How to start a day nursery

Setting up a day nursery can be complex, especially because there are many considerations when starting this kind of business.

From the many health and safety laws and other rules and regulations contained in the ‘Early Years Foundation Stage’ (EYFS) statutory framework to the type of curriculum you offer, there’s a lot to consider.

Our guide will break everything down into easy steps so that you can get your fledgeling day nursery business off the ground.  

Step 1: gain your qualifications

No qualifications are required to set up a nursery, but any nursery practitioners will need to be officially qualified. 

To set up a nursery you don’t need any formal childcare qualifications unless you are going to be involved in the day-to-day teaching and management of the nursery.

Typically, though, most nursery owners do have several years of childcare experience, as well as early years teaching qualifications. 

Managers who work with children need at least two years of experience as a qualified nursery teacher, one or two years of experience as a supervisor, and a nursery qualification. 

The common entry-level qualifications needed to work with children in a nursery are as follows:

• The NCFE/CACHE Level 2, which progresses through to Level 5
• The BTEC National Diploma in Children’s Care, Learning and Development
• The NVQ Level 3 in Children’s Care, Learning and Development

There are other routes into the sector, for instance via apprenticeships or a degree. To work directly with preschool children, one person must have at least a Level 3 childcare qualification that has been classed as ‘full and relevant’ by the Department of Education.

Step 2: write a business plan

Your business plan should be a clear outline of what your day nursery will offer, how it will work, and the costs associated with it. 

When preparing to set up a nursery business, creating an accessible business plan together with market research can help stay within budget, motivate staff, and track progress. Use this free downloadable business plan template to help.

A business plan should include:

• An overview of the business, describing the services it provides
•  Market analysis that shows the addressable market, the opportunity and who your competitors are
• A clear target audience, showing who your customers are, where will you find them and how you will attract them
• A marketing strategy that can help you promote your business to your target audience
• Financial projections, including details on funding, charges, costs, and revenue forecasts
• Safeguarding and how you plan to incorporate legal considerations and health and safety into your nursery. 

Step 3: find qualified staff

Use nursery recruitment agencies or advertise locally to find staff.

Legal guidelines state that at least 50% of staff must have a childcare qualification. This makes finding qualified staff a challenge. Pay rates for nursery staff are often low, usually close to minimum wage, despite being an incredibly challenging job with a high level of responsibility. It is often possible to earn a higher rate working in a supermarket than as a childcare practitioner in a nursery, for instance.

Here are a few ways to find qualified staff:

• Childcare recruitment companies
• Advertise locally, in print or online
• Contact local colleges running childcare courses

It is vital to run a Disclosure and Barring Service (DBS) check for all new staff and volunteers, including those who don’t work directly with young children, like cleaners and administrators. 

How many staff will you need?

There are very strict guidelines in the EYFS statutory framework when it comes to staffing ratios. Staff with childcare qualifications can look after more children at once within certain scenarios in a childcare setting, to adhere to legally required ratios.

The legal requirements are:

• Children aged under two – one staff member to three children
• Children aged between two and three – one staff member to five children
• Children aged three and four –one staff member to eight children (qualified early years teachers ratio is 1:15).

Some settings do offer more generous ratios as part of their quality provision. The limit for numbers in a setting at any one time is 26, regardless of how many staff are present.

Step 4: research business premises

Choose a business premise that suits your needs and satisfies health and safety regulations. 

You can set up a childminding business from your own home if you can get the necessary planning permission from your local authority.

Be aware of minimum space requirements. You need 3.5 square metres per child under two years old, 2.5 square metres per child aged two years, and 2.3 square metres for children aged three to seven.

These requirements need to be considered when deciding the space of your premises. It will impact how many children can be looked after at one time, which affects your total revenue.

If, however, you plan to use an external setting,  there are a few things you’ll need to consider:

• Is the rental price affordable?
• Is the location close to families with young children, or local schools?
• Are there parking spaces for drop-off and collection?
• Is it close to bus stops and train stations?
• Are there facilities to store and prepare food?
• Is there room for changing areas, toilets, and handwashing facilities?
• Is there a provision for a telephone?
• Does it have appropriate heating and ventilation?
• Is there a separate area to store equipment?
• Is there access to outdoor space?

Step 5: consider health and safety requirements

Make sure you follow legal health and safety requirements and all processes and procedures are clearly documented. 

Running a nursery involves complying with numerous health and safety rules. It should be a priority for your business. Not adhering to them may incur penalties. If you have five or more employees, your health and safety policies should be recorded. Policies should include fire safety and emergency procedures.

Step 6: follow legal and insurance requirements

There are strict legal and insurance requirements you must follow when opening a day nursery.

You must follow legal requirements at all times as the early years sector is heavily regulated. The most common form of regulation comes from the Office for Standards in Education, Children’s Services and Skills, otherwise known as Ofsted.

It’s important to keep accurate, updated and clear records of policies and procedures, client details, risk assessments, injuries and other policies. This will help with Ofsted reports, other information requests, or during any disputes.

A nursery is also legally required to hold public indemnity insurance. Other insurance could be helpful but are not legally required.

As you will be employing staff, you must follow all relevant employment legislation regarding working hours, conditions, pay, leave, sickness and other relevant laws.

Step 7: register your nursery

Register your nursery with Ofsted, as well as the tax authorities.

As well as registering your business with the relevant tax authorities, you must register a day nursery business with Ofsted.

During this process, Ofsted will assess the nursery’s ability to meet the 14 national standards for daycare and childminding.

Before registering with Ofsted, owners must apply for a Childcare and Children’s Social Care Health Declaration Form via their GP.

Step 8: build your brand

Your brand should be unique and recognisable.

As with any new venture, building a brand identity and marketing your business is vital to help grow and acquire more customers. For a nursery, marketing is an ongoing process, as each year you need to fill spaces as older children leave to start school.

Here are a few ways to set your brand apart from other nurseries in your area:

• Have a unique style that can be replicated on all of your marketing materials
• Create a memorable logo
• Choose an eye-catching, attractive colour scheme
• Make sure staff have a recognisable and smart uniform for staff

If you’re unsure where to begin with your branding, you could use a specialist branding consultant, but creating your own style that reflects the ethos of your business can be done by your team.

How much does it cost to start a nursery?

Starting a day nursery isn’t cheap – there are a number of big costs to consider. 

Depending on the size of the premises and how many children you enrol, total startup costs can reach £100,000.

When starting a nursery, you need to consider many costs when creating a budget:

• Premises costs including purchase price or monthly rent
• Furniture and equipment
• Renovations and redecorating
• Insurance
• Registration fees
• Staff costs
• Marketing
• Utilities
• Cleaning

Is running a nursery profitable?

You can make reasonable profits, but government-funded hours and inflation can make this difficult.

It can be difficult to make big profits running a nursery school, but it is very possible to make a reasonable profit, particularly if you open further nurseries and benefit from economies of scale. 

However, the problem for nursery businesses trying to make a profit is that government-provided funding for free childcare doesn’t always cover the costs for the nursery, so some have to charge top-up fees.

With this in mind, there are some things you can do to mitigate these losses:

• Open the nursery all year round
• Offer a holiday club
• Offer extended hours after school
• Provide additional services to create new revenue streams

To make sure you’re prepared, we recommend creating a cash flow forecast for your first year to help you decide what to charge, how many children you can support, and what hours they need to attend so that income meets costs with some left over as profit.

Financially, setting up a nursery offers some advantages for establishing a profitable business. With more and more parents having to return to work earlier and a lack of options in certain postcodes, a reliable and open nursery service is invaluable. 

The benefits of starting a day nursery

There are many benefits to starting a day nursery business. Some people have a vocation to help people and it is very emotionally rewarding to help young children grow and develop. The immediate feedback practitioners receive from children is a motivating factor for doing the job.

More parents are working, so the childcare market is growing. Governments recognise that often both parents have to work and offer funding for preschool children to help achieve this, as it benefits the wider economy.

Summary: should you do it?

The decision to set up a nursery business involves complex considerations as nurseries operate in a highly regulated environment with many laws and health and safety issues to consider.

Income potential is affected by government funding which can vary. However, nursery business owners have a ready-made customer base in a sector that will always require their services.

It’s also a rewarding career, where owners and staff can make a positive impact in those formative years. If this is something you’ve been considering, there’s nothing left to do but follow the steps we’ve outlined and give it a go!