In 2019, the child care market size in the United States was valued at $54.3 million and is expected to grow 3.9% between 2020 and 2027. The number of working parents in the U.S. continues to increase and as a result, the demand for adequate and affordable child care continues to grow as well.
If you live in the New Jersey area and are an aspiring business owner with a love for children and families, you may be curious about the necessary steps to starting your own daycare in New Jersey.
It may seem like an extensive process, and yes, there are already plenty of existing competitors, but you shouldn’t let that discourage you.
The demand for childcare is on the rise, and if you have the drive to complete all of the required steps, you can be successful at this business. Below, we’re breaking down some of the important tips for starting a daycare in New Jersey and ways that you can set yourself apart from competitors.
The first and most important step to starting a daycare in New Jersey is obtaining the required licensure.
After that, you’ll need to find a building, write a business plan, break down your budget, apply for a loan and obtain financing, start advertising, and obtain the necessary equipment.
Understandably, starting a daycare is a complicated process. It shouldn’t be easy for just anyone to be in charge of other people’s children for hours at a time, so it makes sense that starting a daycare isn’t exactly a simple process. Here is a further breakdown of the steps required to start a daycare in New Jersey.
How to start a daycare in New Jersey
1.Apply For State License
You can find the necessary licensing documents here on the New Jersey, Department of Children and Families website. However, before applying make sure to understand the licensing process.
Staffing & Sanitation Requirements
First you will want to review the Manual of Requirements for Childcare centers, for all necessary information including staffing requirements, sanitation practices, food and nutrition requirements, and more.
Identify a site for the daycare and ensure that it meets all zoning requirements. You will need to contact a zoning officer to confirm that the site is zoned to be a childcare center.
Determine whether all environmental requirements are met by reviewing the NJ Department of Environmental Protection website, NJ Department of Consumer Affairs website, and the NJ Department of Health website; specifically, their recommendations and requirements for childcare centers. You will need to receive a Certificate of Occupancy (CO) from the municipal construction official.
Renovation or building requirements
If you plan to build the site or renovate an existing site, you will need to submit architectural plans to the following address: NJDCF, OOL, Child Care Plan Review Unit, PO Box 717, Trenton, NJ 08625-0717
2.Get CARI and CHRI forms
Once the above steps have been completed, you will need to apply for licensing for your daycare facility.
Mail your filled-out application, along with the necessary application fee to the New Jersey Department of Children and Families. Complete all required CARI and CHRI forms for staff members and owners.
3.Obtain A Certificate of Occupancy
Be sure to obtain a valid Certificate of Occupancy for on the the following groups:
- I-4 (institutional)
- E (Educational)
- A (assembly)
- A Certificate of Continued Occupancy (CCO)
A Response Action Outcome Letter is also required to be submitted, this indicates that no action is required for the daycare center’s site, and that it is safe for use. A water testing report, checking for lead and copper will also be required along with a Drinking Water Statement of Assurance and Testing Checklist.
Indicate whether the building has ever been used as a Group F, Group H, Group S, Group B, Group M, or Group A/B facility with a Letter of Prior Use. Obtain and submit a Safe Building Interior Certificate (SBIC) from the Department of Health.
A lead paint inspection report will also be needed. This can be prepared by a certified Lead Inspector or Risk Assessor who is employed by a public health agency. The building must be either lead-free or lead-safe.
For more information on obtaining licensing, find all required information and documents here.
4.Get The Right Insurance For Daycare Business
Certainly one of the most important parts of your business plan is obtaining some form of insurance. All it would take is one lawsuit to cause you to have to completely shut your business down.
Although unpleasant to think about, every business faces risks and it is important to protect your company with the proper insurance. Liability insurance can cover legal costs in the event of any type of lawsuit and is essential for daycare owners to have.
There are a couple of different types of liability coverage, but all are important in their own ways. Here are a few different types of insurance coverage that are required and recommended for your daycare:
General liability coverage
General liability coverage is required in the state of New Jersey in order to get a license to open your daycare. This will cover costs from injuries that occur on the property.
Premises liability coverage
Premises liability coverage is similar to general liability coverage but takes care of accidents that happen outside of the facility, such as in the parking lot or play areas.
Commercial vehicle insurance
If your daycare will be using any company vehicles, such as a bus to transport children, then the state of New Jersey requires commercial vehicle insurance.
Corporal punishment liability
You may want to invest in corporal punishment liability, as this will protect your business from being held liable if an employee harms a child by using corporal punishment.
Molestation and abuse liability
There is also a molestation and abuse liability option for daycare owners that protects your business in the event of a child being abused on your premises.
Umbrella coverage describes insurance coverage for any claims that exceed the standard amount of coverage on a given policy. This insurance pays for additional expenses in the event of a large award and protects the business owner’s personal assets from being at risk in this event.
Workers comp insurance
The state of New Jersey also requires that all businesses have workers comp insurance to cover any workers who become injured when on the job.
Commercial liability insurance
Commercial liability insurance is not required in the state of New Jersey but is recommended.
5.Market Your Daycare
Once you’ve gotten the serious stuff out of the way such as licensing and insurance, now it is time to focus on the fun part and start marketing and promoting your business. If you are not skilled in marketing and advertising, this may be a good time to bring on a business consultant to help with this side of things.
Start working on your branding and decide on your company mission, name, and logo. Developing your own brand is an exciting and fun process but can be complex, so having assistance from a marketing expert can help.
You may need a website specialist or graphic designer to help you develop a website and logo.
Start using social media, email marketing, and word of mouth to spread the word about our business. Decide if you’ll be wanting to make it a franchise with multiple locations or a single-location business.
6.Purchase Supplies & Equipment
Before you open up your daycare, there will be some supplies you’ll need to gather to make sure you’re fully prepared. Furniture, safety supplies, and toys are just a few of the important items you’ll need. Here is a further breakdown of the supplies you’ll need to start a daycare.
Your top priority should always be safety. Keep your daycare stocked with safety items such as first aid kits, fire extinguishers, and other emergency supplies.
You’ll also need to make sure that you have an emergency escape route and emergency plans for multiple scenarios including a fire, intruder, or dangerous weather conditions. Make sure your daycare has working smoke detectors installed and a carbon monoxide detector.
You will want to be stocked with plenty of cleaning supplies including hand soap, surface cleaners, floor cleaning supplies, and paper towels. Children are pretty messy so you’ll need to make sure to have a cleaning plan for all employees to follow to ensure that your facility is kept organized and clean.
As far as furniture, it will be important to have designated areas for the children to eat, play and nap. You will need safe, age-appropriate napping furniture such as cribs or cots, depending on the age of the children. You will also need high chairs or booster seats and small tables for activities.
In order to open a daycare, you will need a variety of age-appropriate toys to keep the kids entertained. Have plenty of educational toys such as letter and number blocks and offer other mentally stimulating activities such as crafts and coloring.
In order to keep a group of young children entertained every day, you’ll need a variety of activity options. An outdoor playground is also required, so be sure that your daycare has a safe and functioning playground.
7.Hire The Right Employees
One of your largest expenses will be the salary of your employees. You will have to take the state’s required child to staff ratios into consideration when determining how many employees you’ll need to hire.
Having enough staff is absolutely vital to running a safe daycare facility. Here are the required staff to student ratios as stated by the Department of Children and Families in NJ:
- For children under the age of 18 months: one employee for every four children.
- For children 18 months up to 2.5 years old: one employee for every six children.
- For children 2.5 years to 4 years old: one employee for every ten children.
Once you’ve determined how many children you plan to have at your daycare you can determine how many employees you will need and calculate the cost of their salaries based on the amount you plan to pay them. The average daycare worker in New Jersey makes anywhere from $9 – $17 per hour.
8.Secure Financing (If Needed)
Once it is time to finance your daycare center, there are a couple of options for the type of loan you choose. Here are a few of the financing options for new business owners who are hoping to start a daycare.
An SBA loan is a great option for new business owners and offers fairly low interest rates (on average around 4.25% – 8.75%), longer loan terms, and lower monthly payments.
Asset-based lines of credit
Asset-based lines of credit are considered revolving and in this circumstance, the loan terms are secured by the owner’s assets.
The unsecured business line of credit
An unsecured business line of credit doesn’t require any collateral but does require a good amount of existing cash flow. This type of financing involves strict qualifications.
Merchant cash advance
Merchant cash advances offer short-term financing and give the owner fast access to money but often involve higher interest rates.
Seller carry financing
This type of financing occurs when a buyer and seller negotiate terms and some or all of the financing is taken care of by the seller. Seller carry financing is often paid back within 5 years.
9.Decide On Attendance & Accounting Software
It will be necessary to install daycare software such as attendance tracking, billing tools, credit card processing equipment, and accounting software. Many daycares also offer an app that can be used to communicate with parents to check in throughout their child’s day.
How much does it cost to start a daycare?
The average cost to start a daycare is $10,000 to $50,000, but this can vary greatly depending on the type of facility and many other factors. Here are some of the costs that you can expect when starting your own daycare.
Utilities and other monthly bills
You will obviously need running water and electricity to run a daycare and these monthly bills are the business owner’s responsibility. Determine any other extra bills you will need such as wifi or any subscription services.
Is it worth it to open a daycare?
The short answer is: if you love children and families then yes. Owning a daycare is one of the most rewarding jobs you can ask for but it isn’t even the slightest bit easy so you need to have a true passion driving your efforts.
Don’t do it if you’re simply hoping to turn out a profit! Daycare facilities are extremely expensive to run and it may take many years of hard work before you’re really making a lot of money.
The average daycare owner makes about $37,000 per year but this can range anywhere from $20,000 to $60,000. If you have the funds and the passion, then all the hard work will feel entirely worth it.
Ruben has been doing online marketing for the last 4 years. Prior to that, he spent 15 years managing different brick-and-mortar businesses, in the home improvement and logistics industries. Overall, he has 20 years of business experience under his belt. Recently, he added SEO, affiliate marketing, and link building to his business skills.