Over the past 20+ years, we have helped over 5,000 entrepreneurs create business plans to start and grow their businesses. On this page, we will first give you some background information with regards to the importance of business planning for your daycare. We will then go through a good daycare business plan template step-by-step to help you outline and create your plan today.
What Is a Daycare Business Plan?
A daycare business plan provides a snapshot of your daycare business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.
Why You Need a Business Plan
If you’re looking to start a daycare business or grow your existing one, you need a solid business plan. This plan will help you raise funding, if needed, and plan out the growth of your daycare in order to improve your chances of success. It is a living document that should be updated annually as your company grows and changes.
Source of Funding for a Daycare Business
With regards to funding, the main sources of funding for a daycare business are bank loans and angel investors. With regards to bank loans, a lender will want to review your daycare business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.
The second most common form of funding for a daycare is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding or, like a bank, they will give you a loan. Venture capitalists will not fund a daycare business.
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Daycare Business Plan Template
A good daycare business plan should include the following 10 key elements:
Your executive summary provides an introduction to your daycare business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of child care business you are operating and the status; for example, are you a startup, do you have a daycare that you would like to grow, or are you operating a chain of child care centers.
Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the daycare industry. Discuss the type of daycare you are operating. Include detailed information about your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing strategy. Identify the key members of your team. And offer an overview of your financial plan.
In your company analysis, you will describe the type of daycare company you are operating, including a business description.
For example, you need to decide which type of child care business you plan to operate:
- Home-Based Daycare: this type of daycare business operates out of your home and typically has one or two caregivers on staff.
- Daycare Center: this kind of child care center operates out of a commercial building. It typically has multiple teachers and personnel and can provide care to many kids.
- Preschool Daycare: a daycare business that primarily serves preschoolers
- School-Age Daycare: a daycare business that primarily serves school-age kids.
In addition to explaining the type of child care you operate, the Company Analysis section needs to provide background on the business.
Include answers to questions such as:
- When and why did you start your daycare business?
- What milestones have you achieved to date? Milestones could include sales goals you’ve reached, new program offerings, etc.
- Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
In your industry analysis, you need to provide an overview of the child care industry.
While this may seem unnecessary, it serves multiple purposes.
First, researching the daycare industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your strategy particularly if your research identifies market trends. For example, if there was a trend towards daycare that includes transportation, it would be helpful to ensure your plan calls for such a service.
The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your daycare business plan:
- How big is the daycare business (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the local or national market?
- What trends are affecting the daycare industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your daycare. You can extrapolate such as figure by assessing the size of the market in the entire country and then applying that figure to your local population.
The customer analysis section must detail the community you serve and/or expect to serve.
The following are examples of customer segments: soccer moms, young families, baby boomers caring for grandchildren, etc.
Try to break out your target audience in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the families you seek to serve. Because most daycares primarily serve customers in the same local area, such demographic information is easy to find on government websites.
Psychographic profiles explain the wants and needs of your target families. The more you can understand and define these needs, the better you will do in attracting and retaining your families.
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Your competitive analysis should identify the indirect and direct competitors your daycare business faces and then focus on the latter.
Direct competitors are other daycare providers in your local area.
Indirect competitors are other options that parents have that aren’t direct competitors. This includes keeping children at home and/or after-school programs among others.
With regards to direct competitors, you want to detail the other daycare or child care centers with which you compete. Most likely, your direct competitors will be daycare businesses located very close to your location.
For each such competitor, provide an overview of their services and document their strengths and weaknesses. Unless you once worked at your competitors’ daycare businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of parents do they offer services to?
- What daycare services do they offer?
- What times are they open?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the parents’ perspective.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide superior daycare services?
- Will you provide daycare services that your competitors don’t offer?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a child care business plan, you should include the following:
Product: in the product section, you should reiterate the type of daycare that you documented in your Company Analysis. Then, describe the specific services you will be offering. For example, will you over technology or exercise classes to the children?
Price: Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the child care services you offer and their prices.
Place: Place refers to the location of your daycare. Document your location and mention how the location will impact your success. For example, is your daycare located next to a heavily populated office building, or gym, etc.? Discuss how your location might provide a steady stream of potential customers.
Promotions: the final part of your daycare marketing plan is the promotions section. Here you will document how you will drive families to your location(s). The following are some promotional methods you might consider:
- Social media marketing
- Reaching out to local bloggers (particularly “mommy” bloggers) and websites
- Local radio advertising
- Banner ads at local venues
While the earlier sections of your daycare business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term procedures include all of the tasks involved in running your daycare such as discussions with prospective new customers, procuring supplies, keeping the center clean, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to serve your 100th child, or when you hope to reach $X in sales. It could also be when you expect to hire your 4th employee or launch a new location.
To demonstrate your daycare’s ability to succeed, a strong management team is essential. Highlight your key players’ and teachers’ backgrounds, emphasizing those skills, and experiences that prove their ability to grow your child care business.
Ideally, you and/or your team members have direct experience in the daycare or child care business. If so, highlight this experience and expertise. But also highlight any experience or certification that you think will help your daycare business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your daycare business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in daycare centers and/or successfully running a retail or small company.
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.
Income Statement: an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.
In creating your income statement, you need to devise assumptions. For example, will you serve 10 children per day or 50? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your company. As much as possible, conduct research to try to root your assumptions in reality.
Balance Sheets: While these financial statements include much information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities. For instance, if you spend $100,000 on building out your daycare center, that will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $100.000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement: Your cash flow statement will help determine how much money you need to start or grow your company, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a massive $100,000 daycare contract, that would cost you $50,000 to fulfill. Well, in most cases, you would have to pay that $50,000 now for employee salaries, etc. But let’s say the company didn’t pay you for 180 days. During that 180 day period, you could run out of money.
In developing your financial projections be sure to include several of the key costs needed in starting or growing a day care center:
- Daycare center build-out including design fees, construction, etc.
- Cost of fixtures like tables, chairs, couches, etc.
- Cost of equipment used like computers and televisions
- Payroll or salaries paid to staff
- Business insurance
- Taxes and permits
- Legal expenses
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your daycare center design blueprint or location lease.
Putting together a good business plan for your daycare is an exciting process to help you develop and grow your child care business into the future. If you follow the template above including all the key sections, by the time you are done, you will truly be an expert. You will really understand the daycare industry, your competition, and your target parents. You will have developed a comprehensive business plan and will really understand what it takes to launch your daycare business, obtain the financing you need, and expand your business.
Download Our Daycare Business Plan PDF
You can download our home daycare business plan PDF here. This is a business plan template you can use in PDF format.
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Growthink's Ultimate Daycare Business Plan Template allows you to quickly and easily complete your Daycare Business Plan.