How to Start a Daycare Business

What Are the Benefits of Starting a Daycare?

Starting your own daycare business allows you to combine the enriching feeling of spending time and having a hand in developing the new generation with the entrepreneurial satisfaction of starting and running your own successful daycare business.

Here are just a few of the benefits of starting a daycare:

• It’s rewarding. You are essential in fostering a child’s development socially and emotionally and nurturing their mental development. You can profoundly impact their minds and behaviour while helping families in your community.
• Enjoy financial freedom without working a traditional day job. You can be the boss with autonomy over your financial security and future. A great way to bring in extra money!
• Tax benefits. Being a business owner means certain expenses such as supplies and equipment, mobile phone, energy and water bills, and even some of your housing payments if you run your daycare in your home.
• Childcare for your children. Run a business and earn money while saving costs and caring for your children at the same time.

How Much Does It Cost to Start a Daycare Business?

As with any startup, the opening costs for your daycare business vary.

For a home daycare business, you can work with a budget as low as $3,000 to purchase necessary additional furniture such as change tables and cots, toys, and other supplies. These costs can increase if you add renovations, retrofitting, or buying or leasing an out-of-home location.

To get your daycare business up and running, you’ll need to be prepared for what you’ll need to buy or lease and other expenses. These include:

• Rent and utilities (power, water, heat, phone, and Wi-Fi) for your daycare, specifically if you operate out of the home
• Wages and other compensation for any employees
• Insurance
• Licences and additional related fees
• Food and beverages for snacks and meals (plus all the necessary cups, plates, utensils, etc.)
• Toys, play equipment, and craft supplies for activities
• Childcare supplies (diapers, wipes, etc.)
• Cleaning supplies
• Furniture for rest, eating, and play
• Miscellaneous supplies like toilet paper, linens,
• Office supplies, including a business computer
• Vehicle for transportation (if applicable)

Can You Run a Daycare Business From Home?

Running a daycare business from your home is an affordable and efficient option. If you have the space and desire, investigate what is required in the town or city you live in and the province to ensure you adhere to the policies and regulations necessary. Keep digging, as you may be eligible for tax cuts, funding grants, and other benefits specific to in-home daycares, from the municipal to the federal level.

For example, in Canada, if you use your home for your daycare business, you may be able to claim part of the home expenses. These expenses include public services (electricity, water), heat, insurance, maintenance, mortgage interest, property taxes, and rent.

7 Steps to Starting a Daycare Business

Starting a new business means making smart business decisions from the get-go. Follow these seven steps to get your daycare business up and running:

1. Early Childhood Education Degree

An early childhood degree is an excellent approach to distinguishing yourself from your competitors. While a master’s degree in education may not be required to run a daycare, you will need some combination of licensing and certification. Find out all the training, experience, and credentials you need to operate a daycare facility legally. For example, in Ontario, any childcare program that provides care to more than five children under 13 years requires a licence.

The level of certification required varies across the country, and the level of study or experience depends on the role at the daycare. For instance, a Child Care Assistant must have 40 hours of approved early childhood training in Manitoba within their first year of employment. On the other hand, an Early Childhood Educator must have completed a two-year Early Childhood Education diploma program up to a Bachelor of Arts (focusing on child development and care).

Other requirements will likely arise when you investigate. You and any staff may require CPR certification or, at minimum basic first aid for children; you may need to be cleared via background checks and fingerprinting.

2. Get Your Daycare Licensed

Across Canada, there are rules for childcare and early years programs designed to ensure the safety and well-being of children.

For example, in Ontario, you would be subject to the Child Care and Early Years Act, 2014, which establishes the province’s rules for childcare and early years programs and services. You will be required to comply with the standards, rules and regulations, including maintaining staff-to-child ratios, ensuring compliance with health and safety standards, building codes, nutrition, health and medical supervision, programming, staff qualifications and screening, emergency preparedness, and administration.

In Ontario, you must apply for a childcare licence by registering for the Child Care Licensing System (CCLS). All licensing activity, such as submitting a request for a revision to your licence, must be done through this portal. Gather and submit any required supporting documents through CCLS, such as policies and procedures, relevant approvals, and floor plans

Plan, be thorough, and have all the necessary documentation for your province and municipality before you open your doors.

3. Secure Financing

As a new business with no credit history, it can be challenging to secure financing. Demonstrate your initiative to prospective lenders and be a proactive entrepreneur and seek out various financing alternatives that will have you running your own daycare business in no time:

• Your savings
• “Patient capital” (aka love money) is raised via family and friends, and its name denotes its repayment terms, which are often lenient
• An angel investor
• Local economic development incubators
• Government grants and subsidies
• Bank loans (the most commonly used source of funding for small and medium-sized businesses.)

Small businesses or startups operating in Canada are eligible for the Canada Small Business Financing Program. This loan program collaborates with financial institutions and makes it easier for small businesses to get term loans and lines of credit by sharing the risk with lenders. Financial institutions are responsible for delivering the program and for approving the loan. Apply with the financial institution of your choice, which will review your proposal and decide on your loan application.

4. Draft a Business Plan with Budget and Financial Goals

You may not realize how crucial a plan plays in getting your daycare off the ground, but the strength of your business plan is correlated with your ability to secure financial assistance for your daycare. So, ensure you have one that demonstrates your understanding of every facet of your business and its ability to generate profit.

A business plan also serves as a roadmap for your business’s future growth and development. After describing your business in the executive summary, your daycare business plan will help outline the business opportunity supported by market research, your team and operations, the marketing and client-acquisition strategy, as well as the mission statement of your daycare.

An essential element to cover in your plan is financial forecasting, outlining your budget and financial goals for the next three to five years so investors can understand your strategy. Through this practice, you will consider the startup costs and the fees you intend to charge and project when you expect to break even. To be safe, add an extra 20% to 30% to your budget.

Developing your daycare business plans will force you to answer the questions that will drive your business daily – how do you intend to generate a profit, and how do you plan to operate during periods of low profit? And who is your competition, and what is your target market? Referring to your business plan will work to keep you focused and on track.

5. Explore Tax Credits and Government Grants

Offset the costs of starting and running your own daycare business by researching the available tax credits, reductions, and government grants for which you may be eligible.

Various government grants assist with costs associated with opening a licensed daycare. For example, in B.C., there is a provincial funding program designed to increase the number of licensed childcare spaces available to families in the province.

A federal program called Enabling Accessibility Fund provides funding aimed at improving accessibility and safety in regulated and licensed Early Learning and Child Care (ELCC) centres. It will help support children with disabilities, parents and guardians with disabilities or employees with disabilities.

Often, running an in-home daycare allows you to write off a portion of your housing cost because you’re using your residence for business purposes. Furthermore, there are government grants for early childhood education providers at all levels. Look into whether the municipal, regional, provincial, or federal government compensate for costs, such as grants to obtain additional child development-related education for you, funding for meals, etc.

Links to tax credits and government grant resources are provided at the end of this article to help point you in the right direction.

6. Establish Client Contracts and Policies

Protect your daycare business with a contract and clear policies that the parents review and sign.

Your contract will state that you will provide childcare and will be compensated for delivering that care according to your specified payment terms. It should give you the right to terminate your services. It’s advised to have a contract lawyer review your document.

The set of policies will detail for parents the information relevant to the running of your daycare, such as drop-off and pick-up times, extra-curricular activities, protocols relating to illness and weather and vacation, and whatever else you want the parents to know. Review to ensure you comply with the local childcare licensing requirements.

To capture everything you want to cover in these documents, consider the following questions:

• What is the pick-up time, and what are the consequences of being late?
• What are the pick-up procedures?
• What are the emergency plans, privacy policies, and safety procedures?
• What will you provide, and what are parents responsible for providing? (formula, diapers, etc.)
• What is your policy for sick children?
• When will you take time off, how much will you take, and how will you communicate that to the parents?
• How will you be paid, and what are the consequences of late payment?

7. Marketing Your Daycare

Preparing to market your daycare starts with some research. Begin by identifying your customers and developing an effective and efficient plan to reach them.

Define and highlight the positioning of your daycare and what distinguishes it from the competition to prospective parents. Think about your hours and services. Identify the strengths and weaknesses of your competition and apply this knowledge to and use it to pinpoint opportunities and threats.

That plan can include good old-fashioned word of mouth among the local parents and distributing brochures throughout the community at nearby schools, libraries, and local businesses like coffee shops. List your services in local childcare directories and popular early education or parenting support sites.

Establish your online presence with a website providing more information on your daycare and how to contact you. When developing your business’s website, embed and utilize SEO (search engine optimization) tricks to attract traffic. Online provides a wealth of options to draw in local families. Social media can be the workhorse you need to communicate your services, specialties, and openings. Create a Facebook page, open Instagram and Twitter accounts that echo the same messaging and positioning as your website. Further to organic (unpaid) online marketing, you can use Google and Facebook paid ads targeted to your trade area with both content and contextual placements to attract new clients.

Keep in mind that pricing is vital for marketing in addition to promotion. Your fees can send a message to prospective clients, so clearly outline them, as well as surcharges, penalties, and any incentives.

What Insurance Does a Daycare Business Need?

If you have a daycare business – whether you run it in-home or on a separate premises – you run the increased risk of a lawsuit when caring for other people’s children. Protect yourself, your daycare, and the children with a daycare insurance policy.

It combines different coverages designed to provide comprehensive protection for your business and typically includes commercial general liability (CGL), professional liability, cyber liability, and abuse liability insurance (related to sexual, physical, or mental abuse, harassment and misconduct).

Startup Resources for Daycare Businesses

For more information and tools on how to start and run your own successful daycare business, check out this list of Canadian resources:

• Visit the Innovation, Science and Economic Development Canada’s Business Benefits Finder to find the industry-specific funding, loans, tax credits, and advice available across Canada.
• Do a permit and licence search through BizPal. Filter federal, provincial, territorial, and municipal business permits and licences in Canada. Based on your location, industry, and business activities. Save the ones that apply to your situation.
• For a guide to all Early Childhood Education credentials required across Canada, visit the Childcare Resource and Research Unit website, or contact your local ELCC Association for current certification requirements in your community. Additional training, certifications, specializations and registration may be required and recognized.
• The Ontario Ministry of Education has produced a guidebook helpful to prospective childcare business operators: Planning and Design Guidelines for Licensed Child Care Centres (2022).

Help Your Startup Daycare Business to Thrive: Get Insurance

A detailed blueprint or plan will make it easier to get your daycare business up and running. Be thorough in your research and preparation, and protect your assets and reputation with a daycare insurance policy as you grow your business over time.

Zensurance makes it quick and easy to get the coverage you need. Fill out our online application to get a free quote. Our licensed brokers will shop our network of over 50 insurance providers to find the coverage you need to realize your dreams and give you the confidence to thrive and grow.

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