How to start a daycare

Two decisions before anything else

First: home or center. A licensed family child care program has a fraction of the entry cost, licenses faster, and is how a large share of center owners learned the business. A center serves more children, needs staff from day one and needs a building that can be licensed. There is no wrong answer and there is a wrong order — deciding this after signing a lease is expensive. The business structure is a separate choice: LLC or sole proprietorship for your daycare. If you go the home route, the home daycare license checklist lists what the inspector will walk through.

Second: your runway. How many months of payroll and rent can you pay before enrollment covers them? Four is a common answer and one is not an answer. Programs do not usually fail on the build-out; they fail in month three with half-full rooms and a full payroll.

Everything else in this guide is execution. These two are the plan.

Research the license, not the market

Attend your state's pre-licensing orientation first. Several states — California states it plainly — will not accept an application until you have. It is also where you learn the square footage rule, the fencing spec and the bathroom requirement that decide which buildings are even candidates.

Read the ratio and group-size tables for every age you intend to serve, in months. Read the director qualification. Read the exemption definition if you are near a threshold.

Then look at demand. Waiting lists at nearby programs tell you more than any market report, and infant waiting lists are usually the longest — which is also the hardest room to run.

The money, in order

One-time: build-out, furniture and equipment, licensing fees and inspections, insurance deposit. Build-out is dominated by bathrooms, hand-washing sinks and a kitchen the health inspector will pass, which is why an office conversion costs more than people expect.

Recurring, before revenue: payroll and rent for the runway months. Payroll starts before children do — several states require qualified staff in place before the license issues.

Then the revenue side: your rate, worked from cost and realistic occupancy rather than from the program down the road. Plan at 85% occupancy, not 100%. When the numbers are settled, put them in a daycare business plan that a lender and your licensor can both read.

Hire before you think you need to

Background checks are the slowest item in the whole process and they are outside your control. Submit for every adult the week you begin, including household members in a home program.

The director qualification is the other constraint. If you are not qualified yourself, you need someone who is, named on the license, before you can operate — and that is a specific search, not a general one.

Post rates. The BLS median for childcare workers was $16.82 an hour in May 2025; preschool teachers $18.34. Where your local market sits above that, say your number in the posting, because every applicant assumes silence means low.

Opening, and the first families

Enroll before you open. Tours during the fit-out, a waiting list, and a start date families can plan around — a program that opens and then starts marketing has bought itself an extra empty month at full payroll. Keep a waitlist by room from the first phone call, so opening-day enrollment is a list rather than a guess.

Have the paperwork ready on day one: enrollment packets, handbook, contracts, daily sheets, attendance, medication log, incident forms. The first week is not when to design a form.

And join the food program early. CACFP reimbursement — $2.54 for a free-rate breakfast, $4.76 for a free-rate lunch or supper in centers for 2026-27 — starts paying against a cost you have from the first meal.

• Tours during fit-out, with a real start date.
• Waiting list, in writing, with deposits where you can.
• Every form printed before opening day.
• Food program application filed early.
• First drill run and logged in week one.