How to Start a Daycare Business in 2026: 6 Steps in the Right Order

Sep 21

Starting a daycare means a hundred decisions at once: licensing, costs, legal structure, finding a space. Most people either freeze or start in the wrong order. After 21 years as a child care center director, I've seen what works, and this guide covers the steps in the order they need to happen, whether you're opening a home daycare, a preschool, or a full center.

You don't need everything figured out today. You just need to start, and start in the right order.

The short answer

Research your state's licensing requirements
Choose your business structure (and get insurance)
Create your business plan and budget
Find and set up your location
Hire and train your team
Market your daycare and start enrolling families

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Get the free Daycare Starter Guide. A step-by-step checklist that covers everything below, from licensing and budgeting to marketing and enrollment. Download it here → FREE STARTER GUIDE

Step 1: Research your state's licensing requirements

Licensing always comes first, before supplies, a business name, or a website. Every state has different rules, and home daycares and centers don't follow the same ones.

If you're opening a home daycare, expect the following in most states:

A cap of roughly 5 to 12 children, depending on your space and whether you have an assistant
About 35 square feet of indoor space per child (this varies by state)
A safety inspection: smoke detectors, fire extinguishers, locked-up chemicals, safe sleep areas, and a fenced outdoor area
Background checks for you and every adult living in your home
CPR and first aid certification, and often pre-service training
A licensing application and fee, usually a few hundred dollars

Check your zoning and HOA rules before you spend a dollar. Some neighborhoods don't allow home businesses, and you don't want to find out after you've invested.

If you're opening a center, the process is similar but bigger:

Separate rooms by age group, with staff ratios set by your state (for example, one adult for every four infants in many states, or one to six in Georgia)
Real staff credentials, such as a CDA or college credits in early childhood education for lead teachers, and often more for directors
Background checks for every employee, and in some states volunteers
Building and health inspections, fire marshal approval, ADA compliance, and sometimes a kitchen inspection
A written emergency preparedness plan, a parent handbook, and 10 to 24 hours of annual training per staff member

Go to your state's child care licensing agency website, find the provider section, and download everything. Click here to find your state's licensing dept.

Step 2: Choose your business structure

You can operate as a sole proprietor, an LLC, or a corporation.

Sole proprietor: the simplest way to start, with no filing fee or setup paperwork. The trade-off is no legal separation between you and your business, so your home, car, and savings could be at risk if something goes wrong.
LLC: most daycare owners choose this because it adds a layer of protection. You file through your state's Secretary of State website, and it typically costs between $50 and $500 depending on the state.

After you form your LLC:

Get your EIN from the IRS website. It's free and takes about five minutes.
Open a business bank account and keep personal and business money separate from day one.
Buy general liability insurance before your first child walks through the door. It's not optional.

Step 3: Create your business plan

A formal plan isn't required for a self-funded home daycare, but you'll need one to get a loan. Even without one, writing it helps you think through the important things before you spend money. It comes down to four questions: What are you building? Who are you serving? How much will it cost? How will you make money?

Typical startup costs

ItemTypical costHome daycare (safety equipment, toys, materials, licensing fees)$500 to $3,000Child care center (space, furniture, staff before opening)$10,000 to $50,000+LLC filing$50 to $500EINFree

Your plan should include startup costs, monthly expenses (rent, utilities, food, supplies, payroll), your pricing, and your revenue projections. Work out how many children you need enrolled, at what tuition, to cover expenses and pay yourself. Grab my Business Plan Template here.

Step 4: Find and set up your location

A home daycare uses your home, but it still has to meet your state's rules for square footage, outdoor play space, and safety features like smoke detectors, fire extinguishers, cabinet locks, and outlet covers.

For a center, think about zoning, lease terms, parking, drop-off flow, and ADA accessibility. Call your local zoning office before you sign a lease.

Set up with child-sized furniture, learning materials, and safety equipment, including cribs for infants, cots for toddler nap time, a first aid kit, and clear areas for play, learning, eating, and resting.

Before opening day, make sure you have:

Your license, insurance, and business bank account
A passed safety inspection
Enrollment forms, a parent handbook, and emergency contacts
An emergency preparedness plan
Daily schedules for each classroom

You can find done-for-you templates here. (enrollment forms, parent handbook, and emergency plan templates)

Once your space is ready, an inspector will walk through it and check things like smoke detectors, food storage, safe sleep areas, and outdoor fencing. If you followed your state's guidelines from Step 1, this is just a confirmation that you did the work. Once you pass, you'll receive your official child care license.

Step 5: Hire and train your team

If you're starting a home program, you may open on your own. If you're opening a center, you'll need staff, and your state's ratios decide how many. That's usually your biggest expense, which is why your budget in Step 3 matters.

When hiring, look for people who love working with children, not just people who are qualified on paper. Then:

Run background checks
Confirm CPR and first aid certification
Train them on your daily schedule, emergency procedures, how you communicate with parents, and your philosophy of care

Step 6: Market your daycare and start enrolling

Start marketing while you're setting up your space, even before your license arrives, so you open with families waiting.

Set up a free Google Business Profile with your hours, location, photos, and a clear description. This is how local parents will find you.
Create a simple website or landing page with your location, hours, rates, ages served, and how to contact you.
Join local parent Facebook groups. Be helpful and answer questions instead of spamming. Word of mouth is still the most powerful marketing tool in this industry.
Connect with your local child care resource and referral agency. Many states have one, and they refer parents to licensed providers for free.
Use flyers and business cards at pediatrician offices, libraries, churches, and community centers.

Frequently asked questions

Do I need a business plan for a home daycare?
Not if you're self-funding. It becomes necessary if you're applying for a loan, but I still recommend writing one for your own benefit.

Do I need an LLC to open a daycare?
No. A home daycare can operate as a sole proprietor. An LLC adds legal protection between your personal assets and the business, which is why most owners choose it.

How much does it cost to start a daycare?
A home daycare might cost $500 to $3,000, and a center $50,000 or more, depending on space and staffing.

Is liability insurance required?
At a minimum, you need general liability insurance before your first child arrives.

When should I start marketing?
While you're setting up your space, before you receive your license.