How Much Does It Cost to Open a Child Care Business?

Opening a child care business requires different costs and considerations depending on factors like your state, the number of children you plan to care for, and whether you will work out of your home or a commercial space. Thus, upfront costs can run the gamut, depending on the space, equipment, furnishings, toys, bedding, staffing, and other materials needed to meet the needs for operations, comfort, and compliance.

For instance, a small center-based child care business with eight to 10 children and two or three staff members might expect to need anywhere from $58,000 to $129,000 to launch and fund themselves for the first one to three months of business. On the other hand, a home-based child care center might skip the hefty upfront costs of a commercial lease, with an entry point of $26,000 to $76,000.

To estimate your own potential costs when opening a child care business, reference the cost tables below, which detail expenses associated with your facility, furniture and equipment, licensing and insurance, operations, staff wages, basic marketing and other consumer goods. Where possible, costs are broken down into a per-child or per-staff-member basis for easy custom estimates.

Thousands of child care providers are using Playground to help streamline operations and save money and time. Book a free demo today to see what Playground can do for your child care business.

Building and facility

Your building or facility is likely to be your largest upfront and ongoing cost. Whether you are a center-based or home-based care, you can opt to rent or own your space. If you don’t already own a building, leasing a commercial space may be the best way to avoid upfront costs. A downpayment on a building purchase can cost tens to hundreds of thousands upfront, in addition to ongoing mortgage payments. A lease, on the other hand, will likely require a few months charges upfront, as well as a security deposit. 

Family or home-based care centers will likely have the advantage of overlap in their residential housing costs and business costs. Make sure to consult a CPA about the tax implications for long-term maximization of your budget.

Like the housing market, your building costs are going to be highly dependent on your geographical location. You can generally expect high cost-of-living areas to be more expensive for a building purchase or rental, and vice versa. There are also going to be parallel costs to the building and space itself, including inspections, repairs, utilities, and child-proofing spaces.

To get the most accurate estimate for your area, you will need three figure estimates:

1. The average local commercial lease rate per square foot. A local commercial real estate agent, or recently leased listings can help provide this information. For example, in Boston, the typical commercial lease rate in 2024 was $69.40 – ranging from $31/sqft. for Class C property to $77/sqft. for Class A property.

2. The number of children you plan to enroll. The number of children your organization cares for will dictate how much space you practically need and thereby which compliance rules apply to you. For example, if you are licensed as a Small Group & School Aged facility in Massachusetts, you are allowed to enroll up to 10 children in your commercial facility.

3. The square footage per student required by your state. Depending on your business type, your state’s governing body often dictates minimum space requirements per child. For example, in Massachusetts, small and large center-based operations require a minimum of 35 square feet of indoor activity space per child, while family child care operations with three to six children enrolled are subject to a minimum requirement of 225 square feet. Make sure to review your requirements for your locale carefully, as other rules may apply to bathrooms, outdoor areas, and other building features.

Using the Boston, MA details with a Class C property, we can project the commercial lease costs we need to budget for by multiplying the average or expected lease rate by the square footage needed given licensure restrictions and enrollment.

$31.17 average lease cost per square foot * 10 children maximum * 35 square feet needed per child minimum = $10,910 per month.

Up front, you will likely owe charges for first and last month’s rent, as well as a security deposit equal to one month’s rent, for a total upfront cost of $10,910 * 3 = $32,729, with ongoing costs of nearly $11,000 per month.

If you opt for ownership, you’ll want to keep in mind that you’ll need to fork over a large downpayment – often 25% of the purchase price in commercial transactions – and put aside money for transaction costs, building insurance, mortgage interest, property taxes, and more. If you are new to the industry, it will likely make more sense to start off with a lease before committing so much capital and cash flow in a building purchase.

Furniture and Equipment

Once you have your building secured, you will have to furnish it very specifically to your use case. You will likely need to plan for indoor activity area, naptime arrangements, food preparation, emergency preparation, child transfer strategies, and more. Some furniture and equipment that are common in most child care facilities include:

Based on these figures, a small center-based child care center with 10 children and two or three staff members might expect to spend $15,000 to $45,000 furnishing the center.

Licensing and Insurance

You may already have started your business journey by applying for a business license. Typically an LLC is an appropriate business structure for many child care businesses. Typically, this will cost about $100 to $150 up front, although some states, like New York, have additional hoops to jump through (such as running a public newspaper ad announcing the LLC formation) that may cost hundreds to thousands of dollars extra. 

Due to the sensitive nature of handling other people’s children, your business will also need a suite of insurance coverage. Proper coverage will likely include:

• General Liability: Covers you if a child, parent, or visitor gets hurt on your property or something gets damaged. It protects your business from expensive lawsuits and medical bills.

• Professional Liability: Protects you when someone claims your staff made a mistake while caring for kids, such as not watching closely enough or handling an injury the wrong way.

• Property Insurance: Pays to fix or replace your building, furniture, toys, and equipment if they’re damaged by fire, storm, theft, or vandalism.

• Worker’s Compensation: Required in most states. It pays for medical care and lost wages if a staff member gets hurt on the job — which happens a lot when working with young children.

• Vehicle Insurance: Only needed if you drive kids anywhere (field trips, etc.). It covers accidents involving your center’s vehicle and protects you from big liability claims.

Additionally, depending on your own/lease status and child care license type, you will likely be subject to certain facility inspections which may add on some additional fees. In some cases, you may need to petition your locale for zoning permits or variances if your facility is not currently used as a commercial daycare. 

Based on the typical licensing and registration costs of opening a childcare listed above, a small center-based childcare center with up to 10 enrolled children and 2-3 staff members might expect to pay anywhere from $3,550 to $9,850 in licensing, registration and insurance costs for year one.

Operations

Your operational costs will highly depend on the way your business operates, your facility, the parents you work with, and other factors. For instance, you will have to decide on a firm pick-up and drop-off policy in order to accurately track attendance for compliance and safety purposes. While some child care centers may opt for a manual process with clipboard and pens, others may opt to make a small investment in an operational software program like Playground, which helps parents and caregivers alike stay in sync on a multitude of topics. Book a free demo to see how it can help you save time and money on child care operations.

Common upfront costs for operations in a child care center often include:

Based on the typical costs for supplies and services to support day-to-day operations, a center-based child care with up to 10 enrolled children might expect to pay around $1,800 to $4,900 upfront.

Staff Wages

For most child care centers, staff wages are a major cost, with 70% to 80% of revenue often going to pay out employees. The burden of your staff costs will depend on the size of your center and the state’s associated child to supervisor ratios, as well as the local pay premiums for child care workers.

Assuming our example center-based care with up to 10 children enrolled does not offer health insurance to its staff initially, you could expect to pay roughly $2,700 per month per full-time employee at the average national wage, including payroll taxes.

Marketing

Even if you don’t plan to heavily market your business – let’s say you have your roster on a waiting list already – you will need to invest in certain basics, like outdoor signage and likely a website for parents to learn about and interact with you.

With these basic marketing pillars covered, a small center-based business with up to 10 enrollees, might expect to pay $600 to $6,000 upfront for a basic marketing setup.

Otherwise, comprehensive child care management software like Playground can help you market your business to prospective clients by capturing leads through your website, email campaigns, enrollment and more – in addition to all the operational benefits.

Consumer Goods

Caring for children will require a lot of supplies, from cleaning to food to activities and enrichment. You’ll want to make sure you have enough of the appropriate supplies for the number of children enrolled in your child care. For discounts on a wide range of consumer goods commonly used in child care businesses, check out the Playground Savings Club.

Given the cost estimates above, a small center-based child care business with up to 10 enrolled children might expect to pay in the range of $2,350 to $4,750 in upfront consumer goods costs.

Total Costs for Opening a Child Care Business

Ultimately, the upfront cost of opening your child care business will depend on a wide variety of factors, but the above figures – broken down into per-child estimates where possible – will help you figure out what costs to plan for and what you might expect while shopping.

Using the aggregate estimates above for a ten-child child care business operating out of a commercial facility, you might expect to pay anywhere from $58,729 to $108,629 to get up and running for their first few months of business, including upfront lease costs and staff wages. Because many of the costs require an initial premium or are one-time, ongoing costs will more so be reflected in the cost of paying your staff, and any commercial lease costs.

For a family based child care business with 10 or fewer children, you can remove the upfront commercial lease costs for an estimate of $26,000 to $75,900 for startup, depending on your circumstances and goals, including the cost of paying one full-time employee for one month.