How Much Does It Cost to Open a Daycare? (2023 Update)

Thang Truong
Thang Truong
Updated on:

Starting a daycare can be a rewarding and profitable business for those who love working with children. But, like any business, it requires a clear understanding of costs involved to ensure success. This article aims to help you navigate these costs and better understand what you might expect to invest in starting your daycare operation.

Understanding the different types of daycare

The two primary types of daycare businesses are home daycares and daycare centers. A home daycare is run out of the provider’s home and typically has fewer children due to space and licensing constraints. A daycare center, on the other hand, operates from a commercial location and can accommodate a larger number of children, but with additional costs and regulations.

Initial start-up costs for a home daycare

Opening a home daycare requires transforming a portion of your home into a safe, child-friendly environment, in addition to other daycare certification requirements. This might involve purchasing safety gates, outlet covers, and other childproofing items. Additionally, you’ll need to acquire toys, learning materials, and child-sized furniture, all of which can range from hundreds to a couple of thousand dollars, depending on your choices.

The average cost to re-configure your home to function as a home daycare is about $1,150. It is not too expensive, but not nothing. Most home daycare owners spend from $500 to $3,000 for their start-up costs.

Marketing and advertising are also important in attracting your first clients. Costs for these activities can vary widely, from free (word-of-mouth and social media) to several hundred dollars for professionally designed flyers or website.

Ongoing costs for a home daycare

For a home daycare, you can expect increased utility costs due to extra lighting, heating, cooling, and water usage. Food and snacks are another significant expense, as you’ll likely be providing at least two meals and a snack each day.

You can expect your utilities bills to increase by 20-60% depending on how big your home daycare space is and how many kids you will be looking after. Keep in mind that you can deduct these expenses from your daycare income tax. 

Insurance costs for home daycares are often higher than standard home insurance due to increased liability. Most people purchase a home daycare insurance policy, which includes both liability and home-based business property coverage to protect their new business. This policy costs from $32 to $76 a month. 

Licensing and training are often annual or biannual expenses. Depending on your location and the exact requirements, these could cost a few hundred dollars each year.

Initial start-up costs for a daycare center

Starting a daycare center involves higher initial costs than a home daycare. First, there’s the cost of leasing or purchasing a location. Next, you’ll need to invest in renovations and larger-scale safety measures to ensure the facility meets local and state standards.

The cost of supplies, equipment, and furniture for a larger number of children can run into thousands of dollars. You’ll also need to account for staff salaries and benefits.

Like home daycare, marketing and advertising will also be part of your initial outlay.

Ongoing costs for a daycare center

Running a daycare center involves ongoing expenses such as rent or mortgage payments, utility costs, and facility maintenance. Staff salaries will likely be your largest recurring expense.

Food costs for a daycare center will be higher than for a home daycare, and the same goes for insurance premiums.

Potential additional costs for both types

In addition to these outlined costs, both types of daycare will likely encounter unexpected expenses. These could be things like replacing broken equipment, increased utility bills during extreme weather, or even just covering your time investment in running the business.

How to plan for and manage these costs

Starting a daycare involves careful financial planning. A comprehensive business plan will outline your expected costs and potential revenue, giving you a clear picture of your financial situation.

There are several sources of financial aid for new daycare owners, including small business loans and grants specifically for childcare providers.

Some FAQs about how much does it cost to open a daycare: 

1. Is it cheaper to start a home daycare or daycare center?

Generally, starting a home daycare is less expensive than starting a daycare center. Home daycares require less space, fewer supplies, and typically fewer staff, which all contribute to a lower initial cost. However, home daycares are also usually smaller and therefore have a lower income potential than daycare centers.

2. How much should I budget for unexpected expenses in my daycare?

As a rule of thumb, it’s a good idea to budget an additional 10-20% of your estimated operating expenses to cover unexpected costs. This could include things like replacing broken equipment, covering for staff absences, or handling unexpected increases in utility costs.

3. What financial aid is available for starting a daycare?

There are several sources of financial aid available to individuals starting a daycare. These include small business loans from banks or credit unions, grants from government agencies or non-profit organizations, and even crowd-funding or personal loans from family and friends. You may also be eligible for tax credits or deductions related to childcare.

4. How much can I expect to spend on marketing and advertising for my daycare?

Marketing and advertising costs can vary widely depending on the methods you choose. For example, using social media or word-of-mouth advertising can be free or very low-cost, while hiring a professional marketing firm or running ads in local media can cost hundreds or even thousands of dollars. To start, you might budget between $200 and $500 for marketing and advertising, adjusting as necessary based on the results you see.

5. Can I start a daycare with no money?

Starting a daycare without any money is challenging but not impossible. Some ways to minimize costs include applying for grants, borrowing equipment, or utilizing free marketing channels like social media. However, you’ll still likely need to cover essential costs like licensing, training, and safety equipment. It’s best to carefully plan your finances and look for any opportunities for funding or cost-saving.

6. How much should I charge for my daycare services?

The rates you charge will depend on several factors including your location, the age of the children, the services you offer, and local market rates. It’s important to research what other daycares in your area are charging and base your prices competitively. Always ensure your fees cover your costs and allow for a profit margin.

8. How can I reduce the costs of running my daycare?

There are several ways to reduce costs when running a daycare. Buying supplies in bulk, utilizing energy-efficient appliances, using free resources for activities and lessons, and applying for grants or tax deductions can all help reduce expenses. Also, effectively managing staff schedules and planning meals and activities can help eliminate unnecessary spending.


While the costs to start a daycare can seem daunting, with careful planning, it’s an attainable and rewarding business. In addition, you also need to pay attention to other requirements to open a home daycare. Remember to do your research, make a plan, and prepare for unexpected costs.

Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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