Starting a Daycare Business: The Pros & Cons of In-Home Versus Center

There are many factors to consider when determining whether to own and operate a child care business in your home, or in a facility outside of your home. To help you get started, here are some of the most important advantages and disadvantages of a home-based daycare business.

Advantages of a Home-Based Daycare Business

  • Faster Start-Up Time: The set up and preparation for opening a home daycare can be accomplished within a few weeks or months, depending on the state you live in. If you use a course to help you get started, such as my Daycare Success System , you can use the checklists and forms to get started faster, often in a matter of weeks.

With a center, you typically will need a lot more time to do the front-end research, write a business plan, obtain funding, and build or remodel your facility to meet your specifications.

  • Lower Cost Out-of-Pocket: The initial set-up costs are substantially lower than that of setting up a center. A typical in-home daycare can be set up for less than $1,000, depending on what you already own.

With a center, the costs to get started can range from $50,000-$100,000 or more, depending on your options of purchasing an established center, renting/leasing a building or buying a building for the center.

  • Tax Advantages: Operation of a home daycare allows you to take advantage of many tax breaks. For example, a portion of many of the items you already pay for, such as rent, mortgage interest, taxes, utilities, etc. can be deducted as a business expense. The amount determined is calculated by the amount of time & square footage your home is used for daycare purposes (called the time-space percentage).
  • Lower Overhead: Your costs are much lower on an ongoing basis to run a child care business out of your home. You may have just one part-time employee, or none at all – compared to a full staff at a center. Your food costs can be offset by the Federal Food Program, which will also save you money. Your main costs will be supplies, food / beverages, insurance, and advertising.

The monthly expense of running a center are much greater, and typically include rent, utilities, payroll, building maintenance, additional equipment supply, kitchen supplies, liability insurance, etc. Although operating a Center may be more lucrative with full enrollment, it will also cost more to operate and maintain.

  • More Flexibility: With home-based daycare, you have a great deal of flexibility in determining your hours and days of operation. If you choose to close for 2 weeks vacation, you have the opportunity to do so. It also allows you the option of operating full or part-time. In fact, you may find that there’s a need for “before & after-school” care in your neighborhood, and you can structure your program to fill that need. You also have more flexibility with your program in general, in terms of your daily schedule, if you want to offer curriculum / learning, etc.

With a center, you have to maintain set hours of operation and closing for vacation would not be an option unless you have staffed your center to provide for such closure.

  • You Can Spend the Day with Your Children. With a home daycare, your own children can be part of your daily routine and you get to care for them along with your enrolled children. With a center, you may be more focused on the day-to-day operation of the business, and your children would be in a separate classroom.

Licensing rules for centers (again, depending on your state or country) can vary greatly and may require an Administrator or Director to be present at all times. As the owner, you may not qualify to be the Director, as most states require a degree in Early Childhood Development or similar qualifications.

Advantages of a Center-Based Daycare Business

  • Ability to Care for More Children: If your reason for starting a child care business is to have an impact on large numbers of children, you’ll probably want to consider starting a center. Most states put a restriction on the number of children you can have in a home-based daycare. For example, in Ohio, you can have up to 6 children to be considered a Type A home.
  • Business Does Not Intrude on Home Environment: When you leave your center at the end of the day, you can go home and not have to be reminded of your work. With a home daycare, it’s sometimes difficult to separate work from home life, and this is a big reason that many home daycare providers suffer “burnout”. The best way to avoid this is to have a separate space, such as a finished basement or addition, where you can turn off the lights at the end of the day and separate yourself from where you work.
  • More Likely to Qualify for a Grant: In most cases, grants are very hard to qualify for if you’re a home-based daycare…there’s simply not enough children who would benefit from a single home to qualify for a grant. However, many grants are available for large centers, especially non-profit centers. Even if you’re a for-profit center, if you can demonstrate a benefit to kids in need or children in general, you may qualify for a grant.
  • A Center Is a Real Asset that You Can Sell: When you grow your center into a viable, profitable business, it will be much easier to sell than a home-based daycare. After all, a potential buyer is not going to come into your home to run their daycare! When you decide to get out of the child care business, the sale of your center can support your retirement and/or provide funding for your next business venture. With a home daycare, you aren’t really able to sell the business…just the items and furnishings inside of it.

Final Thoughts

If you want to work “hands on” along with the children, home daycare may be a great place to start. You can build your group size as you feel comfortable, and then move your group into a center-based facility away from your home.

If you prefer an administrative position, then a center may be the most reasonable option, so your main responsibility would be that of hiring, training and overseeing your staff.

A converted garage or building on your property may be another option. As your daycare grows, you can hire an assistant to help, which could be considered a happy medium.

I would recommend that anyone new to the profession start with home-based daycare, so they can evaluate their strengths and weaknesses and then decide from that evaluation how to proceed with either the continuation of a home daycare setting or the start-up/purchase of a child care center.

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