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How to start a home daycare
From registration and business structures to insurance and marketing - we'll show you how to get your home daycare business up and running.
Setting up a babysitting business can be a fulfilling and potentially profitable career if you love taking care of children. However, there are quite a few steps you need to take in order to do it properly. In this guide, you’ll discover some key tasks you’ll need to complete to get your babysitting business up and running.
What’s the difference between babysitters, nannies and daycare workers?
Babysitters provide childcare services on an occasional, short-term basis. Unlike nannies, babysitters don’t usually have household duties like cleaning up, making meals or doing laundry. If they do, these duties are minimal. Babysitters can work for multiple families at the same time and are paid an hourly or daily rate.
Nannies are professional domestic workers who provide regular, ongoing care for children in private homes (usually just one family). Nannies may also have housekeeping duties. Each province has its own employment legislation classifying nannying as an occupation and stating the employment benefits to which nannies are entitled. Benefits could include regular work hours, time off on public holidays, overtime pay, minimum wage etc.
Daycare workers — also known as child care workers — look after infants and toddlers during the day when their parents or guardians are occupied elsewhere. Daycare staff supervise children from multiple families at once and work in a single facility rather than individual homes. Daycare work is a regulated form of employment, and comes with stricter requirements than nannying. Daycare workers must complete special training or certification programs as required by the provincial or territorial government where they intend to work.
If you don’t meet your provincial or territorial definition of a daycare worker, different rules and regulations may apply to your business. So, it’s important to be clear about the legal classification of your job and what your official job title is.
Registration and licensing for your home daycare
The exact requirements for registering your home daycare business vary depending on the province or territory in which you plan to operate. Note that you may to register or obtain permits and licenses on multiple levels including federal, provincial and municipal.
BizPal.ca provides a really convenient tool for determining what permits and licenses your business needs based on where you live.
Do I have to register my home daycare business?
Your province or territory may not necessarily require a business registration number for you to open a daycare. But having one can still be useful, because it allows you to claim tax deductions for certain business expenses.
If the scope of your activity falls beneath the parameters of a “daycare” as defined by your provincial or territorial government, you may not need to get special permits or licenses to operate a daycare centre.
For example, in Ontario you need to be licensed by the Ministry of Education if you’ll be taking care of more than 3 kids under 2 years old and more than 5 kids over 2 years old. So, you won’t need a license if you’ll only be caring for 3 infants (say, 12, 18 and 20 months old) and 5 kids who are 3 years of age or older. But you will need a license if you begin caring for one more infant and one more toddler.
What you’ll need to register
The requirements needed to register your business depends on where you’ll be working but may include:
- Proof that you’ve completed an accredited program in Early Childhood Education or something similar
- A criminal record check
- First aid training certification (more likely to be required if you plan to supervise children who have disabilities)
- Information on where you live and who lives with you. You may need to provide a statement attesting that there are no residents in your home who could pose a risk to the safety and welfare of the children you’ll be supervising.
Make sure you double check the employment laws in your province or territory, so you don’t miss any special requirements. Failing to satisfy regulations will hurt your business in the long run.
Picking a business structure
Your business type determines how much tax you’ll pay on the money you make and how personally liable you’ll be for business debts.
Here are your main options.
- Sole proprietorship. You’ll continue to pay income tax and other remittances to the government as an individual. You personally will be held liable for business debts or lawsuits against your business.
- Partnership. This is essentially the same as a sole proprietorship, except profits are shared with your business partner(s). Under a general partnership, each partner is held personally liable. Under Limited Partnerships and Limited Liability Partnerships, only general partners (those who manage the business) are liable, while limited partners (investors) are not.
- Corporation. Here, your business becomes an entity in its own right and your personal finances are separate from your business finances. In addition to filing your own personal tax return, you’ll also file a separate business tax return. Plus, you’ll have to pay yourself a wage from company profits. You can’t be held personally responsible for business debts and will have reporting and management responsibilities.
- Cooperative. Cooperatives are best for groups of people who share similar social or economic needs and want to operate a business democratically. In Canada, all cooperatives must be incorporated, either at the federal or provincial level. Cooperatives can be set up as for-profit, not-for-profit or charitable organizations.
Compare business loans to finance your new enterprise
Getting insurance for your home daycare
Not all insurers offer the same options, but you may find the following types of coverage helpful for your home daycare business:
- Property. May cover land, certain type of equipment and supplies, electronics, privacy breach expenses, landscaping and more.
- Crime. May cover money, securities, credit cards, debit cards, fraudulent transactions, employee dishonesty, criminal actions to the property of your customers and more.
- Liability. This provides protection if legal action is brought against you for mental or bodily injury, property damage, advertising injury liability, medical costs and other expenses as a result of a lawsuit.
- Equipment breakdown. Covers accidents involving compressors, heating systems, electrical panels, mechanical devices and electrical machines. This type of coverage may be helpful if experience situations like ammonia contamination, dangerous fluids leaking in your home or utility service interruptions.
- Other. You may also be able to get commercial auto insurance as well as coverage for employee benefits errors and omissions (if you’ve hired staff), privacy breaches and damages due to catastrophic losses.
Creating a business plan for your home daycare
Unless you plan to apply for financing, you don’t need to create a business plan for your home daycare. But doing so could still be helpful. Laying out your plan clearly will allow you to spot potential obstacles to your success or reasons why you might want to reconsider starting a business or explore other business options.
A great home daycare business plan would include:
- Company overview. The name of the business and its owners, the business type and its address. Perhaps a short mission statement, explaining your goals for the company.
- Your target market. Who will you market your childminding to and why? It pays to be as specific as possible. The better you know your audience, the easier it is to market to them.
- Products and services. A full list of what products and services are offered by your business, plus how much you will charge.
- Competitors. Who are your competitors? How does your childminding business differ from theirs? Why is yours better?
- Marketing plan. Are you planning to distribute brochures? Where will you market your business? What is your monthly marketing budget for each marketing platform?
- Financial plan. How much will it cost to launch your business? What are the estimated monthly running costs? What are your monthly sales forecasts? (You should list a minimum viable target amount, an average target amount and stretch targets for long-term growth).
How much should I charge for home daycare services?
The cost of daycare in Canada varies widely. The rate you should charge depends on where your daycare is located and the services you plan to provide.
Overall, parents in Canada tend to spend roughly $10,000 a year in daycare costs per child, which works out to an average of $833 per month. Toronto and Vancouver typically charge the highest rates at $1,300-$1,500 per month. Rates in Quebec are usually much lower, with some cities charging around $200 per child per month. Bear in mind that these figures reflect full-time care. The fee for part-time care should be significantly lower.
Offering premium services can help you stand out among the competition and build your business’s local reputation. However, simplifying your services can lighten your workload and decrease your operating costs.
If you plan to offer educational programs, meals and snacks and extended childcare hours, you’ll need more money to cover your costs and should charge a higher rate. But if you plan to offer basic childcare services with regular hours and parents will be providing their children’s food, you can afford to offer a lower rate, which may attract more clients.
How to market your home daycare
Here are some great marketing ideas for your home daycare business.
- Flyers. Not only is this a low-cost way to advertise, but it makes sense since you’re most likely only targeting customers in your local area. Pay for a professional design and offer these flyers in venues around schools, parks and local businesses where parents are likely to visit. Stick them on a board at local shops if they have a local services board. Make sure you have permission first before posting your flyer.
- Business cards. Get professional business cards printed, and hand them out to everyone you know — especially those with children. If your peers don’t have children, perhaps they know someone who does. Referrals are a powerful marketing tool. Don’t forget to give some business cards to parents who sign up for your daycare, so they can easily refer you to people within their network.
- Social media marketing. It’s free to set up business accounts on all social media platforms, and this could really pay off when it comes to getting your name out there. Use these pages to share details of the fun activities you’re enjoying with the children. You won’t be able to post pictures or stories about individual children without their parents’ permission though.
- A blog and search engine optimization (SEO). If you launch a childcare blog and have it well optimized for search terms surrounding childcare and your local area, you could attract clients through Google searches. There’s nothing stopping you repurposing your social media content on your blog and vice versa.
Open a business bank account to manage your home daycare finances
A business bank account works similar to a personal account – the main difference is that it’s dedicated to your business’s finances. Knowing businesses will need to process frequent deposits in higher amounts than individuals typically deposit, banks often charge a fee per deposit based on the size or type of deposit (cheque, cash etc.).
You should expect similar features to what you’d get with a personal bank account — such as a debit card, the ability to send and receive payments, optional overdraft option, online and mobile banking and more. You may even want to look into accounts that let you earn interest on your balance to help your earnings grow even faster.
Learn more about financing a new business
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