This article was written by our expert who is surveying the industry and constantly updating the business plan for a daycare.
Starting a daycare center requires substantial upfront investment and careful financial planning to navigate regulatory requirements and operational costs.
The total startup costs range from $5,000 for home-based operations to over $500,000 for large commercial centers, with most entrepreneurs investing between $30,000 and $50,000 for a moderate-sized facility.
If you want to dig deeper and learn more, you can download our business plan for a daycare. Also, before launching, get all the profit, revenue, and cost breakdowns you need for complete clarity with our daycare financial forecast.
Starting a daycare involves significant initial costs that vary dramatically based on location, size, and service level.
The following table breaks down the major expense categories you'll encounter when launching your daycare business.
| Cost Category | Home-Based Daycare | Commercial Center |
|---|---|---|
| Initial Setup Costs | $5,000 - $10,000 | $30,000 - $50,000 |
| Monthly Facility Costs | $0 - $500 (modifications) | $2,000 - $6,000 (rent) |
| Furniture & Equipment | $3,000 - $8,000 | $15,000 - $40,000 |
| Licensing & Insurance | $800 - $3,000 annually | $1,500 - $5,000 annually |
| Monthly Staffing | $0 - $2,000 (part-time help) | $10,000 - $40,000 |
| Monthly Operations | $500 - $1,500 | $2,000 - $5,000 |
| Working Capital (3-6 months) | $3,000 - $15,000 | $30,000 - $90,000 |
What is the average initial budget required to start a daycare, including setup and licensing?
The average initial budget for starting a daycare ranges from $5,000 for a home-based operation to $500,000+ for large commercial centers.
Home-based daycares typically require $5,000 to $10,000 in startup costs, covering basic licensing fees, safety equipment, furniture, toys, and initial marketing materials. This lower investment makes home-based operations attractive for entrepreneurs with limited capital.
Commercial daycare facilities demand significantly higher investments, typically ranging from $30,000 to $50,000 for moderate-sized centers. These costs include facility rental deposits, renovation expenses, commercial-grade furniture, licensing fees, insurance premiums, and working capital to cover initial operating expenses.
Large daycare centers or those requiring extensive construction can cost upward of $500,000, particularly in urban markets where real estate prices are premium. These facilities often serve 50+ children and require substantial investments in playground equipment, specialized learning areas, and comprehensive safety systems.
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How much does it cost to rent or buy a suitable facility for a daycare, based on location and size?
Facility costs vary dramatically by location, with urban areas commanding 20% higher costs than suburban markets.
| Location Type | Monthly Rent | Purchase Price | Square Footage Needed |
|---|---|---|---|
| Urban Centers | $2,000 - $6,000 | $1M - $4M (land + construction) | 3,000 - 6,000 sq ft |
| Suburban Areas | $800 - $1,000 | $600,000 - $1M | 2,500 - 5,000 sq ft |
| Rural Markets | $500 - $800 | $300,000 - $600,000 | 2,000 - 4,000 sq ft |
| Strip Mall Space | $1,200 - $2,500 | N/A (lease only) | 2,000 - 3,500 sq ft |
| Standalone Building | $1,500 - $4,000 | $800,000 - $2M | 3,500 - 8,000 sq ft |
| Purpose-Built Center | $2,500 - $5,000 | $1.5M - $3M | 5,000 - 12,000 sq ft |
| Church/Community Space | $600 - $1,500 | Variable | 1,500 - 4,000 sq ft |
What are the renovation or safety compliance costs needed to meet local daycare regulations?
Renovation and safety compliance costs range from $3,000 for basic modifications to $50,000 for comprehensive facility upgrades.
Basic safety modifications for existing spaces typically cost $3,000 to $6,000 and include installing safety gates, outlet covers, cabinet locks, non-slip flooring, and basic security systems. These modifications are often sufficient for home-based daycares or spaces that already meet most building codes.
Commercial facilities requiring full compliance upgrades can cost $10,000 to $50,000, depending on the building's current condition. Major modifications include fire suppression systems, emergency exits, handicap accessibility features, commercial kitchen installations, and specialized HVAC systems that meet health department requirements.
Additional compliance costs include health department inspections ($300 to $1,000), fire department approvals ($200 to $800), and building permits ($500 to $2,000). Some municipalities require annual safety inspections with fees ranging from $150 to $500.
Specialized areas like infant rooms may require additional ventilation systems, specialized lighting, and temperature controls, adding $2,000 to $8,000 to renovation costs.
How much should be budgeted for daycare furniture, toys, learning materials, and playground equipment?
Furniture, toys, learning materials, and playground equipment typically require $8,000 to $42,000 in initial investment.
| Equipment Category | Cost Range | Items Included |
|---|---|---|
| Infant/Toddler Furniture | $8,000 - $12,000 | Cribs, changing tables, high chairs, storage cubbies, rocking chairs |
| Preschool Classroom Setup | $6,000 - $10,000 | Tables, chairs, storage units, reading corner, art supplies station |
| Play Area Equipment | $5,000 - $10,000 | Indoor climbing structures, soft play equipment, sensory tables |
| Educational Materials | $1,000 - $3,000 | Books, puzzles, learning games, art supplies, manipulatives |
| Small Playground Equipment | $4,000 - $20,000 | Swing sets, slides, sandbox, riding toys, safety surfacing |
| Kitchen/Food Service | $2,000 - $8,000 | Refrigerator, microwave, dishwasher, food prep areas, high chairs |
| Safety Equipment | $1,500 - $4,000 | First aid supplies, emergency kits, security cameras, door locks |
What are the licensing, registration, and insurance fees associated with opening a daycare?
Licensing, registration, and insurance fees typically range from $1,300 to $8,000 annually, with significant variation by state and facility size.
State licensing fees vary dramatically across jurisdictions, with examples including California at $2,420 annually and North Carolina at $73 annually. Initial application fees typically range from $500 to $2,000, with most states requiring annual renewals.
Business registration and permit fees add $200 to $800 to startup costs, including business license registration, employer identification numbers, and local operating permits. Some municipalities require additional zoning approvals that cost $300 to $1,500.
Insurance represents a significant ongoing expense, with basic liability coverage costing $500 to $1,500 annually for small operations. Comprehensive insurance packages including general liability, professional liability, property coverage, and abuse/molestation coverage range from $1,000 to $3,500 annually.
Additional insurance considerations include workers' compensation (required in most states), commercial auto insurance if providing transportation, and umbrella policies for larger facilities. These additional coverages can add $500 to $2,000 to annual insurance costs.
What are the typical monthly payroll costs for hiring qualified daycare staff and substitutes?
Monthly payroll costs range from $10,000 to $40,000+ depending on facility size and staffing requirements.
Small daycare centers serving 10-15 children typically employ 5 staff members with monthly payroll costs between $10,000 and $20,000. This includes a director ($3,000-$4,500), lead teachers ($2,500-$3,500 each), and assistant caregivers ($1,800-$2,500 each).
Large centers serving 50+ children require 10 or more staff members, resulting in monthly payroll costs of $20,000 to $40,000+. These facilities need multiple lead teachers, assistant caregivers, administrative staff, kitchen personnel, and maintenance workers.
Substitute staff costs add $100 to $300 monthly to cover sick days, vacations, and unexpected absences. Many centers maintain a pool of part-time substitutes or contract with staffing agencies to ensure adequate coverage.
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How much should be allocated for utilities, internet, cleaning, and maintenance on a monthly basis?
Monthly operational expenses for utilities, internet, cleaning, and maintenance typically range from $1,000 to $2,500 for most daycare facilities.
Electricity and water costs vary significantly by facility size and location, ranging from $125 monthly for small home-based operations to $1,500 for large commercial centers. Daycare facilities typically consume more utilities than standard commercial spaces due to constant lighting, heating/cooling for children's comfort, and frequent cleaning requirements.
Internet and security systems cost $100 to $300 monthly, including high-speed internet for administrative tasks, security camera systems, and door access controls. Many centers invest in robust wifi networks to support parent communication apps and educational technology.
Cleaning supplies and maintenance materials cost $200 to $500 monthly, with higher expenses during flu season or when serving younger children who require more frequent sanitization. Professional cleaning services, if used, add $300 to $800 monthly to operational costs.
Regular maintenance including HVAC servicing, playground equipment inspection, and facility repairs typically costs $200 to $600 monthly when averaged over the year.
What are the marketing and advertising expenses needed to attract the first set of clients?
Marketing and advertising expenses should represent 1-3% of projected revenue, typically $500 to $1,000 monthly for new daycare centers.
- Digital Marketing ($200-$400/month): Social media advertising, Google Ads, website development and maintenance, search engine optimization, and online directory listings
- Print Materials ($100-$200/month): Brochures, flyers, business cards, yard signs, and promotional materials for community events
- Community Engagement ($150-$300/month): Sponsoring local events, participating in health fairs, organizing open houses, and hosting parenting workshops
- Professional Photography ($50-$100/month when averaged): High-quality photos of facilities, children (with permission), staff, and activities for marketing materials
- Grand Opening Events ($500-$1,000 one-time): Special promotions, free activities, refreshments, and incentives to attract initial enrollment
What are the projected monthly operational costs versus expected revenue in the first year?
Monthly operational costs typically range from $11,500 to $22,500, while revenue for a 10-child center ranges from $8,000 to $25,000 depending on location and pricing structure.
| Financial Category | Monthly Costs | Annual Totals |
|---|---|---|
| Payroll (5 staff members) | $10,000 - $20,000 | $120,000 - $240,000 |
| Facility Rent/Mortgage | $1,500 - $4,000 | $18,000 - $48,000 |
| Utilities & Maintenance | $500 - $1,200 | $6,000 - $14,400 |
| Food Service (10 children) | $290 - $585 | $3,480 - $7,020 |
| Insurance & Licensing | $200 - $500 | $2,400 - $6,000 |
| Marketing & Supplies | $300 - $800 | $3,600 - $9,600 |
| Total Monthly Costs | $12,790 - $27,085 | $153,480 - $325,020 |
What is the cost of child meals and snacks if the daycare provides food?
Food service costs range from $7.15 to $14.65 per child weekly, translating to $290 to $585 monthly for a 10-child program.
These costs include breakfast, lunch, and two snacks daily, meeting USDA nutritional guidelines required for many licensed facilities. Facilities participating in the Child and Adult Care Food Program (CACFP) receive federal reimbursements that significantly offset food costs.
Higher-end programs offering organic foods, special dietary accommodations, or chef-prepared meals may spend $20 to $30 per child weekly. Urban markets typically see 15-20% higher food costs compared to rural areas due to supplier pricing differences.
Additional food service expenses include kitchen equipment maintenance, health department permits ($100-$300 annually), and staff training on food safety protocols. Many centers hire dedicated kitchen staff, adding $2,000 to $4,000 monthly to payroll costs for full-service food programs.
What software, management tools, or systems are needed, and what is their cost?
Childcare management software and tools typically cost $150 to $500 monthly, depending on center size and feature requirements.
- Childcare Management Systems ($50-$200/month): ProCare, Brightwheel, Daily Connect, or Jackrabbit Care for enrollment, billing, parent communication, and attendance tracking
- Accounting Software ($20-$100/month): QuickBooks, FreshBooks, or specialized childcare accounting systems for financial management and tax preparation
- Payroll Processing ($30-$150/month): ADP, Paychex, or Gusto for employee payroll, tax filing, and benefits administration
- Security Systems ($50-$200/month): Camera monitoring, keypad entry systems, and visitor management tools for facility security
- Parent Communication Apps ($20-$80/month): Apps for photo sharing, daily reports, messaging, and emergency notifications
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How much working capital is recommended to cover the first 3 to 6 months of expenses before reaching profitability?
Working capital requirements range from $15,000 to $90,000+ depending on facility size and operational scale.
Small home-based daycares typically need $15,000 to $30,000 in working capital to cover 3-6 months of basic operating expenses including utilities, supplies, insurance, and modest salary replacement. This lower requirement reflects reduced overhead and staffing costs.
Commercial daycare centers require $30,000 to $90,000+ in working capital due to higher monthly expenses including rent, full staff payroll, utilities, and operational costs. Most centers take 12-24 months to reach full enrollment and profitability, making adequate working capital critical for survival.
Additional working capital considerations include seasonal enrollment fluctuations, unexpected repairs or equipment replacement, and economic downturns that may affect parent enrollment decisions. Financial experts recommend maintaining working capital equal to 6 months of fixed expenses as a safety buffer.
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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.
Starting a daycare requires substantial financial planning and a thorough understanding of ongoing operational costs.
Success depends on careful market research, adequate capitalization, and maintaining high-quality standards that justify premium pricing in competitive markets.
Sources
- ProCare Software - Daycare Center Expenses
- Upmetrics - Daycare Startup Costs
- Business Plan Templates - In-Home Daycare Costs
- Dojo Business - Daycare Expenses Overview
- Real Commercial - Childcare Centre Opening Costs
- Bobbitt - Daycare Center Construction Costs
- KBD Insurance - Daycare Insurance Costs
- Brightwheel - Starting a Daycare Checklist
- CareLulu - Childcare Marketing Budget
- Self-Help - Direct Costs for Child Care Center