Checklist for Starting a Daycare Business
Choosing the Location In Home Daycare or Childcare Center
Nov 16, 2009 Jennifer Harshman
Running a daycare is a business opportunity that appeals to many, including parents and grandparents. Before researching business license requirements, and even before deciding whether or not to start a daycare, there are several things to consider.
Where to Start a Business – In-Home Daycare or a Separate Daycare Center
According to the Illinois Department of Child and Family Services (DCFS), licensed daycare homes outnumber licensed daycare centers by 4 to 1. Both arrangements carry tax advantages, but a separate center means added expense. A potential daycare owner already pays rent or mortgage, utilities and other housing costs.
It also means that the person doesn’t have to go any farther than his or her own front door to go to work. Some clients also prefer to have their children in the comfortable atmosphere of a home, finding daycare centers to be too cold and impersonal.
Judy Hager is a mother who had wanted to stay home with her youngest son, Gabriel, whom she had late in her life. She felt forced to return to work when Gabriel was a toddler, and she was admittedly more particular about where to send her son than most parents would be. Gabriel would be her last child, and she wanted to do everything right.
Mrs. Hager explained her reasons for being so cautions in an interview with a Suite101.com writer on December 20, 2004, and listed what she had looked for in a childcare arrangement. Her son's safety, the high caliber of care, and the warm atmosphere were the top reasons she sought out an in-home provider instead of sending her son to a daycare center. "The centers I looked at... no way. I want Gabe to feel like he's going to his aunt's house, somewhere where he'll be loved and taken care of, not someplace where they might not even notice him."
Starting a Business Brings Tax Benefits and Tax Deductions
Having a daycare in the home equals tax benefits. It means being able to tax deduct a portion of those bills that one is already paying each month. Having it in a separate center also provides some tax deductions, but locating the daycare in a separate daycare center has other advantages.
Separating work and home environments appeals to some. Some clients prefer a separate center because they find a daycare center to be more professional than a home environment, believing that this increases the chances of having superior care.
Whether to Start a Licensed Daycare or an Unlicensed Childcare Home
Each option has its pros and cons. Being licensed is an indication that the business complies with minimum standards, but it is not a guarantee of compliance, nor does it prove that a particular location is a good place for children to be.
Some parents list being licensed as a requirement for any location that they will consider when looking for childcare. Some parents recognize that a provider can be both of high caliber and unlicensed. Whether licensed or not, excellent care is paramount.
Even if a childcare provider doesn’t wish to be licensed (and there are legitimate reasons not to be licensed), knowing and meeting the licensing requirements can be a good idea. Most of the regulations concern the health and safety of children and the provider, and following those rules are in everyone's best interest.
Whether to Run Business Alone or Hire Childcare Assistant
Hiring an assistant may be a desirable option for those who are licensed, because it means that they can enroll more children, and thus bring in more money in fees. The decision to expand the daycare and hire an assistant may depend on the provider's energy level. Even with an assistant, enrolling more children means more work.
Both Illinois and Missouri licensing agencies limit those who decide not to be licensed to having four or fewer children. Four or fewer children would not provide enough income to pay an employee. Unlicensed providers most likely would not be able to afford to pay employees.
How Much to Charge Daycare Clients
Daycare rates are set by individual providers, according to materials put out by the governing agencies in Illinois and Missouri. A daycare business may charge whatever the local market will bear.
Childcare providers who participate in the state-paid childcare programs of Illinois and Missouri may also charge clients whatever they desire, but they may not charge state-paid clients any more than they charge private-pay clients. Doing so is against DCFS program regulations and would constitute fraud.
How much to charge for babysitting is a question every potential childcare service provider must address. One way to get a feel for how much to charge is to ask local providers. Readers can check the websites of local daycare centers, or call providers and ask about the weekly cost for childcare at different ages:
- A six-month old infant
- A two-year old who is not potty trained
- A two-year old who is potty trained
- After-school care (some include before-school care in the cost) for a school-aged child
Daycare Hours of Operation – What Time to Be Open for Business
Childcare providers likely will want to offer care hours that are good for working parents, such as during office hours, or from 8:00 AM to 6:00 PM. More children need to be cared for during those times than at other times. Some don't fit in that category, however.
Some parents need childcare during hours that daycare centers and other providers are closed. An in-home provider may want to take advantage of that fact and offer care during alternative hours, which could mean making more money and doing less work.
When planning a childcare business, entrepreneurs should keep in mind what type (licensed or unlicensed), location (in home or separate center), rates (how much to charge), and hours of operation (office hours or night shift). Those who make the correct decisions for their particular situations will have a better chance for success as a daycare provider.
Resources:
Illinois DCFS Summary of Licensing Standards for Day Care Homes (PDF file).
Missouri Department of Social Services Programs and Services for Children, materials for potential in-home daycare providers.
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