Starting a small scale daycare facility that can only accommodate a minimal number of children per–time in just one location in the United States of America will cost about $100,000 to $250,000.
It is important to know that several factors can determine the actual cost of launching this type of business. The truth is that some of the factors may not apply to you, because the business model and the kind of business a person wants to build would also affect the overall cost of the business
Estimated Cost Breakdown for Opening a Daycare
These are the key expenses you are expected to make when starting a medium scale but standard Daycare facility business in the United States of America;
- The total fee for registering the business in the United States of America – $750.
- Legal expenses for obtaining licenses and permits (Health department license and business license) and permits (Fire department permit, Air and water pollution control permit, Sign permit et al) as well as accounting services (CRM software, Payroll software, P.O.S machines and other software) – $15,300.
- Marketing promotion expenses for the grand opening of the Daycare facility in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
- The cost for hiring a business consultant (including writing business plan) – $2,500.
- The cost for insurance (general liability, theft, workers’ compensation and property casualty) coverage at a total premium – $30,400.
- The cost for leasing a standard facility in a good, centralized and serene location – $350,000.
- The cost for remodeling the facility – $100,000.
- Other start-up expenses including stationery ($500), phone and utility (gas, sewer, water and electric) deposits – ($6,500).
- The operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000.
- The cost for start-up inventory and equipment (Stocking with a wide range of products such as toiletries, flannels, blankets and toys, and staff uniform et al) – $150,000.
- The cost for store equipment (cash register, security, ventilation, signage) – $13,750
- The cost of purchase and installation of CCTVs: $5,500
- The cost for the purchase of furniture and gadgets (Cots, First Aid Kits, Telephone, fax machine, printing machines, computers, flat screen TV, DVD players, tables and chairs et al) – $25,000.
- The cost for building and hosting a website – $600.
- The cost for opening party – $8,000.
- Miscellaneous – $10,000.
You will need an estimate of seven hundred and fifty thousand Dollars ($750,000) to successfully set up a medium scale but standard daycare facility business in the United States of America.
Note that this amount includes the salaries of all the staff for the first 3 months of operation and a business with the potential of owning more than one outlet in key locations within same region.
When it comes to starting a standard and large scale daycare facility business with several facilities in key cities in the United States of America, a daycare facility that can accommodate over twenty children per-time and a daycare facility business with the intention of selling franchise and also offering complimentary services, then you should look towards budgeting well over two million, five hundred thousand dollars ($2.5 million).
3-Year Sales Forecast and Breakeven Analysis
Revenue Streams:
- Tuition Fees: Primary source of revenue from monthly fees charged per child.
- Additional Services: Includes early drop-off, late pick-up, special activities, and summer camps.
Pricing and Enrollment:
- Average Monthly Fee Per Child: $800.
- Initial Enrollment: Assume capacity for 50 children but starting with 70% occupancy, that is 35 children.
Growth Rate:
- Annual Growth in Enrollment and Fees: 5% increase in fees and 10% increase in enrollment capacity and utilization due to increasing demand and reputation.
Operating Costs:
- Fixed Cost: Rent, utilities, insurance, licensing fees, and marketing, estimated at $150,000 annually.
- Variable Cost: Food, supplies, field trips, and part-time wages, estimated at 20% of revenue.
Year 1:
- Revenue: 35 children × $800 per month × 12 months = $336,000.
- Variable Costs: 20% of $336,000 = $67,200.
- Total Costs: $67,200 (variable) + $150,000 (fixed) = $217,200.
- Profit: $336,000 – $217,200 = $118,800.
Year 2:
- Enrollment Increase: 35 children + 10% = 39 children.
- Fee Increase: $800 + 5% = $840.
- Revenue: 39 children × $840 per month × 12 months = $392,880.
- Variable Costs: 20% of $392,880 = $78,576.
- Total Costs: $78,576 (variable) + $150,000 (fixed) = $228,576.
- Profit: $392,880 – $228,576 = $164,304.
Year 3:
- Enrollment Increase: 39 children + 10% = 43 children.
- Fee Increase: $840 + 5% = $882.
- Revenue: 43 children × $882 per month × 12 months = $454,152.
- Variable Costs: 20% of $454,152 = $90,830.40.
- Total Costs: $90,830.40 (variable) + $150,000 (fixed) = $240,830.40.
- Profit: $454,152 – $240,830.40 = $213,321.60.
Break-Even Point
- Revenue per Dollar: $1.
- Variable Cost Ratio: 20%.
Contribution Margin per Dollar of Revenue: $1 – $0.20 = $0.80.
Fixed Cost: $150,000 annually.
Breakeven Revenue = Fixed Cost ÷ Contribution Margin
: = 150,000 ÷ 0.80
Breakeven Revenue = $187,500
From the calculation above, your daycare needs to generate approximately $187,500 in annual revenue to break even. Based on the forecast, the business will comfortably exceed this revenue in the first year and continue to grow profitability in the subsequent years, suggesting a viable and successful business operation.
Factors That Determine the Cost of Opening a Daycare
1. The Type of Daycare Center
A major factor that will determine the overall cost of opening a daycare center in the United States of America is the type of daycare center in question.
There are different types (niche ideas) of daycare centers and they are; Child Care Centre or Long Day Care, Family Day Care, Preschool/Kindergarten/Prep, Before/After School Care or Outside School Hours Care, Occasional, Flexible or Casual Care Services and In – Home Care et al.
You will quite agree that the cost put into opening a childcare center or long day care will be different from the cost of opening an in – home care service.
This is because a child care center or long day care is expected to put structures in place that will conform to what is expected by the city council office regulating daycare centers whereas an in – home care service may not require such facilities.
In-home care service is a flexible form of child care where care is provided in the child’s home by an approved carer. In-home care is available for families who do not use a standard child care service, or where their child care needs cannot be met by an existing service.
Of course, the fact that a child care center or long day care operates from their own facility, has loads of staff members and pay more utility bills means that the cost of opening such business will be more expensive.
2. The Choice of Location
In business, location is key part of what determines the success of the business. There are business consultants cum realtors who are specialized in helping people choose an ideal location for their type of business; a location that will guarantee them to profitability within the shortest time frame.
So, you will agree that location can influence the cost of starting a daycare center in the United States of America. Renting or leasing a daycare facility in a location that is off the city center or off residential areas will be less expensive when compared to renting or leasing a daycare center facility in a well – populated and growing residential estate; a location in a cozy and serene environment.
3. The Required Licenses and Permits
In the United States of America, you cannot open a daycare center without first applying for the mandatory licenses and permits. You would need CDA license, building license, zonal permits, and signage permits amongst others.
These license and permits cost money and it will influence the overall cost of opening your daycare center. Please note that there may be several inspections you must pass before you can be issued your licenses and permits and this will also cost you money.
Obtaining a CDA license alone will you cost about $500. In order to get the overall cost of licensing and permits associated with opening a new daycare center in the United States, we will advise that you reach out to your city government.
You also need to consider state and federal requirements. For example, in California, licensing of child care businesses is handled through the Child Care Licensing Division (CCLD) of the Department of Social Services (DSS).
4. The Type of Facility
The type of facility you want to run your daycare center business from is also a major factor that will determine the overall cost of opening a daycare center business in the United States of America. You have the option of renting, leasing or constructing your own daycare center facility from the scratch.
When renting and leasing a facility, you might just have to spend extra to modify the facility to fit into what you have in mind and the number of offices, playing space and baby and children rooms you want to have in your daycare center facility, but there is a limit to how far you can go and it will be dependent on what the landlord of the facility wants.
Let us assume that you want to construct your daycare center facility from the scratch. It means that you will buy the land or a property, construct and equip the daycare facility to fit into what you have in mind. You will agree that you are going to spend way more when compared to renting or leasing a facility.
5. Additional Services Offerings
Another key factor that will determine the cost of opening and operating a daycare center in the United States of America is the additional service offerings of the daycare center.
The fact that there are different types of daycare centers means that these centers are designed to offer different services. For example, Occasional, Flexible or Casual Care Services provide short periods of care for children under school age.
Families can access Occasional, Flexible or Casual Care on either a regular or casual basis. You will agree that they are expected spend less to set up the business whereas a standard daycare center that offer drops off and pick-up of children will spend extra to purchase comfortable buses and also to fuel and maintain the buses.
6. The Number of Babies or Children They Want Admit
Another very important factor that determine the cost of opening a daycare center in the United States of America is the number of children and babies they intend accommodating or admitting per time. No doubt, there are standard daycare centers that have the capacity to accommodate over 50 babies per time and there are centers that can only accommodate less than 10 babies per time.
Aside from the cost of renting or leasing the facility to can accommodate the babies, it will also cost you more to furnish and equip the daycare center, and the more the number of children and babies in your daycare center can accommodate, the more the money that you are expected to spend to set up and run the business.
7. The Cost of Hiring and Paying a Business Consultant and Attorney
If you want to get your business started on the right foundation, it will be a wise decision to hire the services of a competent business consultant and perhaps an attorney. A business consultant will help with drafting a workable daycare business plan, a marketing plan and strategy, comprehensive SWOT analysis, and other advisory services.
An attorney will help you with registering the business, drafting contract documents and offer you all the legal expertise that will help you start the business on the right foundation. These services will cost you money and it will indeed influence the overall cost of opening a daycare center in the United States of America.
8. The Cost for Branding, Promotion and Marketing of the Daycare Center
The cost for branding, promoting and marketing the daycare center is yet another key factor that will determine the overall cost of opening a daycare center in the United States. If you need massive results as it relates to competing and winning a fair share of the available market in your city, then you must be willing to pay for effective branding, promotion and marketing of your new daycare center.
As a matter of fact, it is not cheap to come by an expert in branding, promotion and marketing that will help you compete with brands that are already determining the market direction in your city. So, if you add the cost of paying a branding and marketing expert, it will sure increase the cost of opening your daycare center.
9. The Cost for Furnishing and Equipping the Daycare Center
Another very important factor that will determine the cost of opening a daycare center is the cost for furnishing and equipping the facility. You will quite agree that aside from the basic facilities that are found in a daycare center, an investor may decide to spend more than expected to furnish and equip the center to look unique.
Before you can open a daycare center, you should buy baby cots, mattresses and pillows, bedsheets and pillowcases mats, toys, children chairs and tables, projectors, flat screen TVs, sound system,
DVD players, Satellite dish and decoder, office furniture (table, stools and sofas), drawers and cabinets, child lock gate, telephones, filing cabinets), office equipment (cash register, security and fire alarm and protection gadgets, CCTV, ventilation, signage), and fancy lightening amongst others.
All these will cost money and it will influence the overall cost of opening a daycare center in the United States of America.
10. The Cost of Insurance
Paying for insurance is yet another important factor that will determine the overall cost of opening a daycare center in the United States of America. In the United States, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from.
Thus, it is imperative to create a budget for insurance policy cover and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your own daycare center business.
11. The Cost for Registering the Business
Registering the daycare center business is yet another cost that will influence the overall cost of opening a daycare center in the United States of America. Although the cost of registering a business is affordable, it will no doubt add to the overall cost of opening your daycare center in the United States of America.
12. Source of Your Supplies and Ongoing Expenses
Another major factor that will determine the cost of opening a daycare center in the United States of America is the source of your supplies.
For example, if you have access to manufacturers of the type of toiletries that you need, it will sure cut down the cost of running the daycare center as against buying your toiletries from retailers. So also, if you have an in-house cook that cooks food for the daycare center, it will reduce the cost of food.
13. Cost of Recruiting and Training Your Staff
The fact that you are opening your daycare center as a new business means that you are expected to recruit and train your staff to conform to the kind of daycare center you want to operate. The training will help you sell the corporate culture of your organization to the new employees.
As expected, it will cost you money to hire expert trainers that will help you train and bring your new hires up to speed and that will add to the overall cost of opening a daycare center.
- Staff/Manpower
When it comes to starting a standard daycare facility business on a large scale, you would need the services of the following professionals;
- Head of The Daycare/School Coordinator
- School Administrator
- Tutors for Various Learning Areas
- Nannies/Caregivers/Aux Nurse
- Marketing and Sales Executive
- Accountant/Bursar
- Client Service Executive/Front Desk Officer
- Cleaners
- Security Officer
14. The Cost for the Purchase and Customizing of Uniforms for Your Employees
Another factor that will determine the overall cost of opening a daycare center business in the United States is the cost for the purchase and customizing of uniforms. As expected, your childminders, front desk/payment attendants and security personnel are expected to have different uniform. All these uniforms will cost you money which is why it must be part of your budget.
15. The Cost for Grand Opening of the Daycare Center
In recent times, no daycare center opens its door for business without first organizing an opening party to officially launch the business. This means that the cost of the grand opening is part of the factors that will determine the overall cost of opening a daycare center business in the United States of America.
You can choose to do a soft opening if you are operating on a low budget or you can choose to go for a grand opening party. The bottom line is that it is a cost that must be part of your budget and this cost will influence the overall cost of opening the daycare center in the United States of America.
How Much Does It Cost to Buy a Daycare Franchise?
In the United States of America, the Average Cost of Purchasing a Daycare Facility Franchise is $20,000. Examples of 3 Well – Known Daycare Facility Franchising Companies in the United States of America are;
- Children’s Lighthouse
- Kids R Kids
- All About Kids Learning Centers
Can a Daycare Business be Bootstrapped on a Lean Budget from Home?
If you are a retiree, stay at home mother or a grandma and you are looking for a small scale business that you can successfully bootstrap on a lean budget right from your home, then you should consider starting a daycare facility business.
This is possible if you have enough space in your home/compound. The truth is that people who live in residential estates find it pretty easy to set up a daycare facility business.
All you have to do is ensure that your facility meets the required standard as outlined by the regulatory authority in your council and get the required permits and license. As a matter of fact, you can start a daycare facility business with as low as five thousand dollars or even less depending on how small you want the business to be and if you already have baby cots and toys et al.
The challenge here is that you must be ready to take on more than half of the available roles in the business. You should be able to serve as the nanny, coordinator, bursar, sales and marketing officer et al.
Financing your Daycare Business
There are different ways through which you can raise startup funds for your day care business. For some raising capital can be as easy as breeze. On the other hand, others may have to struggle in order to raise it. Whatever side of the divide you may find yourself, the paramount thing is to explore some options that can help you raise your funds.
You can be lucky to have had a good saving culture. As such, you can start a day care business through funding from your savings.
There is also the option of through bank loans. There are loads of banks that are interested in funding businesses; as such you may want to capitalize on it by seeking a loan. There are some banks that require collateral, whilst there are some that do not need one.
There is also the option of angel investors, these investors are all and about looking for businesses with wonderful business plans to invest in. If you do have a great business plan that is well crafted, then you may decide to be on the lookout for angel investors who will be ready to finance your business.
However, there is one overlooked option you can consider as a daycare owner and that is government grants. Government grants are a little bit relaxed with respect to requirements and repayment structure; especially when compared to loans. If you are to consider grants, here is how to do it the right way:
5 Steps to Getting Government Grant for a Daycare Center
If you reside in the United States, some of the various grants you can access are Community Development Block Grant, Community Facilities Grant Program, Child Care Access Grant and Childcare Development Block Grant.
- Register Your Daycare, Obtain Your Business License and Ensure Your Pay Your Tax
- Study the Various Grants Available To Daycare Business Owners
- Draft a Good Business Plan and Proposal
- Position Your Daycare Center to Attract Grants
- Make Use of Loans and Grants Tools on the Internet
For whatever option you find suitable as the way to raise funds for your day care business, it is very needful that you have a well-structured plan as to how to pay back. That is assuming you are loaning some funds.