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Tips for Writing a Successful Business Plan for a Daycare Center

November 30, 2021
By James Gussie

With the help of a business plan, you can get your idea off the ground and make it come to life. Here are some tips for putting together an effective document that will help you start building your daycare center.

A business plan is a document that outlines the goals, strategies and financials of a business. It can be used as an idea to start a business or as a way to find funding for your new venture. The “day care business plan examples” will help you create your own daycare center with ease.

It might be difficult to come up with a business strategy for your childcare company. There are numerous expenditures to consider—much more than you would expect! Estimating projected enrollment increase and market demand might also be difficult.

There are several things to be gained, ranging from understanding your competitors to selecting the best location for your childcare business. I know the tactics and approaches that work when it comes to establishing a strong business plan for a daycare center since I run eight successful daycares in the Chicago region.

A company strategy should include the next three to five years. As you go ahead, it will act as a cornerstone of your vision. Your childcare center business plan should be well-thought-out and well-analyzed, as it will pay off handsomely in the end.

Table of Contents

Here are a few questions to have in the back of your head:

Who will be served by your childcare center?
What distinguishes you from the competition?
How are you going to develop?

What distinguishes your childcare facility from others?

To begin, provide a brief description of your childcare facility. You should examine all of the elements of your company model. This description should essentially serve as an elevator pitch for possible business partners and investors to get enthusiastic about what you’re providing as well as your unique location, philosophy, and approach.

What is the foundation of your curriculum? What criteria will you utilize to hire new employees? Describe the market and how you’re meeting demand. Make a list of specific data and qualities of the area where you’ll open your childcare facility that make it stand out. Real estate websites such as Loopnet and Zillow often provide demographic assessments of areas; commercial properties generally have the most detailed information. You’re in excellent position if the region surrounding your upcoming childcare facility has 3,000 children under the age of five and just two daycare facilities to serve them.

Make sure to pay extra attention to what sets you distinct while creating your business description. Perhaps it’s your ideal location, prior experience founding or assisting in the start-up of a daycare center, connections with top-notch personnel ready to work for your daycare center, or other unique tools or services you can provide that set you apart from the competition.

Conduct a thorough market study.

The next step is to do a market study. Investigate the daycare industry’s statistics: how large is it? In the next five years, how much do economists and analysts expect it to grow?

What is the size of your target market?

There are useful tools, such as this market research guide from the US Small Business Administration, for precise information on the size of your major market.

What is the demographic of your target market? Specify who you’re aiming for. As I indicated above, using some of the information from real estate websites might be a useful method. Is the median age of the people in your childcare center’s neighborhood, for example, fairly young or pretty old? Are you a resident of a neighboring city’s bedroom community? Make a list of how your daycare will assist these various types of parents.

Also consider the following: Do you live in a region with a lot of seasonal jobs, where the labor and population diminishes in the winter and explodes in the summer? Whether you like it or not, this will have an impact on your income and enrollment, particularly if you provide part-time care.

What kind of business model do you have?

Not only should you analyze your market, but you should also take notice of your pricing structure, gross margin levels, and other aspects of your company strategy. Will you provide lower-income parents discounts or accept government-subsidized or reduced payments? What kind of daycare discount will you provide to your employees?

There are useful resources, like as this guide from IBISWorld, for comprehensive information on the size of your main market. The U.S. Bureau of Labor Statistics predicts childcare to be one of the fastest expanding businesses in the next several years, according to this interesting piece from Forbes.

Agreements on location and renting

Keep an eye out for the obvious: What is your town’s, city’s, and state’s square-foot-per-child requirement, and what is the price-per-square-foot of the daycare facility you want to lease? These two truths are critical in developing a strong company strategy. The younger the children, the more square feet they will need (i.e. toddlers get more square feet than preschoolers).

Take into consideration elements like the inward arc of a door’s swing and needed sinks when calculating square footage. When estimating the needed square footage for the classroom sizes you desire, always allow at least 10% breathing space.

Also, try to use at least 60% to 80% of your childcare center’s space for classrooms. Other areas will be utilized for office space, corridors, needed sinks, foyers, and so on, but you should use at least 60% of the space for classrooms since that’s where the money is made.

Let’s say that each student in a classroom requires 35 square feet, with a maximum classroom size of 20. That implies you’ll require at least 700 square feet of classroom space (20 multiplied by 35). However, as previously said, you should give 20% to 40% breathing space (for things like door swing radius, necessary baby changing tables, required sinks, and future construction adjustments), thus you should have a room larger than 700 square feet.

In your business strategy, make a note of the lease details and try to negotiate free months of rent with your landlord. It might take up to a year to open a new daycare due to building build-outs, permits, licensing, and other variables. Tell the landlord about it. They’re looking for a long-term renter. Consider signing a longer lease in exchange for a few months free or a landlord’s build-out investment.

In exchange for a higher security deposit or more monthly payments, the landlord may agree to delay rent. Requesting free months demonstrates that you are a skilled negotiator who is serious about his company and has a long-term profit objective in mind.

Another item to keep an eye on with monthly rent is the additional fees. Let’s say your facility is 5,000 square feet and your pricing is $20 per square foot. This comes to a total of $100,000. Divide that number by 12 to arrive at your monthly rent of $8,333. Make sure you know if the rate is gross or net.

Everything is included in gross, however the following are excluded from net:

Taxes on real estate
Utilities
Insurance for landlords
Fees for common area upkeep
Various additional fees

There are few more questions to answer.

How many children live in the vicinity of your daycare facility, and how many childcare facilities are there to serve them?

Consider a typical childcare establishment in a city with 100 children enrolled. If a community contains 2,000 children, there is still capacity for a few childcare facilities to meet demand, assuming that 10% to 20% of parents would enroll their children in daycare.

Good daycare is in great demand in the United States and many other nations right now. You’ll probably be in demand whether you’re in the city or out in the country, but you should still run the numbers before the contractors start working.

Who are your main rivals?

What percentage of the market do they control? What makes them powerful, and what are their flaws? Are there any more general hurdles to your success, such as increased regulatory constraints in your state or a scarcity of fairly priced leases to pick from?

In the daycare business, there are several regulatory regulations (many! ), so bear this in mind when considering expenditures. It’s impossible to keep track of everything!

Keep in mind the following:

Understanding the specifics of your building’s zoning
coordinating utilities and rubbish collection
Possessing the necessary playground
Sinks
Shelving
Supplies
Cribs are a kind of crib (for infant room)
Meeting the criteria for daylight in each classroom
From the center, there are two egress locations.
Kitchen with three-compartment sink and grease trap is up to code.
A fire alarm system is connected to a central station.
Security system with a buzzer
standards for parking
Fees for maintenance and repairs

From the start of the procedure, you’ll engage with a daycare licensing representative from your town or city. They will assist you in navigating the regulatory procedure (you must adhere to both local and state standards), but it is still your obligation to keep track of all charges associated with the regulations and requirements.

Who will be in charge of your childcare center?

The structure and administration of your childcare facility should be next on your agenda. What are the names of the director and assistant director? What are the specifics of your ownership structure, board of directors, investor list, and business partners, for example?

Make a list of everyone on your team’s duties and roles. If you have an advisory board, make a list of all staff salaries, incentives, referral bonuses for recruitment, and other pertinent information. You should also be clear about the legal structure of your company in terms of incorporation, partnership type (I suggest a passive partnership), and other similar details in this section of your business plan.

All ownership percentages, investment information, stock information, and so on should be provided. The historical track record, education, and distinctive talents of personnel, directors, investors, and board members should all be included in their profiles.

What marketing strategy do you have in mind?

Your marketing strategy should come after your organizational specifics. Here, cost-effective marketing methods are the name of the game.

Make contact with your target market.

There is no one-size-fits-all approach, but I suggest thinking about who your target demographic is and tailoring your marketing appropriately. In my instance, I had remarkable success with a marketing strategy in which I placed advertisements on the infant seats of supermarket carts near my childcare facility.

Don’t be vague.

Know who your target market is and what they’re searching for, and then show them how you can help them.

Your marketing plan should include how you’ll describe your childcare center’s distinctive characteristics, how you’ll expand, what marketing personnel, if any, you’ll recruit, and what tactics you’ll utilize, such as internet advertisements, brochures, and billboards. A great marketing strategy can assist you in determining your sales approach.

Have a fundraising strategy in place.

When writing your childcare center’s business plan, you’ll also want to consider where you’ll get your cash.

A financing proposal should include the following information:

How much do you need now and over the next three to five years?
What will the funds be used for?
Any benefits you negotiated with a landlord, such as free months of rent, that demonstrate the feasibility of your concept
Future scenarios, such as a buyout, the sale of the company, and so on

Forecasted revenue, estimated enrollment growth, balance sheets, cash flow statements, and projected/needed capital expenditures should all be included in your financial predictions.

Estimated expenses

Keep in mind that when your enrollment grows, you’ll need additional personnel to fulfill the appropriate student-to-teacher ratios. When you have more children enrolled, you’ll also need more food and supplies.

Many factors must be considered when making financial estimates, including:

Tuition
Fees for registration
Fees for waiting on the list
The expense of construction
Salaries
The expense of a staff appreciation day
The cost of software
Costs of supply
The expense of training
Costs of utilities
Costs of marketing
Charges for bank services
Costs of a nursing consultant on a monthly basis
Insurance
Daycare items for the inside, including clocks, file cabinets, and computers
Costs of an accountant and a lawyer

You’ll be in the red when you initially open your daycare. Starting a daycare is expensive, and it takes time to get up and running, as I previously said. This is very normal. After six to twelve months of operation, you should start seeing profits.

Capital expenditures

The list of capital expenses is broad, ranging from monthly rent and utilities to the aforementioned personnel, building, maintenance, and supply costs. Even more products may be found by digging further into these categories. Towels, cubbies, cribs, and toys are all necessities for infants. Crayons, toys, little seats, art tools, and other items are required for preschoolers. Make a list of everything that comes to mind, and then add additional anticipated costs.

For building, you’ll need to figure out how much it will cost to:

Demolition
Framing
Drywall
Electrical
Plumbing
Heating, ventilation, and air conditioning (HVAC) systems, as well as duct
Finishing touches and baseboards
Doors on the inside
System with a buzzer

Get a few quotes from contractors and tradespeople for the project so you know how much it will cost. Remember to account for architectural costs as well as the cost of heating, electricity, and utilities during the months when the daycare is closed while contractors are working on it.

Obtaining loans

You’ll need to use the profits from another firm you own to secure a bank loan for a new childcare facility. However, I encourage looking into SBA loans since they may be stand-alone depending on the feasibility of your company concept. An SBA loan may be available if you are purchasing a company.

For example, if you pay $500,000 for someone’s current daycare and must put down an usual 20% down payment ($100,000), you may use an SBA loan to fund the balance. You’ll need a great business plan and decent credit, but an SBA loan offers the benefit of not requiring collateral from your other sources of income.

Investor funding is available.

Of course, finding investors is another way to get money. Some individuals seek help from family, friends, or coworkers. I would advise sticking to work and ignoring family and friends. Case you choose this way, make sure you have a good paper record to refer to if things go wrong down the line.

Partnerships in business

When looking for a partner, look for someone who is enthusiastic about your goal but lacks the time or motivation to participate directly. A passive partnership is one in which one partner makes an investment while the other runs the company.

The repayment plan you choose will be determined by your specific circumstances. For example, if an investor or investors give me cash up front for my financial projection that my daycare center will make $200,000 per year after several years, I will repay them 50/50, which means one investor will receive $100,000 per year once the income target is met, two investors will receive one-third each, and so on.

Add an appendix with supporting paperwork once you’ve addressed finance and expenditures in your business plan. Keep a copy on hand for potential investors to review.

You may add the following in your appendix:

History of credit
Resumes
Letters of recommendation
Your market analysis’ backup information and sources
Permits and licenses
Documents of legal significance
A copy of the leasing agreement
Permits for construction
Contracts for utilities, maintenance, building, and plumbing, among other things
Make a list of all the people who work for your daycare, such as accountants, attorneys, and consultants.

Make an executive summary.

Finally, draft your executive summary. When it comes to beginning a childcare facility, there’s only so much you can learn until you’ve been in business for many years. You may, however, write a lot about your company’s mission and strategy, your personal history and motives for opening the childcare facility, and your estimates for future growth and consumer demands.

Finally, if you give excellent service and have a business strategy that anticipates the demands of clients and children, you will have a major success in opening a daycare center!

Watch This Video-

A daycare business plan is an important document for any business. It is a guide that can help you make decisions, and it will also help you to create the perfect environment for your children. Reference: daycare business plan doc.

Frequently Asked Questions

How do I write a business plan for a daycare?

A: The process of writing a business plan for daycare is very different than the process followed in other industries. Typically, you would need to speak with an attorney or financial advisor before creating plans that can support your project.

What makes a childcare center successful?

A: A childcare center is a business that provides care for children. In order to be successful, it must have enough funding and financial support from the government or other institutions in order to sustain itself.

How do you plan a daycare?

A: To plan a daycare, you must first determine what your needs are. Are there children that need to be picked up from school or will they all be able to walk? What is the daily routine of the kids in question? These are only some questions you should ask yourself before planning for how many days per week and which hours each day.