Are you interested in starting a preschool? If YES, here is a complete guide to starting a pre-school from scratch with little money and no experience plus a sample preschool business plan template. Running a preschool can be a very rewarding and profitable venture.
An entrepreneur who is interested in children education and also having a business might find that opening a preschool would meet both desires. Before starting a preschool, one must be prepared by ensuring that they carefully plan out the venture from the beginning, by researching on local and state laws that govern preschool education business.
What Does It Take to Start a Pre-school?
There must also be planning as regards space, getting insurance, developing a curriculum, hiring additional staff, advertising and registration of children. A preschool program is a business that requires that no details be overlooked.
The first thing that needs to be done before starting out is in contacting the local governing body of child care for relevant information regarding the opening of a preschool. When approaching the governing agency, ask to meet with the administrators so as to discuss your business idea, and get information on how to become a licensed preschool program provider.
After gathering all the information that you would need including written literature, you would need to contact the local government as regards getting a license to start. Depending on the state you will be operating in, you might be required to register and pay a fee to obtain licensees.
No business is complete without a preschool business plan. This will allow you clearly see if the business will prosper or not. The business plan should include where you intend to source for capital.
You will also need to ensure that the property you intend using as a facility is in an acceptable area from which the business can be started, even if it is a section of your own residence, this can be done by contacting the zoning department of your local government, and if the area you choose is not suitable, you will be advised on suitable areas.
After applying for a business license as required by the state and meeting any other special requirements needed in order to become a preschool, you should then consult with insurance agencies regarding the right coverage for your facility. Ensure you choose a plan that will adequately cover you, your clients, as well as your business.
Lastly, ensure that you prepare your location for safety inspections, while ensuring that your facility has emergency evacuation plan in place for any unforeseen circumstances or disasters. Also prepare a curriculum for your preschool program.
You can either choose an established program from a particular publisher or choose various materials from several publishers, while not forgetting that you have an option of creating your own curriculum. Do not also forget to hire qualified staff after running background checks, and marketing your school.
24 Steps to Starting a Preschool from Home
Table of Content
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide Which Niche to Concentrate On
- 4. Know Your Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 9. Discuss with an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Write a Business Plan
- 14. Prepare a Detailed Cost Analysis
- 15. Raise the Needed Startup Capital
- 16. Choose a Suitable Location for your Business
- 17. Hire Employees for your Technical and Manpower Needs
- 18. Write a Marketing Plan Packed with ideas & Strategies
- 19. Work Out a Reasonable Pricing for your Services & Products
- 20. Develop Iron-clad Competitive Strategies to Help You Win
- 21. Brainstorm Possible Ways to Retain Clients & Customers
- 22. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
1. Understand the Industry
Preschool industry operators provide day care services for children under the ages of three and four to prepare them for kindergarten. The dispersion of the preschool programs reflects in the geographic distribution of the children, which is also influenced by the cost and supply of preschool programs, income and housing affordability patterns, labor, and child care subsidy policies. Also, varying state and local regulations and licensing requirements affect employment in this industry.
Interesting Statistics About the Industry
According to research and statistics, this industry generates $53 billion annually, and is projected to have an annual growth rate of 2.5% by 2016. The number of business in this industry amounts to 768,021, employing 1,664,311 people. There are about 53,000 commercial facilities, plus about 21,000 facilities run by non-profit organizations. The industry is highly fragmented as the top 50 companies generate less than 20% of revenue for the entire industry.
Preschool programs became popular especially as more percentage of women in the workforce grew by nearly 71% in 2007. According to the Bureau of Labor Statistics (BLS), 28% of mothers with young children worked in 1975, which has more than doubled by 60% by 2013. Over the same period, employees in the daycare industry increased by nearly 250%. The bureau also noted that investment in childcare by non-profit and government agencies, as well as new tax credits, also helped to fuel the industry’s growth.
According to the Child Care Aware group, about 11 million children under the ages of 5, spend an average of 35 hours a week in childcare. Infants in center-based care had an average annual cost that ranged from $5,496 in Mississippi to $16,549 in Massachusetts; 4 year olds had care in a center ranging from $4,515 in Tennessee to $12,320 in Massachusetts; with the quality of care and degree of regulation varying widely. Also, childcare workers were seen to be paid the lowest wages in any professional field, $21,490 on average.
However, the recovery of the economy is already impacting greatly on the preschool market. Parents and especially mothers are going back to work, thereby causing the demand for preschools and preschool services to grow. This means that disposable income will increase which will let parents especially women put more resources towards child care like the high value early educational programs.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
When it comes to the demographic and psychographics composition of those who need the services offered by a preschool, employers and parents make up the major markets in this industry.
Households make up the largest market segment, with parents making the ultimate decision on where to take their children to for day care services. Customers with 0 to $25,000 income make up to 28.2% of the potential household market, while households with income exceeding $25,000 had majority paying out of their pockets.
3. Decide Which Niche to Concentrate On
As regards the niche in this industry, the services offered are mostly uniform in nature and any differing services all have to point to the same goal which is educating the children in a safe and fun environment. Some preschool directors incorporate certain niches into their curriculum, such as;
- Teaching the children in other languages
- Taking the children out on community field trips like visiting farms, restaurants, the museum, and other such exciting places where the kids can learn.
One thing though with field trips, you would need to have a huge insurance for any incident that might happen to the property caused by the kids, harm to the kids themselves, or to one of your staff. Specializing in niche is mainly done to stimulate the interest of the children, while unlocking their potentials.
The Level of Competition in the Industry
When starting a preschool program, entrepreneurs should be aware that the demand in this market is largely driven by growth in the youth population, and secondarily by income and employment. The profitability of individual preschool facilities depends on how well they can favorably compete with their rivals through good marketing and efficient operations.
Large preschool facilities have the advantage of economies of scale in advertising and administration over smaller preschool facilities. However, smaller preschool facilities can compete in local markets if they own convenient locations.
4. Know Your Major Competitors in the Industry
Brands that are well known are those who have carved out a niche for themselves in the industry, either through the quality services they offer to the children, but it could also be in their areas of specialization that they become known for. Being regarded as a brand isn’t an easy feat, and shows that a facility has what it takes to care for the kids. Some well known brands in this industry are:
- Apple Kids
- Tree House
- Mother’s Pride
- Bright Horizons Family Solutions
- Knowledge Universe
- Learning Care Group
- Sylvan Learning Center
- Goddard Systems Inc.
Before starting up a preschool program, entrepreneurs need to be thorough when carrying out their feasibility study and research, and also be certain about the location that they intend to site their facility. In recent times, the demand for preschool program dropped due to the economic downturn and more people especially mothers being out of jibs and staying home to take care of their children, but as the economy has improved, so is the demand for preschool gradually increasing as more parents are going back to work.
This is why it is important for entrepreneurs going into this business to note that, the demand for preschool services is driven by more parents having an increase in their disposable income, and being able to pay for such services. Preschools services depend on demand to be able to operate and generate revenue.
5. Decide Whether to Buy a Franchise or Start from Scratch
The common belief is that it is better to start one’s own business from scratch rather than buying a franchise. Starting one’s own preschool has certain challenges especially as new owners might underestimate the start-up costs, and the growing competition isn’t making things easier but it also allows the entrepreneur build his or her strategies from successes and drawbacks, especially if they are starting out small.
However, buying a franchise isn’t all that bad as those that buy a franchise get a value of immediate income better than one who starts from the scratch and might have to wait to break even in 1 or 2 years. Also, those who buy from franchise usually get training and consultation from those they buy the franchise from. Even though each side has its pros and cons, the ultimate decision of how the business should start depends solely on the entrepreneur and the vision he has for his preschool program.
6. Know the Possible Threats and Challenges You Will Face
Some of the threats and challenges faced by most preschool owners are that from competition, especially from facilities that offer in-house child care. Challenges might come also from lawsuits for alleged cases of abuse or neglect, which can happen even in an efficiently run preschool. Also, there is the risk of high staff turnover and difficulty in finding qualified staff to assist in running the facility and taking care of the children. However, in any business there is always going to be one challenge or the other, how you handle your challenge will determine if your preschool grows or not.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
Every business start-up has various legal responsibilities that you as an entrepreneur should be aware of, especially as the legal entities are there to protect your business and avoid costly penalties. There are various ways that a business venture can be structured as the different business types are distinguished by the number of people that own the business, the personal liability of the owners, the tax advantages and the simplicity in forming the entity.
The legal business entity you decide to use such as sole proprietorship, Limited Liability Companies (LLCs) and partnership will determine the type of additional paperwork that you will need. The forms are usually filed with the state and federal government or other appropriate government agencies.
The easiest to form is a sole proprietorship, as it is initiated once the business starts. However, this is a venture that you would not want to be personally held liable for in-case anything goes wrong. A corporation on the other hand has a number of variations for each such as S Corporations, and Limited Liability Corporations (LLC), and protects the owner from being personally held liable should anything go wrong.
8. Choose a Catchy Business Name
- Intuitive Children Learning Centre
- Catch Them Young Learning Inc.
- Young Minds Inc
- Mother’s Joy
- Swings and Books
- Playful Learning
9. Discuss with an Agent to Know the Best Insurance Policies for You
There are risks that are associated with taking care of small children in preschool, particularly when it comes to their health and safety. Apart from the health and safety of the children you also have to worry about generic business issues like fire, personal injury to the children or staff, and property damage. As a serious professional, you would need to meet with an insurance agent, so that you could be advised on the best policy that is suitable for your preschool business.
Here is some of the basic insurance you should consider purchasing, if you are serious about starting your preschool business in the united states:
- Public Liability Insurance
- Employers’ Liability Insurance
- Workers’ Compensation Insurance
- Accidental Damage
- Professional Indemnity
- Personal Accident
- Contingent Motor Liability
- Personal Effects
- Group Accident and Liability Insurance for Child Care Providers
- Business Interruption Insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
If you are venturing into this business, you might need to be concerned with the hassles of intellectual property protection. This means that your preschool might need to apply for intellectual property protection if it deems it necessary. You can secure an intellectual property protection on copyrights and trademarks which could include graphics, logos, icons and images.
11. Get the Necessary Professional Certification
Intending owners of preschools in the United States might not need to have a professional certificate except in situations where they also double as the preschool’s director.
However for teachers and directors that might have the demanding tasks of working with the children, there are essential requirements that they need to become certified in the United States of America. Most teachers and directors have certifications that are recognized nationally, and public preschools require that preschool teachers and directors be licensed in early childhood education.
12. Get the Necessary Legal Documents You Need to Operate
Some of the basic legal documents that you would need to successfully run a preschool business in the United States of America are:
- Certificate of Incorporation
- Business License
- Business Plan
- Insurance Policy
- Company Bylaws for Corporations
- Trademark registration for IPP (Optional)
- Operating Agreement for Limited Liability Company (LLCs)
- Employment Agreement
- Contract Documents (For suppliers)
- Non Disclosure Agreement (NDA)
- Tax Clearance Certificate
- Health Certificate from local municipality
- Environmental Health Permit
13. Write a Business Plan
The business plan is the personal tour guide of the entrepreneur. It is not the plan that is most beneficial to your business, it is the value you gain by completing the process of carrying out the feasibility study, creating the plan and the writing it down. The business plan therefore is like a roadmap for your business, providing the research and analysis that can be used to determine the direction the business needs to go, keeping your business on track, and setting milestones that will enable you to measure the success of your business.
A business plan enables a business to establish a vision and determine the direction a business ought to go in. it also set goals, chart and review operations as well as establish and maintain fiscal fitness.
Every business plan is unique to the specific business that it is written for. Due to this, what is included in a business plan, from the analysis and details to the format of the plan. As a general guideline, the elements of a business plan usually includes key elements such as executive summary which gives a brief summary of the information that will be provided in the plan, such as the company operations, marketing and financial overviews.
The other elements which are included in the business plan are as follows:
The purpose tells what your business is and why it exists. Other information include business description, structure, owners, location, hours of operation, product or service, target market, competitive edge or unique selling points, and any business achievements. It also includes mission statement, vision statement and value statement.
Other important elements such as the industry analysis, includes industry economics and trend, SWOT analysis, regulations, economic factors, price comparisons, competition, staffing, business operations, equipment, production or service, quality control, inventory and supply.
Lastly, a business plan should have market research which includes the demographics, psychographics, market segment, and marketing plan strategy and market share. As this might seem daunting for some entrepreneurs, one could make use of consultants that could help in writing out this business plan, or download a preschool business template online.
14. Prepare a Detailed Cost Analysis
The increase in household income due to both parents working has created huge demand childcare facilities. Every state has its own regulations regarding the necessary requirements to legally operate a preschool facility, the teacher-to-child ratio and the safety requirements for staff and children. Fees might be charged depending on the state to register your preschool.
The actual start-up costs for your preschool will depend on how as an entrepreneur you choose to establish and operate your business. If for instance, you operate from your residence, it will be far cheaper than having to rent or buy a facility; especially as home based preschool have lower overhead costs including rent and building costs and maintenance. Other factors might be feeding, number of children you plan to accommodate, and the number of staff you intend to recruit.
In launching your own preschool, these are the basic costs you would have to contend with:
- Business incorporation fees $750
- Licenses and Permits $700
- Legal and Accounting Fess $400
- Facility fees $10,000
- Utilities such as electricity, phone, water and garbage removal $1,500
- Insurance $5,000
- Supplies and Equipment such as cribs, tables and small chairs, safety equipment, activity centers, playground equipment, special needs equipment, teaching toys and supplies, eating utensils, books, cleaning supplies, diapering supplies $10,000
- Food costs $3,000
- Administrative costs $700
- Marketing costs $300
- Other operating costs $500
Going by the report from detailed research and feasibility studies, you will need an average of $35,000 to start a small scale preschool business in the United States of America.
If you want to start a medium scale preschool business in the United States, you would need nothing less than $70,000. And if your intention is to start a large scale preschool business in the United States of America, then you might need over $150,000 for a start.
15. Raise the Needed Startup Capital
Regardless of the business you want to venture into as a serious minded entrepreneur, you will need capital that will get the business going. Most of what makes the cost of startup high is the operating equipment that is used in starting the business. In financing a business, the entrepreneur has to remember that not all things might be needed to be purchased, and that the aim of the business is to make profit which can only be done after all expenses and tax has been deducted.
The amount of money you need to start the business will depend on the size and location of the business, the number of children you intend to enroll, number of staff you want to recruit and the services your preschool will offer. This is why the business plan is important as it provides a clear picture of how much your business would need, and that will determine if you can comfortably use your personal money, borrow from family, or go to the bank to get a loan.
Listed below are the options available to you when intending to finance your preschool business start-up:
- Personal Savings, Property Equity, Unit Trusts, Insurance Policies
- Family and friends
- Personal Line of Credit
- Bank Loans
- Small Business Administration Loans
- Loan from investors
16. Choose a Suitable Location for your Business
Deciding on the appropriate location for your business is very vital. In choosing a location for the tutorial school, it is important to know your goals and vision for the tutorial business. If you are going to open your preschool business in a commercial area, it should be a place that would be close to where the parents work or live. This could be in a residential neighborhood, close to a school, or sharing the facility with another community organization.
Regardless of being in a commercial area, it should fulfill the criteria of not being close to busy roads, hotels, markets, and entertainment centers, so that the children can learn in a conducive environment without being constantly distracted.
Your location has to answer questions such as: is there enough space for parking? Is there enough space for all the equipment you intend to get, whilst still complying with the local municipality’s requirements? Is the area you intend to locate your business zoned for your kind of business? How much refurbishment will be carried out on the facility before it could be operated as a preschool?
If you intend to operate from home, you will have to consult with certain people such as your family members first on how they would feel having the business operated around them, and possibly encroaching into their privacy. Your neighbors have to be consulted also about the potential noise and extra traffic that is bound to occur, and how you intend to keep the inconveniences to the barest minimum.
Lastly, you will also have to find out from the local municipality if your home needs to be zoned for special concessions or business rights.
17. Hire Employees for your Technical and Manpower Needs
Some of the equipment and children tools needed to launch a preschool business can be bought as fairly used and they will serve you for a long period of time if well managed and utilized. It is safer and economical to purchase some of the tools and equipment as fairly used for a preschool business especially if you just want to start the business on a small scale. Some of the fairly used tools and equipment can be gotten cheap at online stores.
These are some of the equipment that you would need to fully launch your preschool business;
- Play structures
- Indoor Play
- Card Stock
- Paper Links
- Crayons and Colored Pencils
- Foam Sheets and Stickers
- Construction Paper
- Child Safe Scissors
- Ziploc bags
- Scrap Paper
You can totally run your preschool business from home as long as you meet with all the local requirements. If you must get an office facility, ensure that it is in the right area and that it is safe and conducive for the children and staff.
The number of staff needed to assist in your preschool business will vary according to how many children you want to enroll. If they are few, you could run the business effectively b yourself, but if they are more, then you would need a director, secretary, and three or four teachers. This could be between 5 to 7 people.
The Service Delivery Process of the Business
There is no production process involved in the preschool business as this is mostly a service oriented business. The only production might be in creating curriculums or activities for the children.
The process can range from learning and knowing about different subjects, languages, or being versed in other skills such as gymnastics and dancing, and any other requirements that will be needed while caring for the children. The other process ranges from feeding the kids to preparing them for KG, and also providing emergency care in case of any incident to health that might occur while caring for them.
18. Write a Marketing Plan Packed with ideas & Strategies
If you want to generate income for your preschool business, then you have to get out there to market the services of your preschool. Marketing means you have to exhaust all possible means that will generate revenue for your preschool. You must go out to where the parents are using all means possible, and convince them on why their kids should be in your preschool.
Depending on your marketing budget, you can decide on what avenues should be explored for your preschool, which is why most entrepreneurs set aside a huge marketing budget for their businesses, so as to make use of all means and wide options available instead of being restricted to limited options due to a tight budget.
Also, it is wise to carry out a thorough research before spending on advertising and marketing, so that you know the best areas that bring in results, instead of splurging the money with no plan in mind. Here are some marketing tips that you can adopt for your preschool business:
- Get an online presence by having a website for your preschool, and ensure that you deploy a good Search Engine Optimization (SEO) so that your school would top most search sites.
- Word of mouth referrals from family and customers
- Use your staff as your preschool program marketers by training and involving them in your marketing strategies
- Make use of the social mediate and ensure that your preschool’s presence is felt on certain platforms like Facebook, Twitter, Google Hangouts and Instagram.
- Use the emails to market your preschool business by engaging in permission marketing
- Make use of brochures, fliers and business cards to market your preschools in target geographical region
- Make use of the media such as newspapers, relevant magazines, radio and television.
- Your preschool should be represented at community events, or you can as well host and organize your own community shows and fairs or children events.
- Use newsletters effectively to market your business.
19. Work Out a Reasonable Pricing for your Services & Products
Even though a preschool might be considered one of the best business to start up, there are factors that could make or mar your preschool business, and one of them is the right pricing to set for your customers. This is not a business that can be operated from home, where you can hope to reduce your overhead costs, and so while it might seem a bit impossible especially as quality things do not come cheap, you would need to offer a price that match your services.
Parents would not mind paying the price you set for your preschool if your price conforms to location and quality service. For example, you cannot locate your preschool in an area where there are low income earners, and charge so high for your services.
20. Develop Iron-clad Competitive Strategies to Help You Win
Except you are running a monopolistic business, you would always need competitive strategies to stay afloat. Also competitive strategies ensure that your preschool remains proactive in pricing and delivering of services, as parents and guardians will always look out for preschools that won’t put a drain on their pocket, while delivering the quality service and education that their kids would need to be smart.
Your competitive strategy could be one that you could adopt where kids are given equal opportunities at excelling academically and otherwise in a learning environment that is conducive. This means that even though the curriculum might be strict and adhere to the guidelines of the state, the kids should enjoy learning and excelling.
Another competitive strategy that you would need to employ can be other ways of learning for kids that cannot learn or cope with others.
21. Brainstorm Possible Ways to Retain Clients & Customers
According to studies from the United States Small Business Administration and the United States Chamber of Commerce, it found that acquiring new customers can cost as much as seven times more than just retaining existing customers.
One of the smartest way to increasing customer retention is in setting client expectations early and a bit lower than your preschool can provide, which will then eliminate uncertainty as to the level of service you would need to offer to ensure your clients being happy. This means that your preschool can when doing more than what the customer expects can then be seen to be over delivering, especially as clients tend to remember negative experiences more than they would positive experiences, and might use that as a reason to withdraw their kids from your preschool.
22. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
One of the most important aspects of marketing is branding, and preschools are no exception. As preschools are close substitutes in terms of services being offered, it is mainly the brand awareness that helps in bringing in new clients. This means that preschools need to boost their brands to ensure that clients see them as the only school that provide the best education and development for the child.
Below are the platforms that can be used to boost the brand awareness of your preschool:
- Make brand ambassadors of your customers by delivering more than promised and also putting some parents (customers) on the school’s board
- Organize events for the preschool such as counseling sessions on good parenting tips, or baby shows, as this will help boost brand awareness.
- Advertise your preschool in local newspapers, radio stations, and on local television stations.
- Create a website and promote the preschool’s unique activities, students and events.
- Establish your preschool in your geographical region by sponsoring other kids activities or kid’s fair
- Use the social media to your preschool’s advantage, by ensuring that your preschool has social media handles in the right places such as Facebook, twitter and Instagram.
- Use direct mailing approach to reach out to potential clients as well as existing ones.
23. Create a Suppliers/Distribution Network
Those that run a preschool would need to scout for food and supply networks, where you can get food items and educational materials for your students and staff.
If you are in a good business relationship with these suppliers of food items and educational materials that is needed for your pre-school, it will help your business run well without any hitches, as food items will be brought on time as well as educational materials.
Apart from executing jobs for you without delay, these vendors can also help you get the items you need for your preschool cheaper than you would get them directly from retailers, thereby saving your business some operating cost and improving the bottom-line.
24. Tips for Running a Pre-school from Home Successfully
A pre-school’s success is usually determined by the director’s enthusiasm. As a director you have to ensure that you provide a fun and safe environment for the 3 and 4 year old that will help them enhance their social and medical skills. Success can be determined if as the entrepreneur, if you carefully follow the specific requirements and rules required by the state in which you are operating in. This also means having a professional relationship with the state licensing inspector that will be beneficial to the pre-school and ensure that it runs successfully.
Another way by which the pre-school can be successfully run is by hiring licensed pre-school teachers and other staff members that are trained according to the policies of the preschool and that of the state. You also need to continually evaluating the performance of your staff that will help maintain control of the organization. You should also use a structured curriculum that will prepare the children for kindergarten.
Provide nutritious meals for the children by joining a food assistance program that will ensure that you and your staff are trained in proper nutritional habits while receiving monetary reimbursement for food purchases.