Starting a nursery business: 5 simple steps
A business that offers daily rewards, flexibility and community involvement, here's how to turn your dream of running a nursery into a successful reality...
- Register your nursery business name with our preferred company formation agent (external site, opens in new tab)
- See if you can get a Start Up Loan to help you start a nursery business idea (external site, opens in new tab)
A childcare business can be the perfect start-up for an aspiring entrepreneur with a caring nature, a passion for children’s welfare and education, and an interest in community development. And as childcare costs and availability become an increasing problem for working parents in Britain, it’s obviously a business with a significant market.
However it’s not all face painting and adorable toddlers, running a nursery is a business and one that comes with a lot of rules and regulations. It also takes an abundance of energy and patience; strategic business planning, close cashflow monitoring and assertive customer relations. You may also have to train and hire staff as your business grows, and as you’re responsible for the safety of children, it will be essential that you have a good reputation and that you employ the right team.
We’ve put together five top tips to help you launch a successful nursery business – and ensure your experience is more Mary Poppins than Kindergarten Cop…
1. Be passionate: Owning a nursery means juggling tantrums with balance sheets
Running a nursery means a lot more than just being good at taking care of children. You must be trained in childcare and, if employing staff, have trained carers on your books but you’ll also need to meet health and safety regulations as well as managing general business administration, such as red-tape issues and financial planning. (It’s worth noting that nursery businesses generally do not result in high turnovers). And it’s not just the paperwork that can be difficult, an entrepreneur running a childcare facility must be enthusiastic, energetic and patient – children are extremely energetic, and can be easily upset but not so easily amused.
However, while it won’t necessarily make you a millionaire and will undoubtedly be hardwork, running a nursery business can result in much more than financial gain. It’s a business that is well-suited to working parents, enabling them to look after and watch their own children develop as well as other kids. Additionally it can offer a sense of personal accomplishment, as you’ll be creating an enjoyable and safe environment for children, training young people to be nursery nurses and working within a community. If running a full-time nursery seems a little daunting to start with, you could always try becoming a child-minder first, which will mean you do not need to be fully trained and can choose to work part-time.
2. Like any business, plan ahead and do your market research
Market research is important for any business; it allows you to gauge what the competition is like and understand if their is a market for your nursery; it will also assist you in deciding what your start-up’s USP can be, who your main customer is and how you will target them. Finally it will help you mould your company into a success – many entrepreneurs start out with one business in mind but end up pivoting or adjusting their original model because they’ve been influenced by a competitor or potential customers.
It may be worth considering seeing if you can get a Start Up Loan (external partner site, link opens in a new tab) to help you with financing, and mentoring to start this business idea. You'll also need to think about registering your business, either as a sole trader or as a company - if a company, then Smarta Formations (external partner site, link opens in a new tab) are an organisation that can help you set up.
Begin by looking at your local council’s full list of registered childcare providers and focus on anything that will be a competition to your company – such as other nurseries, mother and toddler groups or self-employed childminders. Another local government list to analyse is the census as this will assist you in measuring the number of nursery-age children and the general economics of your demographic. Having this sort of information can help you to create a business plan, acquire finance, and further understand your market and what pricing model will be most suitable for your business.
3. Playground rules: Make sure your business is up-to-date with regulations
Working with children comes with a considerable amount of red tape. Your business must be registered with the Office for Standards in Education (Ofsted) but before you can do this there are two preliminary steps – a DBS check (a scan to check your suitability and your history for any prior criminal convictions) and you must fill out a health declaration booklet, which requires you to list any health problems and medications you are taking.
To be successful in registration your business will need to demonstrate to Ofsted that you comply with the standards, including staff training and vetting; child group size, fire safety and premise regulations (if you decide to convert your home into a nursery this will require planning permission). You should also contact your local environmental health department to ensure your business complies with legal obligations under the Health and Safety at Work Act 1974 and the Food Safety Act.
The registration process takes time as officials have to check that your business meets requirements – allow for at least six months for it to be finalised as staff will be checked for their suitability to work with children too. For more information on registration requirements, check out our guide to nursery regulations and rules here.
As a self-employed nanny, you’ll also need to make sure you’re legally protected and have insurance in place. Here’s everything you need to know about nanny insurance.
4. Your playhouse is important – consider your business premises carefully
Another important element to running a childcare business is finding a suitable premises. Government regulations set out how much space you will need per child so once you have worked out how many children your nursery will cater to, you can work out the minimum space required and the best way to acquire it – build, rent or buy. It will be difficult and expensive to move premises so make sure to plan carefully.
If you decide to renovate and make structural alterations to a building that already exists (like your home), you will need to factor in significant finance depending on its current state and size. You will also have to ensure that the premises are up to fire safety standards and that there is suitable security. For more help in choosing a location, look at our guide here.
5. Be business savvy and manage your cashflow carefully
In addition to premises costs you will have to invest in equipment before you open, which will range from toys and books to first aid supplies. There will also be significant ongoing costs, such as staff, energy bills, food and cleaning supplies – as well as fixing and replacing broken equipment – so be prepared to set aside approximately 75% of your fees for running costs.
Monitoring how much money is coming in and going out of your business is crucial, and you’ll need to be firm with customers about your payment policies to ensure you can keep on top of your cashflow. This can get tricky if parents are also your friends – but it’s necessary to keep your business afloat. It’s advised that nursery entrepreneurs get their fees paid up front, and make sure that parents are paying all year round – to avoid cashflow gaps. And reserve the right to expel children or refuse entry; if a child in your nursery is bullying other children then he/she will be detrimental to both the other children’s development and your business. Finally be prepared for a slow start – make sure that you can get through the first couple of months without your nursery being full as it can take time to build momentum and, with considerable upfront costs, it may be worth considering raising finance to get your new business off the ground.
For more information on starting and running a childcare business, take a look at our guide to help you prepare for the launch of your nursery start-up.