Buying or Starting a New Daycare Business: The Pros and Cons

Published: 24th January 2012
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You have two options to consider when starting your own daycare business. You can either buy an existing daycare business, or start a new one. Both options have their own advantages and disadvantages depending on your requirements such as budget and location.

Buying a Daycare Business

Buying an existing daycare involves investigation to determine the state of the business. Through careful investigation, you should be able to determine if the business is worth purchasing. That is, proper analysis gives you the comfort that you are getting what you pay for. Buying a daycare business is not a simple feat and you should consult with experts such as business valuators, brokers and lawyers before undertaking such a transaction.

There are advantages of buying an existing daycare business. Assuming it is profitable, the business is cash flow positive, which is a key advantage compared to starting a new center. A profitable business gives you the confidence that you are getting some returns on your investment. In addition, an established daycare center is already known within the local community. Whenever a family needs childcare services, it is almost certain that they will consider an established center, reducing the need to spend money on marketing.

While the advantages of buying an existing daycare center is compelling, It has its own disadvantages as well. Buying an existing daycare center may require you to inject more capital for renovations and working capital. In many cases, daycare centers for sale are old and in need of some repairs. Moreover, an existing business will have an existing culture. This culture is carried over and may not be consistent with what you envision the center to be. You may also inherit bad staff.

Starting a New Daycare Business

Starting a new daycare business from scratch requires you to research, determine and assess all costs associated with starting one and may include but are not limited to the following:

  • Renovation costs. Includes materials and labour - electrical, plumbing, mechanical (Heating, Ventilation and Air Conditioning or HVAC), drywall frames, etc.

  • Professional fees. Includes architect and construction supervisors

  • Permit fees. Includes all types of building permits from the government

  • Furniture and appliances

  • Toys and learning materials

  • Outdoor playground equipment

Total cost to start a daycare center will vary and will depend on several factors such as construction materials used, amount of toys and materials, and more importantly, the size of the center. For instance, little capital or minimal cost is needed to start a home daycare. In contrast, a large daycare center operated in a commercial space will require large investments to get it started.

Compared to buying an existing daycare business, there are advantages of starting one. You can design the center specifically to your requirements. You have the flexibility of implementing all your ideas. In addition, you can set your own culture and implement your own policies and procedures with ease.

However, starting a new daycare business also has its disadvantages. The business may not be cash flow positive for some time. As a result, you will need to maintain a certain level of working capital or inject more money until your business reaches breakeven. In addition, you will need to spend more effort to market your daycare since it is new and not yet established - i.e. its brand and presence are unknown to the local community.

For more tips and strategies on how to start and manage a daycare, please visit this free How to Start and Manage a Daycare online tutorial.

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