How much does it cost to open a daycare?

This article was written by our expert who is surveying the industry and constantly updating the business plan for a daycare.

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The Dojo Business Team

A team of financial experts, consultants, and writers

We're a team of finance experts, consultants, market analysts, and specialized writers dedicated to helping new entrepreneurs launch their businesses. We help you avoid costly mistakes by providing detailed business plans, accurate market studies, and reliable financial forecasts to maximize your chances of success from day one—especially in the daycare market.

What is the total startup budget typically required to open a daycare, including all major expenses?

The total startup budget for opening a daycare center varies dramatically based on the business model and scale of operation you choose.

For home-based daycare operations, entrepreneurs typically need between $5,000 and $30,000 in startup capital. This lower investment covers basic childproofing, safety equipment, educational materials, licensing fees, and initial insurance premiums. Home-based operations benefit from using existing residential infrastructure, which significantly reduces initial facility costs.

Small commercial daycare centers require substantially more capital, with startup budgets ranging from $30,000 to $100,000. These facilities need dedicated commercial space, professional-grade equipment, comprehensive renovations to meet regulatory standards, and higher insurance coverage. The investment also includes commercial furniture, playground equipment, and enhanced safety systems required for larger operations.

Large commercial daycare centers represent the highest investment category, with startup costs ranging from $100,000 to over $500,000. These comprehensive facilities often serve 50 to 100+ children and require extensive real estate investments, sophisticated security systems, commercial kitchen facilities, multiple classrooms, and substantial staffing infrastructure from day one.

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How much does it cost to secure or rent a suitable space for a daycare, and what are the typical renovation or adaptation costs?

Facility costs represent one of the largest ongoing expenses for daycare operators, with rental rates varying significantly by location and property size.

Monthly rental costs for daycare-suitable commercial space typically range from $1,000 to $10,000, depending on your geographic market and facility size. Urban markets command premium rates, with prime locations in major metropolitan areas reaching the upper end of this range. Suburban and rural markets generally offer more affordable options, particularly for larger square footage requirements.

For entrepreneurs considering property purchase, new construction costs average $1.2 to $1.9 million for a 10,000 square foot facility according to national construction data. This option provides long-term stability but requires substantial upfront capital and financing arrangements that many new operators cannot access initially.

Renovation and adaptation costs depend heavily on the condition and previous use of your chosen space. Moderate renovations typically cost $10,000 to $50,000 and include basic safety modifications, flooring updates, bathroom adaptations for children, and minor structural changes. Major overhauls or purpose-built renovations can exceed $50,000 and involve comprehensive electrical upgrades, plumbing modifications, playground installation, and specialized safety systems required by state regulations.

Home-based daycare operations have minimal facility costs, primarily involving childproofing measures, safety gate installation, and minor modifications to create age-appropriate spaces. These adaptations typically cost under $5,000 total.

What are the licensing and registration fees, and how often do they need to be renewed?

Licensing and registration fees vary significantly across jurisdictions but represent essential regulatory costs that every daycare operator must budget for ongoing compliance.

Most jurisdictions require annual license renewals, though some states operate on biennial or longer cycles. Renewal fees typically represent 50% to 75% of the original licensing cost, creating predictable ongoing regulatory expenses that operators must factor into their annual budgets.

How much should be budgeted for insurance, including liability and property coverage?

Insurance represents a critical ongoing expense for daycare operations, with comprehensive coverage typically costing between $1,000 and $3,500 annually depending on your facility size and risk profile.

General liability insurance forms the foundation of daycare coverage, protecting against accidents, injuries, and property damage claims. Home-based operations typically pay $450 to $800 annually for basic liability coverage, while commercial centers face higher premiums of $1,200 to $2,200 annually due to increased exposure and higher coverage limits required for larger operations.

Property insurance protects your physical assets including buildings, equipment, and contents, costing approximately $200 to $1,200 annually. Commercial facilities require higher coverage limits to protect substantial equipment investments and facility improvements, driving costs toward the upper end of this range.

Abuse liability insurance has become essential coverage for daycare operators, providing protection against allegations of inappropriate conduct. This specialized coverage typically costs $200 to $600 annually but provides crucial financial protection against potentially devastating claims that standard liability policies exclude.

Workers' compensation insurance becomes mandatory once you employ staff, with costs varying based on payroll size and state requirements. Professional liability coverage, cyber liability protection, and business interruption insurance represent additional coverage options that many operators choose to include in comprehensive insurance programs.

What are the staffing costs, including salaries, taxes, and benefits for all required roles?

Staffing represents the largest ongoing operational expense for most daycare centers, typically accounting for 60% to 70% of total operating costs.

Average hourly wages for daycare employees range from $13 to $19 per hour, translating to annual salaries between $28,000 and $40,000 for full-time positions. Lead teachers and directors command higher wages, often earning $35,000 to $55,000 annually, while assistant caregivers and support staff typically earn wages at the lower end of the range.

Payroll taxes and mandatory benefits add approximately 15% to 20% to base salary costs. These additional expenses include Social Security and Medicare taxes, federal and state unemployment insurance, workers' compensation premiums, and any required state disability insurance programs. The exact percentage varies by state due to different tax rates and benefit requirements.

A small daycare center employing 5 to 10 staff members typically faces annual staffing costs between $150,000 and $300,000 including all taxes and benefits. Medium-sized centers with 10 to 20 employees often spend $300,000 to $600,000 annually on total compensation, while large centers can exceed $800,000 in annual staffing expenses.

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What are the costs of furnishing and equipping the daycare (e.g., cribs, tables, chairs, toys, safety equipment)?

Furnishing and equipping a daycare center requires substantial upfront investment in age-appropriate furniture, educational materials, and safety equipment that meets regulatory standards.

Classroom furnishings represent the largest equipment category, with costs ranging from $8,000 to $20,000 per classroom depending on age group and quality standards. Infant and toddler rooms require higher investment due to specialized equipment including cribs ($200-$400 each), changing tables ($300-$800 each), high chairs ($100-$300 each), and safety gates throughout the space.

Outdoor play areas and playground equipment typically cost $5,000 to $10,000 for age-appropriate installations that meet safety regulations. This investment includes swing sets, climbing structures, sandboxes, tricycles, and safety surfacing materials required under most licensing standards.

Educational toys and learning materials require $1,000 to $3,000 per classroom for initial stocking. This category includes books, puzzles, building blocks, art supplies, musical instruments, and manipulative toys that support child development across different age groups.

Safety equipment represents a critical investment category costing $1,500 to $2,500 for comprehensive coverage. Required safety items include fire extinguishers, smoke detectors, carbon monoxide detectors, first aid supplies, emergency evacuation equipment, and security systems mandated by licensing authorities.

The total initial equipment investment for a small daycare center typically ranges from $20,000 to $50,000, while larger facilities often exceed $75,000 in furnishing and equipment costs before opening their doors.

How much does it cost to provide meals and snacks per child, per month?

Food service costs vary significantly based on your menu offerings, local food prices, and whether you prepare meals on-site or contract with external providers.

Daily food costs per child typically range from $2 to $5, depending on the comprehensiveness of your meal program and local market conditions. Centers offering full meal service including breakfast, lunch, and two snacks generally fall toward the higher end of this range, while facilities providing only snacks or limited meal service operate at lower daily costs.

Monthly food costs per child range from $40 to $150, assuming approximately 20 operating days per month. Urban markets with higher food costs and centers emphasizing organic or premium ingredients typically experience costs toward the upper end of this range.

A daycare center serving 20 children can expect monthly food expenses between $800 and $3,000, representing a significant ongoing operational cost that must be factored into tuition pricing decisions. Centers serving 50 children might face monthly food costs ranging from $2,000 to $7,500.

Many operators participate in the USDA Child and Adult Care Food Program (CACFP), which provides reimbursements for meals served to eligible children. This program can significantly offset food service costs, particularly for centers serving lower-income families, making participation an important financial planning consideration.

What are the monthly utility costs (electricity, water, internet, heating/cooling)?

Utility costs for daycare centers vary based on facility size, local rates, energy efficiency, and climate conditions in your operating location.

Energy costs represent the largest utility category for most daycare centers due to extended operating hours, intensive lighting requirements, and climate control needs for child comfort and safety.

What is the cost of educational materials and curriculum tools needed on a monthly or annual basis?

Educational materials and curriculum costs represent ongoing investments in child development resources that support your program's educational objectives and regulatory compliance.

Annual educational material budgets typically range from $1,000 to $10,000 depending on your center size, educational philosophy, and curriculum complexity. Centers emphasizing STEM education, multilingual programs, or specialized learning approaches often require higher investment in supporting materials and resources.

Monthly educational expenses generally range from $100 to $800 for most daycare operations. Small home-based programs typically operate at the lower end of this range, while larger centers with multiple classrooms and comprehensive curriculum programs require higher ongoing investment in educational resources.

Curriculum licensing fees represent a significant cost category for centers using commercial educational programs. Popular curriculum systems like Creative Curriculum, HighScope, or Montessori programs often require annual licensing fees ranging from $500 to $3,000 depending on enrollment size and program scope.

Art supplies, science materials, books, and learning manipulatives require regular replacement and expansion as programs grow and materials wear out through normal use. Technology investments including tablets, educational software, and interactive learning systems represent growing expense categories that modern daycare centers increasingly include in their educational budgets.

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What amount should be planned for marketing, advertising, and initial client acquisition?

Marketing and advertising investments are essential for building enrollment and establishing your daycare center's reputation in the local community.

Initial marketing budgets typically range from $1,000 to $10,000 for comprehensive launch campaigns that include website development, print materials, online advertising, and community outreach programs. New operators should expect to invest more heavily in marketing during their first year to build brand awareness and achieve target enrollment levels.

Website development represents a crucial initial investment, with professional daycare websites typically costing $2,000 to $5,000 for custom design and functionality including online enrollment, parent communication portals, and mobile responsiveness. This digital presence serves as the foundation for most marketing efforts and parent communication.

Ongoing annual marketing expenses generally range from $500 to $3,000 for established daycare centers that maintain consistent enrollment levels. These ongoing costs include website maintenance, social media advertising, community event participation, and referral program incentives that help maintain a steady pipeline of new families.

Digital marketing strategies including Google Ads, Facebook advertising, and local online directories typically require monthly budgets between $200 and $800 for effective reach in most markets. Traditional marketing approaches including direct mail, newspaper advertising, and community sponsorships represent additional investment opportunities that many operators find effective for local market penetration.

What are the ongoing maintenance, cleaning, and supplies costs each month?

Maintenance, cleaning, and supply costs represent essential ongoing expenses that ensure your daycare facility meets health and safety standards while providing a clean, safe environment for children.

Professional cleaning services typically cost $500 to $1,500 monthly for comprehensive deep cleaning, floor maintenance, and sanitization services that meet daycare regulatory requirements. Many operators supplement professional cleaning with daily staff cleaning routines, creating hybrid approaches that balance cost control with cleanliness standards.

Cleaning supplies and sanitization materials represent ongoing monthly expenses ranging from $200 to $500 for most daycare centers. These costs have increased significantly in recent years due to enhanced sanitization protocols and requirements for higher-grade cleaning products that effectively eliminate germs and viruses in childcare environments.

General maintenance expenses including HVAC servicing, plumbing repairs, electrical work, and facility upkeep typically cost $500 to $1,000 monthly. Preventive maintenance contracts for critical systems like heating and cooling equipment help control these costs while ensuring reliable operation during all seasons.

Office supplies, paper products, and administrative materials add approximately $200 to $400 monthly to operational expenses. Diapers, wipes, and personal care supplies for infant and toddler programs can add another $300 to $800 monthly depending on the number of young children served.

Total monthly maintenance, cleaning, and supply costs typically range from $1,000 to $3,000 for medium-sized daycare centers, representing approximately 5% to 10% of total operating expenses.

How much working capital is recommended to cover operating expenses for the first 3 to 6 months before reaching profitability?

Working capital requirements represent one of the most critical financial planning elements for new daycare operators, providing the cash flow foundation needed to operate successfully while building enrollment.

Financial experts recommend maintaining 3 to 6 months of total operating expenses in working capital reserves before opening your daycare center. This recommendation accounts for the time required to build enrollment, establish positive cash flow, and navigate unexpected expenses during the startup phase.

Small daycare centers serving 10 to 20 children typically require $30,000 to $90,000 in working capital reserves. Monthly operating expenses for these facilities generally range from $10,000 to $15,000 including rent, payroll, utilities, food, supplies, and other recurring costs.

Medium-sized centers with 30 to 50 children often need $60,000 to $180,000 in working capital to cover 3 to 6 months of operations. These facilities face monthly operating expenses between $20,000 and $30,000, requiring larger cash reserves to maintain operations during the enrollment building phase.

Large daycare centers serving over 50 children may require $100,000 to $300,000 or more in working capital reserves. These comprehensive facilities often face monthly operating expenses exceeding $35,000, making substantial cash reserves essential for financial stability during the critical startup period.

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Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.

Sources

1. Business Plan Templates - In-Home Daycare Startup Costs
2. Upmetrics - Daycare Startup Costs
3. ProCare Software - Daycare Center Expenses
4. Business Plan Templates - Childcare Center Startup Costs
5. Dojo Business - Daycare Startup Costs
6. RS Means - Day Care Center Construction Costs
7. FinModels Lab - Daycare Operating Costs
8. CA Quality Early Learning - Licensing Fees
9. Huckleberry Insurance - Child Care Insurance
10. Kaplan Early Learning - Classroom Furnishing Costs