1Is It for You?
Does children’s laughter sound like music to your ears? Do you enjoy the idea of six kids chaotically crawling at your feet at any given moment? Then read on for your perfect business.
The number of working parents – including single-parent families and families with both parents employed is climbing, creating an ever-growing need for quality child care. That need is creating a tremendous entrepreneurial opportunity for people who love children and want to build a business caring for them.
Related: Free sample business plans here
Child-care services range from small home-based operations to large commercial centers and can be started with a small investment.
You can stay very small, essentially just creating a job for yourself, or you can grow into a substantial enterprise with potentially millions of Rands a year in revenue.
You also have a tremendous amount of flexibility when it comes to the exact services you choose to offer. You may limit your clientele to children in certain age groups or tailor your operating hours to meet the needs of a particular market segment. You may or may not want to provide transportation between your center and the children’s homes and/or schools. You may want to take the children on field trips.
As an alternative to child care, you may want to consider a business that focuses solely on providing transportation for children. Of course, the basic work you’ll be doing − caring for someone else’s children − bears a tremendous amount of responsibility and requires a serious commitment. When the children are in your custody, you are responsible for their safety and well-being.
You will also play a key role in their overall development and may well be someone they’ll remember their entire lives.
2Filling an important need
One of the biggest challenges facing South African families today is caring for their children while the parents work. According to Stats SA 39% of women head households in South Africa. A higher percent than ever of married-couple families, both husband and wife work outside the home. The labor-force participation of women in their childbearing years continues to expand. As the number of working parents rises, so will the demand for child care.
Another issue that has an impact on child-care issues is the new, 24-hour global market. Occupations with a high number of employees working nights and weekends − such as janitorial, hospitality, customer service and technical support − are experiencing substantial growth, and workers in these fields find obtaining quality child care an even greater challenge than their 9-to-5 counterparts. For many working parents, there is no single solution to their child-care needs.
More than a third use more than one option, such as day-care centres part of the time or full time or use domestic staff to provide care for children who don’t attend a daycare centre.
Do you have what it takes?
What are the characteristics of a person who would do well operating a child-care. The person needs to be energetic, business-minded, a competent leader, have a pleasant personality, be professional, be willing to take calculated risks, be a good role model, have strong financial resources, be consistent in expectations of the staff, and be consistent in the delivery of service.
A child-care business can easily be started in your home with just a few weeks of planning and a modest amount of start-up cash. A commercially located centre takes a greater investment of time, energy and money. The size and type of business you choose will depend on your start-up resources and goals for the future.
Many child-care providers are satisfied with a one-person operation in their home that generates a comfortable income while allowing them to do work they enjoy (and possibly even care for their own children). Others may start at home and eventually move to a commercial site as the business grows. Still others begin in commercial locations and are either content with one site or have plans to expand.
3The Beginning Stages
As you complete your startup efforts, use this checklist (and tailor it to your own needs) to make sure you’ve covered all your bases before you open your doors.
- Type of centre: Will you operate from your home or a commercial location?
- Licensing: What licenses are you required to have and from which agencies? What are the requirements, costs and lead times?
- Training and certification: What types of training and/or certification do you need?
- Market: What are the child-care needs of your community?
- Location: Choose a site that is appropriate and affordable.
- Legal requirements: Check on zoning and any other legal issues. (See regulations later on in the story)
- Financial issues: Estimate your start-up costs and identify the source(s) of your start-up funds.
- Health and safety issues: Plan for accident and illness prevention, and develop emergency procedures. See regulations later on in the story)
- Programs: Develop an appropriate schedule of activities for the children.
- Equipment: What do you need to adequately equip your centre, where will you get it, and how much will it cost?
- Insurance: What coverage do you need to adequately protect yourself and the children in your care?
- Staffing: If you plan to hire people, know the required staff-to-child ratios and develop your human resources policies.
- Links: What community and professional resources are available to you?
Conducting Market Research
Prime candidates who need full-time child care are parents with infants to 5-year-olds. Parents with children over 5 are good prospects for after-school care programs. The market segments most likely to use child-care services are dual-income families and single-parent households in most income brackets.
A number of government programs help low-income families pay for child care so the adults can stay in the work force.
Within this very broad market is the narrower group of clients you’ll serve. Use market research to figure out who these people are and how you can best attract them to your center. Lois M. says the primary market at four of her six locations is parents who are upper-income working professionals; the other two centers serve a number of middle-income families as well as those being subsidised by public funds.
Janet H. says about half her clientele consists of dual-income families, and the other half is single mothers who receive government assistance as they work through programs designed to get them off welfare. The goal of market research is to identify your market, find out where it is, and develop a strategy to communicate with prospective customers in a way that will convince them to bring their children to you.
When Lois M. opened her first centre, her demographic research revealed that there were 9,000 children from infant to 5 years old within a 5-mile radius of the site; half the pre-school children in the area were in day care of some sort because their mothers (or both parents) worked; and the number of households in the area was expected to double within a decade. Contained in that 5-km radius were six child-care centres serving approximately 800 children.
Brenda B.’s research wasn’t as sophisticated. Living in a small town, she knows just about everyone and is well aware of the lack of child-care services.
“There’s such a need for day care,” she says. “I go through periods where I’ll get as many as five calls a week from parents needing care, and I don’t have room for them. I’ve had families on my waiting list for up to two years.”
4What licenses do you need to start a pre-school?
Early Childhood Development Centre have to be registered with the Department of Social Development (DSD). This registration can be done through your local branch of the DSD.
The DSD suggest that you follow the following steps:
- Complete an application form for registration as a place of care. You can get the application form on the web.
In order to apply you must submit a weekly menu and daily programme and then submit the following information:
- A building plan/hand drawn sketches of building
- A copy of constitution, signed and dated (only if you also require funding)
- Service/Business Plan (for application for funding
- Financial report of the past year (for funding purposes)
- Contract with the owner of the building (lease – for funding purposes)
Once the documentation is approved, you will have to undergo an assessment from the Local Authority on structural and health requirements
What types of child-care services can be offered
Before you open your doors to the first child, you should decide on the services you’ll provide and the policies that will guide your operation. To simply say you’re going to “take care of children” is woefully inadequate.
- How many children?
- What ages?
- What hours?
- Will you provide food or ask their parents to?
- What activities will you offer?
- What sort of price and payment policies will you have?
- And the list goes on.
Your first step is to check with the appropriate regulatory agencies, which in South Africa is your local municipality and the local division of the Health Department. They will explain to you what’s involved in providing particular services.
For example, each province has its own guidelines for the maximum number of children and maximum number in each age group in a family child-care facility. Municipalities in various regions also have guidelines regarding caregivers. There will likely be other requirements and restrictions, depending on the type of facility you run.
Decide what services to offer based on your own preferences and what your market research says your community needs. Your choices include:
- Full-time care during traditional weekday hours
- After-school care
- Non-traditional hours (very early mornings, evenings, overnight care, weekdays and/or weekends)
- Drop-in or on-demand care, either during traditional or non-traditional hours
- Part-time care
- Parents’ night out (weekend evening care)
- Age-based care
How to find the right location for a child-care business?
If you’re going to open a center on a commercial site, it makes sense to locate your facility close to your target market. Some parents may prefer a center close to home; others may choose a center close to their workplace. In the latter case, parents get to enjoy more time with their children during their morning and evening commutes, as well as the opportunity to spend time with them during the course of the day, perhaps for lunch or special programs.
Some site suggestions to consider include:
- A facility within or adjacent to a residential neighbourhood or near a school
- A facility in a shopping centre where parents with children are likely to pass by
- Sharing a facility with other community organisations
- Office and planned light-industrial parks with a sizable work force.
Opening a child-care centre at home
If you’re going to open a child-care centre at home, discuss your plans with family members and neighbours before you open. Younger children may resent other children coming into your home and changing their lifestyle.
Older children − especially teenagers who will need to be told what’s expected of them and what they can expect as your business gets off the ground. Spouses may not completely understand the time commitment involved in this business, so talk about things in detail well in advance of bringing the first client in.
You may find that your extended family and friends don’t really understand what’s involved in a professional child-care business and may think that, since you’re at home during the day, you’re “not really working” or you’re “just baby-sitting.”
Talk to your neighbours about the impact your business will have on them in terms of traffic (as parents drop off and pick up their children) and noise (think about the decibel levels five or six children can generate when playing). Let them know what steps you’ll take to keep any irritation or inconvenience to a minimum, and reassure them that they should feel free to contact you with any concerns or questions.
Some family child-care centre operators have certain rooms of their homes designated for their business; others use their entire homes. Your decision will be based on your state guidelines and personal preferences.
Brenda B. has a playroom for the children, but they are not restricted to that area; she says she pretty much uses her entire house and her large, fenced backyard for her business. Sherri Ax’s house in Durban has a living room that serves as the primary child-care area.
How much cash is needed to start a child care business
So what do you need in the way of cash and available credit to open your doors? Depending on what you already own, the services you want to offer and whether you’ll be home-based or in a commercial location, that number could range from a few hundred to tens of thousands of Rands.
As you consider your own situation, don’t pull a startup number out of the air; use your business plan to calculate how much you need to start your ideal operation, and then figure out how much you have. If you have all the cash you need, you’re very fortunate. If you don’t, you need to start playing with the numbers and deciding what you can do without.
Start-up costs can be low
Many of the child-care entrepreneurs we talked with used their own personal savings and equipment they already owned to start their businesses. Because the startup costs for a family child-care business are relatively low, you’ll find traditional financing difficult to obtain − banks and other lenders would much rather lend amounts much larger than you’ll need and are likely to be able to qualify for. A commercially located centre will take a more substantial investment and would likely qualify for a bank loan.
Brenda B. estimates that she initially spent R3000 to R4000 on equipment for her family child-care centre. She shopped at second hand shops and accepted donations of used toys and other items from friends and acquaintances.
Janet H. spent considerably more – about R40 000 – to set up her family child-care centre because she remodeled her garage to serve as the primary room for her business as well as added a bathroom for the children. When she opened her first commercial location, she used a combination of personal savings and credit cards to pay the expenses. By the time she opened her second location, she was able to qualify for a commercial loan.
Lois M. took out a second bond on her home to get the R105 000 she needed to adequately equip her commercial centre when she opened. Yvette B. in Miami, put R250 000 of personal savings into her children’s transportation service. Deborah B.’s start-up costs Johannesburg, were in the range of R40 000 to R50 000, which she funded primarily with personal credit cards.
As you’re putting together your financial plan, consider these sources of startup funds:
- Your own resources. Do a thorough inventory of your assets. People generally have more assets than they immediately realise. This could include savings accounts, equity in property, insurance policies, unit trusts, and other investments. You may opt to sell assets for cash or use them as collateral for a loan. Take a
- Look, too, at your personal line of credit. most of the equipment you’ll need is available through retail stores that accept credit cards.
- Friends and family. The next step after gathering your own resources is to approach friends and relatives who believe in you and want to help you succeed. Be cautious with these arrangements; no matter how close you are, present yourself professionally, put everything in writing, and be sure the individuals you approach can afford to take the risk of investing in your business.
- Partners. Though most family child-care centres are owned by just one person, you may want to consider using the “strength in numbers” principle and look around for someone to team up with you in your venture. You may choose someone who has financial resources and wants to work side by side with you in the business. Or you may find someone who has money to invest but no interest in doing the actual work. Be sure to create a written partnership agreement that clearly defines your respective responsibilities and obligations.
Take advantage of provincial and national government grants and funding programs designed to support small businesses. Women, minorities should check out niche financing possibilities designed to help these groups get into business.
7Regulations, legal and licences
You have to register with the local municipality and apply for a health permit. Contact the Department of Health who will refer you to the correct area that you are zoned for and provide. Once you have selected a venue you have to register with the local municipality who in turn follows the regulations laid down by the Department of Social Development in accordance with the Childcare Act, 1983 ( Act No 74 of 1983).
When approving an application for registration, the Council can impose further conditions and restrictions as it sees fit. Once the application for registration has been approved, the Council will issue a Certificate which will:
- State the name of the person to whom it is issued
- Describe the premises in respect of which the application was approved
- Will specify any conditions or restrictions which it may have imposed
- Will state the period for which the premises will be registered.
The crèche or crèche-cum-nursery school has to comply with health by-laws to the to the satisfaction of the Medical Officer of Health who issues an Environmental Health Permit which every day centre or crèche should have. Setting up a crèche or day care centre regulations state that there should be:
Office, staff room and sick-bay
If there are more than 30 children are cared for on the premises, provision should be made for a separate office large enough to be divided into a sick bay to accommodate at least two children, as well as a staff room. These can be combined
Indoor Play Area
- There must be an indoor play area covering a minimum floor space of 1,8m² per child to be used for play, meals and rest.
- Cots and mattresses utilised for sleeping purposes by children must be arranged so that there shall be a minimum of 50cm space between the cots or mattresses.
- The kitchen must have suitable cooking and washing facilities. Kitchen has to be separate from the play area and not be accessible to the play area or the children
- There must be adequate natural lighting and ventilation
- Wall surfaces should have a smooth finish and should be painted with a washable paint
There must be one toilet and one hand washing facility for every 20 or less children under 5 years of age, irrespective of sex.
- Or one toilet and hand washing facility for every 20 or less children above the age of 5 years, separate for each sex.
- Separate toilet facilities must be provided for the staff as set out in the National Building Regulations.
- There must be a supply of hot and cold running potable water at the wash-hand basins, or if no running water is available, a minimum of 25 litres of potable water, stored in a hygienically clean container.
- If potties are used they must be emptied, cleaned and disinfected with a disinfectant immediately after being used and stored in a suitable place
Outdoor play area
If you have an outdoor play area it must provide at least 2 m² per child. The play area must have shady areas or other safe surfaces, be fenced / walled and have approved lockable or child-proof gates and should be free of excavations and dangerous steps and levels.
The crèche must keep a health register.
What licences are required and what legal, health and safety steps that must be taken?
A safe playground is crucial
Operating a safe playground for children to enjoy means that you have to follow the regulations as stipulated by the local council. You must also take advice from your insurer and your lawyer.
It is important to buy liability insurance, including accident and equipment liability. Be sure to get a detailed list of insurer’s requirements and follow those to the letter. When purchasing play structures, make sure that they include warranties.
Comply with local council
Once the playground is built, you will have to comply with health by-laws to the satisfaction of the Medical Officer of Health who issues an Environmental Health Permit for the playground. You will have to undergo an assessment from the Local Authority on structural requirements before you can open the business.
Health and safety bylaws apply
In terms of the playground, the business has to comply with health by-laws to the satisfaction of the Medical Officer of Health who issues an Environmental Health Permit for the play area. You will have to undergo an assessment from the Local Authority on structural requirements before you can open the business. Contact the DoH and request the details of the local authority in your area
Getting your own licences is difficult
If the business is an independent operation, it’s harder. Your first step is to check with the appropriate regulatory agencies, which in South Africa is your local municipality and the Department of Health. Each municipal area has different by-laws, which is why it is so difficult to be specific in terms of licence requirements. The local council will explain to you which licences are required in providing particular services.
Food and liquor compliance
To serve food, a Certificate of Compliance for Food Preparation is required. If you sell any form of alcoholic beverage, you have to apply for a liquor licence.
Get legal advice
Consider consulting an attorney to ensure that you have all the correct licences. Browse through the Entrepreneur legal directory for options.
How to set prices and receive payments for a child care business?
The fees you charge will provide the financial base for your company and your income. They need to be competitive in your market, reasonable and affordable for the parents, and also fair to you. You need to consider a variety of issues, including your costs, the profit you want to make, the going rates in your area and what the families you’re targeting can afford. Setting your rates, explaining–and often justifying–them to parents and then collecting the money are all part of being in the child-care business.
Since you’ll be offering a carefully planned curriculum that is far more than a mere baby-sitting service, you are justified in establishing a fee structure similar in design to a private school. A one-time enrolment charge of half a week’s tuition will hardly raise an eyebrow, but it will compensate you for the cost in time, paperwork and special attention each entrant needs.
Calculating how much to charge for space in your centre will be based primarily on three variables:
- Labour and materials (or supplies)
A fourth factor uncommon to most businesses but significant for a child-care centre the limit to the number of children you can accommodate. In most fields, if your business grows, you just keep hiring employees to serve the increasing number of customers. But in child care, municipal by-laws and practicality limit the number of children you can accept, putting a lid on the income potential of your business. To overcome this, successful child-care centre operators often open more locations in nearby areas to increase their client base and income.
Forms of Payment
You’ll receive payments by check and cash, and you may also want to set up a merchant account so you can accept credit cards or electronic transfers. Check with your bank or the different credit card companies for information on accepting credit cards. Many child-care and transportation service providers find that automatically debiting parents’ credit cards is the easiest way to obtain payment. “A debt order every month is the easiest way to get your money,” says Yvette B. “There are discount fees involved, but its well worth it.”
In most parts of South Africa, the demand for quality child care is so high that marketing your business will be relatively easy. In fact, many of the providers we talked to for this story − especially the home-based centres − do little or no marketing because they’re established, with strong reputations and waiting lists.
But every business needs a marketing plan, and yours is no exception. All your marketing materials should be professional and letter-perfect. Consider hiring a graphic designer and/or professional writer to help you with your marketing package. If they have children, you may be able to negotiate their fees in barter.
Keep these questions in mind as you form your marketing plan:
- Who are your potential customers?
- How many of them are there?
- Where are they located?
- What are they currently doing for child care?
- Can you offer them anything they’re not getting now?
- How can you persuade them to bring their children to you?
- Exactly what services do you offer?
- How do you compare with your competitors?
- What kind of image do you want to project?
The goal of your marketing plan should be to convey your existence and the quality of your service to prospective customers, ideally using a multifaceted approach. The child-care center operators we talked with used a variety of marketing methods, from simple word-of-mouth to more sophisticated techniques.
Ask new clients how they found out about you. Make a note of their answers and what kinds of businesses they represent (how many children they could potentially refer to your business). This will let you know how well your various marketing efforts are working. You can then decide to increase certain programs and eliminate those that aren’t working.
How many children can a day-care centre accommodate before registering the business?
If there are five children or less you do not need to register the business. However, once there are six or more children you have to register.
When should a day-care centre be registered?
“You only need to register a day-care centre if there are six or more children,” says community development officer, Tinyiko Shibambu at the Department of Social Development in Johannesburg. “First you have to register the business as an NPO (Non Profit Organisation). Once you have a NPO certificate, then you can register the day-care centre with the Department of Social Development,” advises Shibambu. Contact the Department of Social Development for details.
Procedure to register an NPO
There is a specific registration process to follow in order to register an NPO
In a crèche scenario, how many caregivers should there be for the number of children in a class?
According to the Department of Social Welfare, to operate a basic crèche you must have a minimum of three staff members per class. In South African childcare centres, the staff to child ratio for 0-2-year-olds in an ideal situation is one caregiver to every five children, 1:5. For 2-3-year-olds, the ratio is 1:10. However, according to the Department of Social Welfare, to operate a basic crèche you must have a minimum of three staff members per class and you can employ more if the business can afford it. However, it is best to contact the municipal office in your area and check the regulations as each municipality has different regulations
What goes into effectively managing a child-care business
The high rate of attrition in the child-care business is driven in large part by the fact that many caregivers focus almost exclusively on nurturing and caring for the children in their charge, and neglect the financial and management sides of their operations. But whether your goal is a small, family child-care centre or to build a chain of commercial locations, you must deal with administration and management issues if your business is going to survive. If you plan ahead, that won’t be hard.
Set up your financial record-keeping system
From the outset in a way that will provide you with the information you need to monitor your profitability and handle your tax payments to SARS. You may want to hire a consultant or an accountant who specializes in small businesses to help you at first; this small investment could save you a substantial amount of time and money in the long run.
Spend time marketing and doing admin
Expect to spend a significant amount of time on management, marketing and administration. If you have employees, they need to be trained and supervised. Although the demand for child care is high, parents won’t be able to find you if you don’t market your service.
And keeping up with administrative details–paying accounts, buying supplies, doing budgets and forecasts, meeting ongoing licensing requirements, facility maintenance, etc.− is a never-ending process.
Choose staff very carefully
The staff that you employ must be children-friendly. Conduct thorough background checks on all potential staff.
Ready to Take the Next Step?
You will need to create a business plan to get you going.
Here is a Free Sample Business Plan.
Capital is essential to starting up your business. You can self fund, or alternatively seek outside funding to assist you in starting up your business.