How to Start a Daycare Business?

The nuclear family structure is becoming more prominent in our country, especially in tier 1 and 2 cities. With increasing urbanisation and double income family set ups, it is common to find nuclear households with both parents working fast-paced jobs. These working parents face problems taking adequate care of their children during their often long working hours.

As an aspiring business owner, your business instincts might have already sensed a business opportunity in this changing social reality. Yes, we are talking about the daycare business. High-quality, professional daycares are in peak demand in tier 1 and 2 cities with a large working population. Are you ready to seize this business opportunity? Here’s a complete guide for you on how to start a daycare business.

1. Perform market research

Comprehensive market research is the bedrock of any new business. Through market research, you want to identify the cities and the areas in those cities with large working populations.

Further, you also want to learn about the key existing daycare businesses in and around these areas. These are your potential competitors. Analysing the services provided by your competitors will give you a concrete idea of a market gap in these areas that you can exploit. This market research will form the basis of your business plan, which we will discuss next.

2. Create a business plan

Once your market research is complete, it’s time to codify that research into a business plan. All productive and sustainable businesses have one thing in common: a detailed, goal-oriented business plan. Here’s how you can create one for your daycare business:

• Prepare an executive summary: An executive summary should briefly describe your daycare business and its mission and vision statement. You can include the following details in your summary: business leadership, potential employees, potential locations and operations.
• Describe products and services: From the market research, you need to identify the services provided by your daycare business and daily operations, including their timings and potential charges.
• Financial plans and projections: Financial plans include your plans for financing the business. Here, you need to provide possible avenues available to you for arranging capital for your daycare business. Apart from initial capital, you must also provide detailed financial projections for your business. Here, if required, you can take help from finance professionals, such as chartered accountants for accurate assessment.
• Establish short and long-term milestones: A goal-oriented business plan is incomplete without describing essential milestones. What do you want to achieve financially and otherwise in the short and long term? What’s your desired timeframe? Everything goes in the milestones section.

Some of the details associated with the business plan will be further concretized in the following steps.

3. Choose the optimum location

Choosing the location is your most critical and challenging decision regarding your daycare business. Location can make or break a daycare business.

Your choice of location depends on several factors: what distance from home are parents comfortable with the daycare, whether the area you choose is pollution and traffic-free to avoid agitating the kids, whether any other daycares are operating in the area and at what scale. Here, you again rely on your market research.

4. Arrange capital

Once the location for your daycare business is finalised, it’s time to plan your business funding.

The major costs associated with your daycare business are:

• Space cost: The exact cost will depend upon the city and area where you plan to open your daycare business. Further, whether you want to buy or rent office space will affect the cost.
• Employee cost: From your business plan, you already have an estimate of how many potential employees you need for your business. Employee costs will depend upon prevailing market rates and the necessary employee benefits your business will provide.
• License cost: Before starting your daycare business, you need to obtain relevant licenses and certifications. These licenses and certifications will add up to the license cost.
• Day-to-day operation cost: This refers to the business operation cost and will include utility charges, cleaning charges, etc. The capacity and area of operation will most affect these costs.

5. Enrol in a childcare training program

Even if you’re not planning to play a significant role in day-to-day operations, understanding childcare dynamics will help you build a sustainable daycare business. You can take crash courses or childcare training programs to get better acquainted with the business. The training program will also improve your chances of obtaining the various licenses for your business.

6. Develop advertising and marketing strategy

In the age of social media, marketing your business is a must. If your business is not visible, it effectively does not exist. You need to prepare a targeted advertising and marketing strategy to make your business more visible and stand out from other daycare businesses. If necessary, you can engage a digital marketing firm at this stage. Don’t forget to add the cost of marketing and advertising to your financial plan.

7. Obtain a Daycare Business License

You require several licenses before you can start operating your daycare business. To obtain a daycare license, you need the following documents:

• Fire safety certificate
• Business registration
• NOC from the landlord if renting office space
• Health certificates for your staff
• Police verification

Apart from these, you must also prepare and submit any documents the local municipality requires. After submitting your daycare business application along with the application fee, the relevant authorities will set a date and inspect your business premises. If they’re satisfied, you will get your daycare business license.

Concluding thoughts

We hope you now understand the nitty-gritty of starting a daycare business in India. Once you have all the specifics in place, you must tackle the question of financing. Keep your savings for a rainy day and consider the convenience of an MSME startup loan. If you’re looking for a reliable lender, look no further than Tata Capital.

Tata Capital is one of the best in the market when it comes to rates of loan interest for business. Apply for Tata Capital’s zero-margin business loan and focus on growing your business without worry.