Guides
What does it take to start a childcare center completely from scratch?
Starting a childcare center means licensing, a lease, staff at ratio, and enough enrolled children to cover payroll before the first fee arrives.
What to take away
- To start a childcare center completely from scratch, call your licensing officer before you call a landlord. That officer sets your room capacity, your staff-to-child ratios and your age groups in writing.
- Break-even enrollment is arithmetic you can do before you sign a lease. It has to count the children who pay a subsidy rate instead of your posted rate, and the enrollment section works one example.
- Ratios decide payroll, and payroll is the largest line in a childcare budget. A room licensed for 24 infants needs more adults than a room licensed for 24 preschoolers.
- Start the criminal record checks, references and College of ECE registration before you sign an offer. A cleared hire takes weeks, and a vacant ratio position closes a room.
- Budget for the inspection list and the repair list separately. Playground surfacing, cribs and changers have to meet CSA standards, and a failed inspection is a closed room.
This is general business information for operators planning a new center. Licensing, subsidy, employment, tax and lease terms vary by province, state and municipality. Confirm your own requirements with your licensing officer, the ministry responsible for childcare in your jurisdiction, a lawyer and an accountant.
Start with the licensing officer, not the lease
The first call is to the body that licenses childcare where you are. In the United States that is your state licensing agency. In most Canadian provinces that is the provincial ministry responsible for childcare, and in Ontario it is the Ministry of Education.
Four licensing numbers to get
- Max children by age group
- Staff-to-child ratio per age group
- Staff qualifications per room
- Physical space requirements
Regulators differ by name. California child care centers apply through the Department of Social Services. Texas operators file with the Health and Human Services Commission. New York centers go through the Office of Children and Family Services.
Childcare.gov explains that states and territories set and monitor minimum requirements, and that ratios, qualifications and exemptions differ by jurisdiction and care setting.
Ask for four numbers in writing before you look at a single property:
Start with the licensing officer
- The maximum number of children your proposed space can be licensed for, by age group.
- The staff-to-child ratio for each age group.
- The staff qualification required in each room, and whether a supervisor needs College of ECE certification.
- The physical requirements for the spacesquare footage per child, washrooms, outdoor play area, kitchen, and fire separation.
Those four numbers set your revenue ceiling and your wage floor at the same time. A room you cannot staff at ratio is a room you cannot fill.
Ratios vary by age and jurisdiction. Most U.S. states license infant rooms between 1:3 and 1:5, toddler rooms between 1:6 and 1:9, and preschool rooms between 1:10 and 1:12.
Canada
In Canada, licensing is provincial. The ministry responsible for childcare issues the licence, and in Ontario that ministry is Education. The document for each site is a Child Care Centre Licence. Ask the ministry for the current review time in writing before you commit to a lease.
Ontario's Child Care and Early Years Act allows one educator for every three infants under 18 months, one for five toddlers, and one for eight preschoolers. Other provinces set their own ratios, so get the numbers for your province in writing.
The startup sequence, step by step
Startup sequence, step by step
- Get licensing numbers, check zoning
- Price build-out with licensed contractor
- Calculate break-even enrollment
- Apply for license, pass inspections
- Clear every ratio position
- Open one room at a time
The startup sequence
- Get the four licensing numbers in writing, and check the zoning and certificate of occupancy at the address before you sign anything.
- Price the build-out with a contractor who has finished a licensed childcare space. Washrooms, fire separation, fencing and a kitchen drive the bill.
- Learn the licensing calendar before you sign a lease. Most U.S. states review a complete center application in 4 to 12 weeks, and Ontario allows several months for a new Child Care Centre Licence.
- File the application. California uses form LIC 200, Application for a Child Care Center License. Texas operators file with the Health and Human Services Commission, and Ontario operators apply to the Ministry of Education.
- Pass the fire, health and equipment inspections. Fire and health are separate appointments, usually booked 1 to 3 weeks out, and a failed item triggers a re-inspection.
- Clear every ratio position before you advertise spaces. An incomplete file is a staff member who cannot be counted. Open one room at a time as staffing allows, instead of filling every licensed space on day one.
The startup cost list
Costs split into three buckets: one-time setup, monthly fixed, and monthly variable. Get quotes for the first bucket before you commit to the second.
Typical startup cost ranges
- Licensing application$50–$500
- Build-out$30–$120/sq ft
- Playground$15k–$60k
- Software$50–$250/mo
- Insurance$1.5k–$6k/yr
| Bucket | What is in it | How to price it |
|---|---|---|
| One-time setup | Leasehold improvements, licensing application fees, cribs, changers, cots, tables, playground surface and equipment, kitchen equipment, sign-in and billing software setup, signage | Written quotes from suppliers; confirm equipment meets CSA standards with your licensing inspector |
| Licensing application | The fee to file for a center license with your state or provincial regulator | Typically $50 to $500; a few jurisdictions charge nothing |
| Leasehold build-out | Washrooms, sinks, fire separation, fencing, flooring and kitchen work | Typically $30 to $120 per square foot in major metros |
| Playground and surfacing | Equipment plus the impact-absorbing surface beneath it | Typically $15,000 to $60,000 for a licensed outdoor space; CSA Z614 covers the equipment |
| Software | Enrollment, attendance, billing, parent messaging and food program claims | Brightwheel, Procare and Lillio publish plans that typically run $50 to $250 a month per center; KidKare files USDA food program claims |
| Insurance | General liability, property, and abuse or molestation cover | Typically $1,500 to $6,000 a year for a small center |
| Lease or rent | The space itself, usually quoted per square foot per year | Typically $12 to $40 per square foot per year in U.S. markets and $30 to $70 in the largest metros; confirm whether taxes, insurance and maintenance are billed on top |
| Payroll | Teaching staff, a director, substitutes and employer contributions | Start from state or provincial wage data and add 15% to 30% for burden; at 40 children, nine teaching positions plus a director land near $36,000 a month |
| Monthly fixed | Rent, insurance, software subscription, accounting, utilities, base administrative wage | Lease and policy documents |
| Monthly variable | Wages and payroll burden, food, supplies, cleaning, repairs, substitute coverage | Your provincial wage grid plus benefit and payroll costs |
Payroll burden is the line new operators underestimate. Employer contributions, benefits, paid planning time and substitute coverage typically add 15% to 30% on top of the hourly wage in the United States and Canada.
Work one payroll example. Nine full-time teaching positions at $17 an hour, 40 hours a week, cost $680 each in weekly wages, about $2,950 a month.
Add 20% for employer contributions, benefits and paid planning time, and one position costs about $3,540 a month. Nine positions come to about $31,900.
A director at $50,000 a year adds about $4,200 a month. First-year payroll lands near $36,000 a month before rent, insurance and food.
Rent is the other fixed cost that decides the deal. Childcare space typically runs $12 to $40 per square foot per year in most U.S. markets, and $30 to $70 in the largest metros. A 3,000 square foot space at $22 per square foot costs about $66,000 a year, or $5,500 a month.
Childcare needs ground-floor space, outdoor access, washrooms sized for children and fire separation. Cheap second-floor office space rarely converts without spending the difference.
In Toronto and Ottawa, rent and wages together typically decide whether a center is viable at all. In a smaller market the split shifts toward wages.
Equipment and build-out costs can be financed. In the United States, SBA 7(a) and 504 loans through participating lenders can cover leasehold improvements for eligible borrowers.
Nonprofit community development lenders, including the Low Income Investment Fund, finance child care facilities in some states. In Canada, ask your ministry whether capital funding for new spaces exists in your province.
Enrollment, waitlists and fee regimes
Revenue depends on enrollment, not on capacity. A center licensed for 60 children running at 45 is a different business from one running at 58.
Key enrollment and fee figures
- 60licensed capacity example
- 45enrolled children example
- 58enrolled children example
- $9 to $10Quebec daily fee
Two things shape how fast you fill. The first is the fee regime. In Canada, provincial and federal programs change what parents actually pay: the Canada-wide Early Learning and Child Care agreements, Quebec's low daily fee, and Manitoba's funding model for non-profit centers all work differently.
Quebec's reduced-contribution rate is one daily fee set by the province and indexed each year, around $9 to $10 a day recently. The federal-provincial agreements target an average $10-a-day fee by 2026.
Your posted fee is not your revenue per child if some families receive a subsidy. Model both rates.
In the United States, Child Care and Development Fund vouchers pay a state-set rate that often sits below a center's posted fee.
The second is the waitlist. Winnipeg and Vancouver run centralized waitlists, so parents register once and you draw from a queue rather than marketing to individual families. Ask your municipality's waitlist office how new centers are added and how referrals are made.
Most U.S. markets have no central queue, so enrollment marketing sits in your budget.
Track four numbers monthly from the day you open:
Enrollment and fee regimes
- Occupancyenrolled children divided by licensed spaces.
- Average daily feetotal fee revenue divided by child-days.
- Labor as a percentage of revenue.
- Break-even enrollmentfixed monthly costs divided by your average net fee per child.
Run the break-even arithmetic with assumed numbers. Fixed monthly costs are $46,000: rent $5,500, payroll $36,000, insurance $400, software $150, accounting $300, utilities $650, and food and supplies $3,000.
The posted fee is $1,250 a child a month. Divide $46,000 by $1,250 and the answer is 36.8, so 37 children cover the fixed costs. The license allows 40.
Now count the subsidy. If one child in three pays a net $1,000 a month instead of $1,250, the blended net fee is $1,167. Divide $46,000 by $1,167 and break-even moves to 40 children, which is the whole license with nothing held back for a vacancy.
If break-even enrollment is above your licensed capacity, the model does not work at that fee. Change the fee, the lease or the age mix before you open, not after.
Staffing and the checks that take time
Hiring in childcare is slower than hiring in most sectors because the checks are mandatory. Plan for criminal record checks, vulnerable sector checks where required, reference checks and, in provinces that regulate the profession, College of ECE registration. None of these can be completed the week you open.
Plan the waiting time in weeks. State and FBI fingerprint results typically come back in 1 to 3 weeks, and a full staff file with references and a vulnerable sector check can take 4 to 8 weeks to clear.
College of ECE registration in Ontario needs transcripts, a fee and a completed application. Allow 4 to 8 weeks after you submit, and start the file when you make the offer, not when the candidate accepts.
Mandatory pre-hire checks
- Criminal record check
- Vulnerable sector check
- Reference checks
- College of ECE registration
- FBI or state fingerprint checks
- Pediatric CPR and first aid
In the United States, most states require FBI or state fingerprint checks before a hire counts toward ratio, plus pediatric CPR and first aid cards renewed every two years.
Credentials differ. A Child Development Associate credential from the Council for Professional Recognition satisfies lead teacher rules in many states, a state teaching permit does it in others, and Ontario requires a registered early childhood educator in each group.
Build a reliability test into the interview. Ask candidates to describe a shift they covered at short notice and what they did when a colleague called in sick. Ratio breaches usually start with an unfilled shift, not with a bad hire.
Set your wage against the provincial ECE wage grid, then add the burden. If your grid wage plus burden puts labor above roughly two-thirds of revenue at full occupancy, you need a different fee, a different age mix or a different space.
Keep a substitute list of cleared staff. A vacant ratio position closes a room the same morning.
Compliance paperwork you will be inspected on
Your licensing officer will inspect against the requirements they gave you.
Records inspectors will ask for
- Attendance and sign-in sheets
- Staff schedules showing ratio coverage
- Qualification documents
- Criminal record check dates
- Incident reports
- Equipment maintenance logs
Compliance paperwork
- The license itself, posted where parents can see it, plus the most recent inspection report.
- The licensing application and your correspondence with the licensing officer.
- Attendance records, signed daily, for every child in every room.
- Staff files with criminal record and fingerprint results, vulnerable sector checks where required, references, CPR and first aid cards, and registration numbers.
- Immunization records and any exemption letters.
- Medication authorization forms and a medication log.
- Incident, injury and illness reports.
- Fire drill and emergency evacuation logs.
- Menus and food service records, plus Child and Adult Care Food Program claims if you serve meals.
- Equipment and playground inspection logs, including the impact-absorbing surface.
- Ratio and staffing schedules for each day, with the substitute list.
- Subsidy billing records and the attendance that supports each claim.
Most state agencies inspect at least once a year, and some visit twice. Fire and health inspections run on separate schedules.
Centers that serve meals can claim USDA Child and Adult Care Food Program reimbursements through their state agency. The claims need the same attendance records as your subsidy billing.
Two failure cases are common. The first is a ratio breach found on inspection, which can suspend a room. The second is a subsidy clawback, where a claim is disallowed because the attendance record does not match the hours billed. Both are paperwork problems before they are care problems.
For the business side, the U.S. Small Business Administration: SBA Business Guide covers planning, startup costs, permits, insurance and finance. It also covers hiring.
The Internal Revenue Service: Starting a business covers structure, tax identification and recordkeeping. Childcare.gov: What Is Child Care Licensing? is the plainest starting point for how licensing works in U.S. states and territories.
Common questions
What do I need before I sign a lease?
Four numbers from your licensing officer: licensed capacity by age group, staff-to-child ratios, required staff qualifications, and physical space requirements. Without them you cannot calculate revenue or payroll, and a lease you cannot staff at ratio is a lease you cannot use.
How much does it cost to open a childcare center?
A small center moving into a space with the right washrooms and kitchen typically spends $25,000 to $75,000 on equipment, licensing and setup. A build-out from a bare shell typically adds $150,000 to $500,000 or more, mostly at $30 to $120 a square foot.
How long does hiring take?
Longer than most sectors, because criminal record checks, vulnerable sector checks, references and College of ECE registration all take time. Start the process before you sign an offer, and keep a substitute list so an unfilled shift does not close a room.
How do I know if the center will be profitable?
Work the break-even calculation in the enrollment section, including the subsidy mix. If the result lands above your licensed capacity, the fee, the lease or the age mix has to change before you open.
Which rules apply to my center?
The ones your provincial ministry or state licensing agency sets, plus your municipal waitlist office for enrollment and your provincial or state tax authority for business registration. Confirm each in writing and date the source, because fee regimes and funding programs change.
