What Is the Cost of Opening a Daycare Center?

by Karen Gardner - Updated June 26, 2018
Female teacher with preschool boys and girls learning alphabet in classroom

A daycare business can be a convenient way to earn money and take care of your own children at the same time. It can be an ideal home-based business, or you could choose to open a daycare center. But remember, running a daycare or childcare business isn’t just about playing games with kids all day. You must be truly prepared and know what to expect. Then you’ll be ready to start that successful business.

What Kind of Daycare?

Do you want to open a home daycare or would you prefer having your business in a neutral location? Home daycare centers cost less because you won't be paying rent or buying a building to house your business. But what you will do is sacrifice part of your home to the daycare business. You'll need indoor and outdoor play areas, along with learning areas and quiet areas. Opening up a childcare center costs more. You could obtain a franchise of an existing business, which will take away some of the headaches, although not the upfront costs.

Estimated Cost of Opening a Daycare

Cost estimates for starting a home-based daycare business range from $10,000 to $50,000. Daycare center franchise startups range from $59,000 to $3 million. Cost estimates for a startup daycare center that's not a franchise depend greatly on the building you choose, but a typical example of a daycare center for 76 children in a building that needs renovation is $95,000. This varies according to location and the condition of the building.

If you have some of this money up front, banks will take you more seriously when you ask to borrow the remainder of the costs. Startup costs for another sample childcare center, totaling $107,500, call for $30,000 in furniture and classroom equipment, $10,000 in kitchen improvements, $19,000 for overall building improvements, $6,000 in signs and $42,500 in working capital. Another example from Maryland for a childcare center for 97 children, infants to age 5, called for $145,500 to renovate an existing building, and $250,000 in other costs to meet state requirements.

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Take Advantage of Help

Grants and loans are available to childcare businesses. Some local businesses offer financial incentives as a way to support employee retention, and some local communities offer home providers economic support for home improvements. Consider partnering with a local business to offer onsite daycare.

The federal Child and Adult Care Food Program reimburses daycare centers for some of the costs of feeding children, and many federal and state-based grant and loan programs are available to daycare providers. The national nonprofit ChildCare Aware of Arlington, Virginia, provides many resources for potential daycare providers, including sample budgets and sources for grants and loans.

Opening a Childcare Center

When you open a childcare center, you must be licensed. Rules for licensing vary considerably by state. You will need to pay licensing and training fees, and consider utility, food, insurance, activity and game costs. You will likely also need training, ranging from a childcare course at a community college to an associate’s degree in early childhood education. You must have the right first aid and CPR certifications, and SIDS (Sudden Infant Death Syndrome) prevention training.

A daycare center will have more rules than a home-based daycare. You will most likely need to serve many children to make your business profitable, with the right staff-to-child ratio. You’ll need to find a good location, possibly near a large neighborhood or on a commuter route, and hire well-trained staff. To keep costs down, consider locating in a church or a community center. A certain amount of indoor and fenced-in outdoor play areas are required, and you may also need a commercial kitchen, office equipment and a diaper-changing station. The plumbing must be in good shape, and the electrical work must be safe and updated. You’ll need playground equipment and parking areas for convenient drop-off and pickup.

Home-Based Daycare

The advantage to home-based daycare is the lack of commuting, fairly low startup costs and the ability to set your own hours. You may want to start out by offering babysitting services for friends or relatives on an as-needed basis to be sure this is what you want to do. If that goes well, then check into your state's licensing requirements for starting your own home-based daycare. You'll have lots of requirements to meet, but they're not as extensive as those for a daycare center. Make sure your zoning allows for home-based daycare. Your home will be inspected, and you’ll need a fire safety check and a background check.

Check into the resources provided by your state or locality. For example, the Maryland Family Network offers a step-by-step guide to opening a home-based daycare, from start-up budget costs to marketing. If you know the upfront challenges of opening a daycare business, you will be able to focus most of your energy on the children themselves, rather than associated costs.

About the Author

Karen Gardner is a former features editor and reporter, and is now a freelance writer in Maryland. She enjoys writing about small businesses and discovering the entrepreneurial spirit that helps them succeed.

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