How to Start a Daycare Business Plan

Build an Expert-Level Daycare Business Plan: How to Get Started

The childcare industry is full of passionate, hard-working individuals. Entrepreneurs just like you are starting a daycare from the ground up. In this guide, you'll find guidance and templates to build a solid daycare business plan.

What Is a Daycare Business and Why Should I Start One?

Daycare businesses have been projected to have some of the fastest employment growth of all industries. Starting a daycare is a great opportunity for aspiring business owners passionate about early childhood education and child development.

‘Daycare’ is an umbrella term for various childcare options (such as Montessori, head start programs, preschool, and more) where parents and guardians drop their children off and leave them in your care to:

• ​Socialize with other children in their age group
• ​Learn basic fundamentals for future academic success
• ​Reach important developmental milestones

Is Starting a Daycare Business Worth It?

Starting a childcare business or franchise is profitable, emotionally rewarding, and sustainable. The need for committed childcare entrepreneurs has never been greater. As of 2021, there were over 850,000 childcare centers in the United States. The growing popularity of childcare centers comes from the demand—parents will always need care for their kids, and there’s a necessity to socialize children in an environment that fosters development.

Types of Daycare Providers

1. 1.In-home daycare
2. 2.Relative care
3. 3.Preschool
4. 4.Independently-owned daycare
5. 5.Daycare franchises

The Difference Between Individual Centers and Franchises

An independently-owned daycare typically has an individual owner, a center director, and possibly a few other administrative staff members, along with teachers, cooks, bus drivers, etc. The owner is usually an individual who invests their own money and savings into opening the daycare, so all business rights (name, branding, etc.) belong to them.

A daycare franchise falls under a corporate brand that has made an agreement with an individual to legally establish a business using the company’s brand or trademark. The franchisee pays an initial fee and ongoing royalties to the franchisor, gaining the use of a trademark, support, and the right to use the franchisor's business system. This model can be beneficial for those passionate about early childhood education but unsure how to get started on their own.

Daycare Franchise Terms

1. 1.Franchisor: A daycare company that provides its services, brand, and business operations to the individual (franchise system).
2. 2.Franchisee: An individual owner supported by the company (franchisor). Buying into a daycare franchise makes you the franchisee.
3. 3.Franchise: The legal agreement between the company and the franchisee.
4. 4.Franchise disclosure document: The legally binding contract between the company and the individual.

Proactive Tips Before Starting Your Daycare Business: Essential Planning Steps

1) Conduct Market Research

Conducting regular market research improves customer retention and increases the likelihood of revenue growth. Market research evaluates consumer behavior, competitor habits, and industry trends to determine the viability of your center and build a foundation for future business operations.

There are various digital tools available for market research, such as Survey Monkey, Attest, and Sprinklr.

2) Determine Your Target Market

A market segment is a group of consumers that could potentially enroll at your childcare center. Identify your daycare target market segments and determine the size of each segment. Avoid defining your market as “everyone in your community.” Instead, focus on specific segments to communicate effectively with your ideal customers.

A common strategy is to use the TAM, SAM, and SOM approaches:

• ​TAM (Total Available/Addressable Market): Everyone you wish to reach (e.g., your entire local community).
• ​SAM (Segmented Addressable Market/Served Available Market): A portion of the TAM you will specifically target (e.g., families with young children).
• ​SOM (Share of the Market): The group of your SAM you will realistically reach, especially in the first few years (e.g., families with young children who make at least $65,000 each year in household income).

Standardizing business processes across franchise locations ensures a consistent, high-quality experience for families, leading to higher conversion success and profitability.

3) Develop Your Buyer Personas

Before writing your daycare marketing plan, define your market and buyer personas. Audience personas help you understand your customers’ motivations and how to communicate with them effectively.

Steps to develop buyer personas:

1. 1.List the various programs and classes you’d like to offer.
2. 2.Determine the primary decision-maker and influencers for each scenario.
   • ​Primary decision-maker: Typically the individual(s) taking financial responsibility.
   • ​Primary influencers: Those who can sway decision-makers (e.g., children influencing summer camp choices).

Audience Overview

List the audiences, personas, or segments that you want your center’s marketing and messaging efforts to reach. Select one audience and describe it, considering motivations and behavior. Identify the key stages in your audience’s enrollment journey: awareness, consideration, action, and advocacy.

Decision Journey Map Terms & Definitions

• ​Stage: Each stage of the enrollment journey—awareness, consideration, action, and advocacy.
• ​Awareness: When a family first learns of your center and brand.
• ​Consideration: When a family is touring your center and deciding between providers.
• ​Action: When a parent decides to register their child for care.
• ​Advocacy: When a satisfied parent becomes an advocate for your business.
• ​Emotion: What the persona is feeling at each stage.
• ​Key Actions: Actions a consumer takes at each stage.
• ​Questions: Questions the consumer is asking at each stage.

Assess Your Competition

Competitive research helps you understand why customers choose your center over others. Look up similar daycare centers in your area, see what programs they offer, their facilities, capacity, and curriculum. Highlight the features that make your center stand out and showcase your selling points in all marketing and advertising efforts.

Key questions to consider:

1. 1.Who are my direct competitors and what do they offer?
2. 2.Who are my indirect competitors?
3. 3.What does my competition's pricing look like?
4. 4.Do they offer promotional pricing or payment plans?
5. 5.What do they do best?
6. 6.What do they do poorly?

How to Start Your Daycare Business

1) Build a Daycare Business Plan

A good business plan will guide you through each stage of starting and managing your childcare organization, including how to structure, run, and grow your new business. Identify your business objectives and use this document as a roadmap for achieving your goals.

A strong business plan can help you recruit investors, gain funding, or find new partners. Prospective investors want to feel confident they’ll see a return on their investment, and your business plan is the perfect tool to assure them.

Write a Day Care Executive Summary (Daycare Business Plan Outline)

Although this section is the first thing people will read, it’s advised to write it last, once you know the details of your business. The executive summary should be clear and concise, covering only the essential components of your daycare in one to two pages. It should include:

1. 1.The city and state of your center
2. 2.A potential open date
3. 3.A projected enrollment count
4. 4.Programs you plan to offer
5. 5.Ages you hope to serve
6. 6.A quick financial summary (based on grants, funding, and potential revenue from projected enrollments)

Conduct an Opportunity Analysis

The opportunity section of your business plan includes information about:

1. 1.The problem you’re solving within your community
2. 2.Programs and classrooms you plan to market
3. 3.How your daycare facility fits into the existing competitive landscape

Opportunity Analysis: An Example

• ​Strengths: What are we doing well? Which programs make us stand out? Which facilities are a selling point?
• ​Weaknesses: Is our value proposition lacking clarity? What can we improve? Which stages of our enrollment pipeline aren't performing well?
• ​Opportunities: How can we expand our reach? Which childcare software can help us grow? Is our daycare a competitive solution that parents trust?
• ​Threats: Have our conversion rates decreased? Are there new daycare competitors in our area? Have we received any negative feedback from families?

The opportunity analysis outlines what distinguishes your daycare from competitors and details how you can expand and grow your center in the future. Use your competitive research to determine your daycare business’s competitive advantage and position. Analyze potential strengths, weaknesses, opportunities, and threats.

Problem and Solution

Describe the problem you are solving for your customers. Childcare centers are need-oriented, meaning your consumers have tangible pain points that you must resolve to be successful.

• ​What is the primary pain point for them? (e.g., busy, working parents need a caring, safe place for their child during the day; families seeking after-school care; parents needing 24-hour childcare options)
• ​Assess how they are solving their problems currently and where there’s room for improvement.

Defining the problem you are solving for your customers is the most critical element of your business plan and is crucial for your daycare business’ success. Conduct surveys with potential customers to validate their needs and pitch your potential solution to see if it’s a good fit.