  • Business registration fees
  • Certification fees (CPR, etc.)
  • Activity and educational supplies
  • Outdoor recreation equipment
  • Books and toys
  • Play Mats
  • Cots
  • Software programs
  • First aid kits
  • Fire extinguishers
  • Smoke alarms
  • Miscellaneous home safety equipment
  • Marketing and  advertising

Before starting your business, you should carefully list all the associated costs, add them up, and make sure you have access to enough funding to get everything you need.

In general, there two types of funding you can look for: self-funded/bootstrapping, or external funding.

Self-Funding/Bootstrapping

If you have sufficient savings, or you already have most or all the necessary supplies and equipment, it may be possible to self-fund your in-home daycare center. 

You may also want to ask for loans from friends or immediate family to help start your business. You can show them the business plan you’ve created and explain your plan for generating profit with an in-home daycare business that provides a needed service in the community.

External Funding Sources

External funding sources include things like bank loans, grants and subsidies.

You may be able to get a business loan at your bank after presenting a detailed business plan. Banks will charge interest, so make sure you can cover the interest fees with business profits.

Depending on where you live, you may be able to secure special grants or subsidies as someone starting a small business. Check with your local government to determine if any programs are available.

Licensing & Insurance

Home Daycare Licensing

Some states or countries require in-home daycare centers to operate with a license. Check with your local government to determine whether a license is required for you to operate an in-home daycare.

Insurance

Insurance protects you from financial liability that you may incur in the process of operating an in-home daycare. There are several types of insurance that are common for in-home childcare providers:

  • General Liability Insurance – Covers third-party claims for property damage or bodily injury
  • Commercial Property – Protects your home and assets where your business is located
  • Commercial Auto – Needed for daycares that transport kids to/from school in motor vehicles
  • Professional Liability – Protects you from claims of professional negligence or mistakes
  • Workers Compensation – If you plan to hire employees, workers compensation insurance will protect you from liability claims related to workplace injuries

Having the proper insurance can mitigate the consequences of unforeseen accidents that occur in and around your home daycare center.

Safety

To ensure the safety of children in your care requires the development of safety and emergency preparedness planning for your in-home daycare center. Before opening your in-home daycare, you should document response plans for common types of safety incidents, including:

  • Child illness or injury
  • Public health emergency
  • Missing child
  • Shelter-in-place/Lockdown 
  • Evacuation
  • Fire
  • Hazardous Spills
  • Gas Leak
  • Power Outage
  • Natural Disaster/Extreme Weather

In 2020, the COVID-19 public health emergency has required child care centers to adopt special standards and practices to mitigate the spread of infection. Child care providers are encouraged to teach and reinforce healthy hygiene practices (hand-washing, covering your cough, etc.), intensify cleaning and disinfectant in shared spaces, and monitor staff and children for signs of illness. In-home daycares should strongly encourage parents to keep children at home if they are sick. 

Your in-home daycare safety plan should be updated to keep in line with the CDC’s interim guidance on coronavirus for childcare centers. The guidance includes directives for mitigating the risk of infection, what to do if someone with a confirmed case of COVID-19 enters your daycare, and how to respond to varying levels of COVID-19 spread in the community.

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Managing Your In-Home Daycare Business

Once you’ve organized your legal business structure, daycare licensing, insurances and funding, you’re ready to acquire your first customers and start managing your in-home daycare.

To make things simple, we can divide your most important management activities into four categories and list them in order of importance:

  1. Sales & Marketing – Getting new customers and keeping them engaged and happy.
  2. Operations – Managing the daily tasks of a child care center.
  3. Finance – Managing cash flow, budgeting, account, taxation, billing, accounts receivable, payroll and procurement.
  4. Human Resources – Hiring, scheduling, training and managing staff.

Next, we can identify the most important management activities in each category and the role they play in your business.

Sales & Marketing 

Without an effective sales and marketing strategy, you’ll have no customers, no operations, no finances to manage and no need to hire anyone. 

That’s why sales and marketing is the most important part of managing your business. 

The core components of sales and marketing are:

  • Customer Acquisition – Getting new customers.
  • Customer Retention – Keeping your customers.

When it comes to customer acquisition, there are several ways to start getting customers:

  • Offer your services to family and friends.
  • Ask your family and friends to spread the word about your new business in the community.
  • Advertise in the classifieds section of the local newspaper.
  • Advertise on social media (Facebook, Instagram, etc.).
  • Create a brochure or poster and post it around your neighborhood, on message boards, and throughout the community.
  • Advertise in free online classifieds (Craigslist or Kijiji).
  • Join an agency.
  • Talk to schools in your area that may be able to connect you with parents that need child care.
  • Tell everyone you talk to about your business (doctor, pharmacist, store clerk, gas station attendant, cashier, restaurant cook, waitress, bank teller, grocer, etc.)

Customer retention is about making sure that your existing customers are engaging with your business and satisfied by the service they receive. With a software solution like Procare Connect, you can engage parents with weekly or monthly newsletters, direct messaging, and photos or videos of their child’s daily activities.

Operations

Once you have kids coming to your house every day, you will spend much of your time managing daily operations. 

Daily operations include every single task that is required for you to deliver on your business values and meet the needs of children and expectations of parents.

Start by listing every service that your in-home daycare center provides:

  1. Meals
  2. Education
  3. Personal Care
  4. Transportation
  5. Activities

Next, list out all the tasks that need to be completed to provide each service, and how frequently the task should be completed.

For the service of providing meals, you might have:

  • Create meal plan (monthly)
  • Check flyers for coupons and discounts (weekly)
  • Verify attendance numbers (weekly)
  • Go shopping (weekly)
  • Make breakfast (daily)
  • Make lunch (daily)
  • Make dinner (daily)
  • Run the dishwasher (daily)

Be as specific and as detailed as you can. Your goal should be to produce a full list of tasks that must be completed to ensure that all services at your daycare center meet customer expectations. Once you produce such a list, you can schedule items or delegate to employees as needed to make sure everything gets done.

Finance

Managing your business from a financial perspective means overseeing procurement, accounting for revenue and expenses, keeping track of billing and payments, maintaining cash flow and setting aside money for taxes. Let’s briefly look at each of these tasks and why it’s important.

Procurement

Procurement is the process of purchasing items that are essential for your business. Managing expenses carefully can help you save money and add substantially to your profits over the course of a year. Make a point of looking for the best deals on items you can’t do without.

Accounting

You will need to keep track of your revenue and expenses so you can measure your profits and pay the right amount of taxes each year. That means keeping receipts, invoices and all the documentation created when you spend or receive money that is related to your business.

Cash Flow Management

Cash flow management is all about making sure that you have enough money in the bank to cover your most immediate business expenses. To effectively manage cash flow, you’ll need to construct an operating budget that clearly defines your daily, weekly, monthly and yearly expenses and when they come up.

Billing & Payments

You will need to manage a billing account for each customer of your business as well as offer one or more methods of accepting payment. You’ll also need to keep track of daily, weekly or monthly rates by family and maintain reliable records of the payments you receive.

With Procare Connect, we’ve made it easier than ever for in-home daycare centers to manage invoices, billing and payments. With our sign-in system, centers can track attendance and calculate related charges in real time, set up tuition plans for each student, and process payments through ACH or credit card. 

Online and in-app payment options for parents make tuition payments convenient, traceable and secure. 

Taxes

As an independent business owner, you will need to set aside money to pay your taxes at the end of the year. Your taxation rate depends on where your business is located and how it is legally structured. Consult with a local accountant to determine how much you should be setting aside.

Human Resources

Hiring

As you acquire more customers, you may eventually decide to hire additional staff to help with your in-home daycare business. Hiring staff means vetting them, training them, scheduling them, and paying either a salary or hourly wages.

Worker Licensing

As the owner/operator of your in-home daycare center, you may be responsible for ensuring that staff have the appropriate qualifications and accreditations to work with children in a daycare setting. Check with your local authorities to determine what kinds of requirements exist in your area.

Simplify In-Home Daycare Management with Procare

Starting an in-home daycare is a great way to turn your passion for child care and early childhood education into a rewarding full-time job.

Procare can help make your in-home daycare a success, empowering you to streamline core business functions, engage more effectively with parents, organize staffing and much more.

With Procare, you’ll spend less time on paperwork and administrative tasks and more time on the things that matter most, like providing education and caring that make a difference in a child’s life.

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