Daycare Business Plan: Licensing, Ratios, and Costs

What should a daycare business plan include?

The SBA describes a traditional business plan with eight sections: executive summary, company description, market analysis, organization and management, service or product line, marketing and sales, funding request and financial projections ^[1]. Lenders and partners know that order, so it is the right frame for a daycare too.

SBA section	What a daycare plan adds
Executive summary	Program type, ages served, licensed capacity, opening date
Company description	Home or center, mission, what families get that nearby programs lack
Market analysis	Families with young children near you, waitlists, competing programs
Organization and management	Legal structure, director, staff roles, required qualifications
Service or product line	Age groups, hours, curriculum, meals
Marketing and sales	Enrollment plan, tours, referrals, local listings
Funding request	Build-out, equipment, licensing costs, working capital
Financial projections	Tuition by age group, payroll by ratio, five-year forecast

In a daycare plan, the licensing rules are not an appendix: they set your capacity, your staffing and most of your costs. Write the licensing research first, then let it feed every other section. If you have not chosen a business structure yet, our LLC by state guides explain the filing step, and a mission-driven program could look at how to start a nonprofit instead.

How do licensing rules shape your daycare plan?

Licensing is the main way the U.S. and its territories regulate child care. State and territory governments set minimum health and safety requirements that programs must meet to legally operate, and licensed programs are monitored to make sure they keep meeting them ^[2]. Childcare.gov also notes that licensing sets a baseline and does not guarantee quality.

For the plan, turn licensing into a short research section that answers these questions with your state's rules:

• License type: Does your program need a family child care home license, a center license or something else? The answer depends on your state, the number of children and the setting.
• Capacity: How many children may you serve, by age?
• Ratios and group sizes: How many children may one caregiver supervise in each age group?
• Staff rules: Background checks, minimum age, training hours and director qualifications.
• Building rules: Square footage, outdoor play space, fire safety and health inspections.
• Local rules: Zoning, business licenses and occupancy permits from your city or county.

Start with your state's child care licensing agency; Childcare.gov links to state and territory resources. Do not copy another state's rules into your plan: ratios, capacity limits and fees differ from state to state.

What staff-to-child ratios should you plan for?

Ratios set your minimum payroll, so they belong in the plan in detail. Here is one official example, not a national rule: Texas sets the maximum number of children one caregiver may supervise in centers licensed for 13 or more children ^[3].

Age group (Texas centers, 13+ children)	Max children per caregiver
0 to 11 months	4
12 to 17 months	5
18 to 23 months	9
2 years	11
3 years	15
4 years	18
5 years	22
6 to 13 years	26

The math is simple once you have your state's table. Under the Texas example, 8 infants under 12 months need at least 2 caregivers on duty in ratio, while 2 caregivers could cover up to 36 four-year-olds. Younger children need more staff per child, so an infant room costs far more to run than a preschool room of the same size. Breaks, open and close shifts and absences mean you will schedule more staff hours than the bare ratio.

For wage planning, the BLS reports a median pay for childcare workers of $34,980 per year, or $16.82 per hour, in 2025 ^[4]. That is a national median, so half of workers earn more and half less; check local pay before you set your payroll line.

How do you fill in each section of the plan?

Copy these tables into your own document and replace every bold blank. Keep answers short and specific.

1. Executive summary

Item	Your answer
Program name	[name]
Program type	[family child care home / child care center]
Ages served	[for example, 6 weeks to 5 years]
Licensed capacity sought	[number of children]
Location	[city, county, state]
Target opening date	[month, year]
Funding needed	[$ amount and purpose]

2. Company description

Item	Your answer
Mission	[one sentence]
Legal structure	[sole proprietorship / LLC / corporation / nonprofit]
What families get that nearby programs lack	[hours, ages, curriculum, language, location]

3. Market analysis

Item	Your answer
Families with children under 6 in your area	[number and source]
Licensed programs within your drive radius	[count from your state's provider search]
Waitlists or unmet age groups (often infants)	[what you found]
Local tuition range by age group	[weekly rates you collected]

4. Organization and management

Role	Required qualifications in your state	Who
Owner or director	[state requirement]	[name]
Lead caregivers	[state requirement]	[number]
Assistants and floaters	[state requirement]	[number]

5. Service line

Age group	Hours	Ratio in your state	Max enrolled	Weekly tuition
Infants	[hours]	[1:__]	[number]	[$]
Toddlers	[hours]	[1:__]	[number]	[$]
Preschool	[hours]	[1:__]	[number]	[$]
School age	[hours]	[1:__]	[number]	[$]

6. Marketing and sales

Item	Your answer
Enrollment goal by month 3, 6 and 12	[numbers]
How families will find you	[tours, referrals, state provider listing, local groups]
Enrollment steps	[inquiry, tour, application, deposit, start date]

7. Funding request

Use of funds	Amount
Lease deposit or home modifications	[$]
Furniture, cribs, toys and learning materials	[$]
Safety items and fire equipment	[$]
Licensing, inspections and permits	[$ from your state and city fee schedules]
Insurance	[$ from quotes]
Working capital until enrollment fills	[$]

8. Financial projections

Line	Formula	Year 1
Tuition revenue	enrolled children x weekly rate x weeks open	[$]
Other revenue (fees, food program reimbursement)	[source]	[$]
Payroll	staff on duty by ratio x hours x wage	[$]
Rent or occupancy	[lease]	[$]
Food, supplies, insurance	[quotes]	[$]
Net income	revenue minus expenses	[$]

SBA advises forecasting the next five years in this section ^[1]. Use the same table for years 2 to 5.

How do you estimate daycare costs and revenue?

Build your budget from quotes and your state's rules, not from national averages. Add each startup line from the funding table to our startup cost calculator to get a total you can defend to a lender.

On the revenue side, the USDA reimburses participating child care providers, including child care centers and family day care homes, for meals and snacks they serve through the Child and Adult Care Food Program ^[5]. Ask your state agency whether and how you can join before you count it in your projections.

Three numbers drive the projection:

• Enrollment ramp: plan enrollment month by month instead of assuming you open full.
• Payroll by ratio: from the ratio section above, by room and by hour.
• Tuition by age group: infant rooms need more staff per child, so price each age group from its own payroll cost.

If you want to compare formats, our cleaning business plan and food truck business plan use the same SBA sections.

Should your plan be for a home daycare or a center?

A home program usually has lower facility costs and a smaller capacity, so the plan focuses on your home's safety setup, your hours and a full roster. A center plan carries a lease, build-out and a larger payroll, so lenders will look hardest at the enrollment ramp and the ratio-based staffing table. Our guide to how to start a business covers the registration steps that come with either model, and our business ideas page lists other models to compare.