How to set up a childcare business
Below we've listed the key things. Just click on the links to move down the page.
Market research allows you to see how much demand there is in your area for a new business or service. Downloading our market research information sheet (PDF) and reading the Childcare Sufficiency Assessment 2014 is a good starting point. You can also refer to the Audit of Childcare and Early Education Provision with 2015 data. You may also be interested in the other research we do.
Type of business
You'll need to decide on the type of childcare you want to offer and how many hours and days a week you want to open for. Ofsted recognises four types of childcare:
- Childcare on non-domestic premises - childcare on premises that are not being used as a home, for example a playgroup, day nursery, pre-school, creche at a gym or shopping centre, after school club or breakfast club.
- Childcare on domestic premises - four or more people looking after children on domestic premises including childminders and assistants.
- Childminders - individuals looking after children on domestic premises which is not the home of any of the children being cared for.
- Home childcarer - childcare at the home of one or more of the children being cared for, for example a nanny or au pair.
If you're planning to set up childcare on non-domestic premises please refer to Ofsted guidance.
Age of children
You'll need to decide on the age range of the children or young people you're going to care for. Ofsted has different requirements for different age groups. If you're caring for children aged between birth and five years old you'll need to follow the Early Years Foundation Stage (EYFS) framework. This sets out the welfare, education and learning requirements. You can find out more and download the EYFS documents from the Department of Education website. If you're caring for children aged between two and four years old you may want to offer free early education. This entitles some two year olds and every three and four year old to funded part-time early education which is a great benefit to parents. You'll need to register with us and then we'll pay you directly for these children.
If you are starting a business, either as a sole trader, partnership or a voluntary management committee, you are legally and financially liable for the decisions you or your organisation make, and the consequences. Although you can take out insurance it may not cover you completely and your personal assets and money could be at risk. You can limit your liability by changing the legal status of your business to a limited company.
We have written a guide to incorporation (PDF) you can download to help you do this.
The number of children you can look after will depend upon the useable space inside your premises. The EYFS framework document (page 27 section 3.57) tells you how much space is needed for each child depending on their ages. You should ensure that access is available for those with physical disabilities and you'll need plenty of storage space for your equipment and enough toilets and washbasins for the children, as well as giving them access to an outside play area each day. If your premises has access to nearby woodland you might like to set up a forest school, if you have had the necessary training to run one.
For a playgroup or pre school you may want to hire a hall. Your local district or borough council will have lists of halls and venues that are available to hire, along with their costs and conditions. Do also consider properties such as sports pavilions and uniformed youth organisations HQ buildings that are often available during the daytime because they are often non profit making enterprises and your hire fees will help them, too and benefit the whole community.
If you're thinking about buying a property to use then try a local estate agent who deals with commercial properties or try searching online. You could also rent a commercial property but remember you may have pay VAT on top of the rent. Commercial premises need to have a D1 Business use classification so you may need to apply for planning consent for change of use.
Don't forget to check with the local fire brigade to ensure the building meets fire regulations and if you are planning to prepare food on the premises you will need a certificate from the Borough Environmental health team.
If you're thinking about extending or changing your own home to offer childcare then you'll need to contact the Planning Office at your local district or borough council. You'll need permission to change residential premises into business use.
How many staff you need to employ depends on how many children you look after and how old they are (your staff ratio) (see EYFS from page 22, section 3.31).
Businesses offering childcare must register with Ofsted except in a small number of circumstances. Details of these circumstances can be found on the Ofsted website. Ofsted manage two registers, the Early Years Register and the Childcare Register. The Childcare Register is made up of two parts, the Compulsory Childcare Register and the Voluntary Childcare Register. You may be required to register on more than one of these registers.
You'll need to think about how to market your business effectively. You can download our marketing information sheet for advice (PDF).
Start up costs
When you're setting up a business you may need a lot of money to cover things like staff costs, equipment, premises and marketing. You may be able to apply for our start up grant.
Business planning and financial management
You'll need to do a business plan and include things like budgets and cashflow forecasts. You can download our information sheets on business planning (PDF) and financial management (PDF) which may help you with this.
Files available to download
- Market research sheet (PDF)
Information about market research, including understanding local markets and your customers' needs
- Marketing sheet (PDF)
Information about marketing, including identifying your customers, promotion and evaluation
- Business planning sheet (PDF)
Information on developing a business plan, including identifying where you want your business to be and how you're going to get there
- Financial management sheet (PDF)
Information about financial planning and forecasting income and expenditure
- A guide to incorporation (PDF)
A guide to incorporation for childcare businesses