Starting a preschool is a rewarding venture that combines a passion for early childhood education with smart business sense. The child care market is worth billions of dollars, reflecting a steady demand for quality programs from working families and parents seeking an academic head start for their children.
This guide will take you through the practical steps of obtaining the right licenses, selecting a location, securing funding, and hiring qualified staff to help you launch a successful preschool business in the U.S.
Step 1: Plan and validate your business idea
Understand your local market
Start by researching local demand. You can survey parents in community Facebook groups or at local parks to understand what they want in a preschool. Also, check with your local Child Care Resource & Referral (CCR&R) agency for data on child care shortages in your area.
Analyze the competition
Next, map out every preschool in your target area. Look at their websites for tuition rates, curriculum focus, and hours. A mistake many new owners make is entering a saturated market. Finding a neighborhood with fewer options gives you a much stronger start.
You can also use the National Association for the Education of Young Children (NAEYC) database to see which local centers are accredited. This gives you a benchmark for quality and pricing.
Estimate your startup costs
A detailed budget is your roadmap. Initial costs for a small-to-midsize center often range from $45,000 to $100,000. This figure can feel large, but breaking it down makes it manageable. Plan for major expenses before you spend a single dollar.
Here is a typical breakdown:
- Licensing and legal fees: $500 - $2,000
- Rent deposit and renovations: $15,000 - $60,000
- Furniture and learning equipment: $10,000 - $30,000
- Curriculum and initial supplies: $2,000 - $5,000
Here are 3 immediate steps to take:
- Survey at least 20 local parents about their child care needs and budget.
- Create a spreadsheet listing all competing preschools within a five-mile radius, noting their tuition and programs.
- Draft a preliminary budget that itemizes your estimated startup costs.
Step 2: Establish your legal structure and secure licenses
You might want to consider forming a Limited Liability Company (LLC). It separates your personal assets from business debts and liabilities. Most states charge a filing fee between $50 and $200. This structure also offers pass-through taxation, which simplifies your annual tax filing.
State and local requirements
Your main document is the state child care license. Contact your state's Department of Health or Human Services to get the application. The process can take 60 to 120 days and cost up to $500, so it is wise to begin as soon as you have a location.
You will also need local permits. These often include a general business license, a fire department permit, and a health inspection certificate. Check with your city or county clerk's office for a full list and associated fees, which typically total a few hundred dollars.
On the federal level, you must get an Employer Identification Number (EIN) from the IRS. It is free to apply for online and you will need it to open a business bank account and hire staff.
Here are 3 immediate steps to take:
- File LLC formation documents with your Secretary of State.
- Apply for a free Employer Identification Number (EIN) on the IRS website.
- Request a child care licensing packet from your state's regulatory agency.
Step 3: Secure insurance and manage risk
Find the right insurance coverage
You will need several types of insurance. General liability covers accidents like slips and falls, while professional liability protects against claims of negligence in your educational services. A good starting point is a policy with $1 million per occurrence and a $2 million aggregate limit.
In addition, property insurance protects your building and equipment from fire or theft. Once you hire your first employee, you must have workers' compensation insurance. This is a state requirement. Annual premiums for a comprehensive package often range from $1,500 to $4,000.
Many new owners make the mistake of using a general agent. You should seek out providers like Markel, Philadelphia Insurance Companies, or The Hartford who specialize in child care. They understand unique risks like playground injuries or abuse allegations and can offer better-suited policies.
Here are 3 immediate steps to take:
- Request quotes from at least two insurance providers that specialize in child care.
- Ask agents about bundling general liability, professional, and property insurance into one policy.
- Confirm your state's specific requirements for workers' compensation coverage.
Step 4: Find a location and buy equipment
Your location is a major part of your brand. Most states require at least 35 square feet of usable indoor space per child. For a class of 15 children, you need over 500 square feet just for the classroom. You will also need about 75 square feet of outdoor play area per child.
Before you sign a lease, confirm the property’s zoning with your city’s planning department. A space in a commercial zone is ideal. Some residential areas allow preschools with a special permit, but the approval process can take months and is not guaranteed.
Negotiate your lease
When you find a promising location, you might want to negotiate for a Tenant Improvement (TI) allowance. This is money from the landlord to help pay for renovations like adding child-sized toilets or fencing the outdoor area. A five-year lease with an option to renew offers good stability.
Purchase furniture and supplies
You can buy durable, high-quality items from specialized suppliers like Lakeshore Learning or Community Playthings. A mistake some owners make is to buy cheap residential furniture which does not withstand daily use. Plan your budget for key items.
- Tables and chairs: $500 - $1,500
- Shelving and storage units: $800 - $2,000
- Dramatic play center: $400 - $1,200
- Art easels and supplies: $300 - $700
Here are 3 immediate steps to take:
- Check the zoning classification for two potential properties on your city’s website.
- Ask a prospective landlord about a Tenant Improvement allowance for renovations.
- Create a sample cart on a supplier website like Community Playthings to estimate equipment costs.
Step 5: Set up your payment processing
Most preschools bill tuition monthly, due on the first. While some parents still use checks, offering digital payments is expected. You will want to set a clear policy for late fees, like a $25 flat fee if tuition is not paid by the fifth of the month.
When you choose a payment solution, keep a close eye on the fees. Many providers charge between 2.5% and 3.5% per transaction, plus monthly charges. A system with automated recurring billing is a huge time-saver for collecting monthly tuition.
For preschools that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit, and digital wallets directly through your smartphone - just tap and done.
At just 1.99% per transaction with no hidden costs or extra hardware needed, it's particularly useful for collecting registration fees during tours. This is a great rate, as many other payment solutions charge between 2.5% and 3.5% per transaction.
Here is how it works:
- Get Started: Download the JIM app for iOS.
- Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
- Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers.
Here are 3 immediate steps to take:
- Draft your payment policy, including tuition due dates and late fee amounts.
- Research payment systems that offer automated recurring billing.
- Download the JIM app to explore its features for in-person payments.
Step 6: Secure funding and manage finances
Explore your funding options
Many new preschools get off the ground with an SBA 7(a) loan. You will need a strong business plan and a personal credit score above 680 to qualify. Loan amounts for new centers often fall between $50,000 and $150,000.
Expect interest rates around Prime plus 2.75% to 4.75%. A mistake some owners make is accepting the first offer they get. Different lenders have slightly different terms, so it pays to shop around and compare.
You can also look into grants, which you do not have to repay. The Child Care and Development Block Grant (CCDBG) is a major federal source distributed by states. These funds are competitive and often favor programs in underserved areas.
Plan your working capital
You need a cash reserve for your first six months of operation. This buffer covers rent, payroll, and utilities before your enrollment reaches capacity. For a small center, this could mean having $30,000 to $60,000 set aside.
Once you are open, use accounting software designed for child care, like Brightwheel, or a general option like QuickBooks. This makes tracking tuition payments and expenses much simpler and helps you monitor your financial health month-to-month.
Here are 4 immediate steps to take:
- Check your personal credit score to assess your eligibility for an SBA loan.
- Search your state’s human services website for CCDBG information.
- Calculate your estimated operating expenses for the first six months.
- Compare features of accounting software like QuickBooks and Brightwheel.
Step 7: Hire your team and set up operations
Build your teaching staff
Your team is the heart of your preschool. You will likely start with a Lead Teacher and an Assistant Teacher. Lead Teachers, who often have a degree or a Child Development Associate (CDA) credential, can earn between $35,000 and $55,000 annually.
Assistant Teachers provide support and typically earn $25,000 to $40,000. A mistake some new owners make is to overlook credentials. Always verify qualifications and ensure all staff have current CPR/First Aid certification and pass a comprehensive background check before they start.
Streamline your daily operations
State licensing dictates your staff-to-child ratios. For preschoolers, a ratio of one teacher for every ten children is common, but you must check your local regulations. Payroll will likely be your largest expense, often accounting for 40-50% of your total budget.
To manage daily tasks, you might want to use child care management software. Programs like Brightwheel or Procare Solutions help with parent communication, daily reports, and staff scheduling. This frees up time to focus on the children and curriculum.
Here are 4 immediate steps to take:
- Draft job descriptions for a Lead Teacher and an Assistant Teacher with salary ranges.
- Confirm your state's specific staff-to-child ratios and background check requirements.
- Create a sample payroll budget for your first two employees.
- Request demos for management software like Brightwheel and Procare Solutions.
Step 8: Market your preschool and enroll families
Build your online presence
Your marketing should start long before you open. First, create a simple, professional website with photos, tuition rates, and your philosophy. Also, claim your free Google Business Profile. Many new owners find that most parents discover their school through a local online search.
You can also join local parent groups on Facebook. Instead of just posting ads, answer questions and share helpful tips about early childhood development. This builds trust and establishes you as a community expert before you ask for an enrollment.
Connect with the community
An open house is one of your strongest marketing moves. It allows families to see your space and meet you in person. The conversion rate from a tour to an enrollment is often between 50% and 75%, so these events are highly effective.
To create early momentum, you might offer a "Founder's Circle" discount, like 10% off the first three months of tuition for the first 15 families who enroll. This creates urgency and helps fill your initial spots quickly. Budget around $100 to $300 for your customer acquisition cost per family.
Here are 4 immediate steps to take:
- Create and verify your Google Business Profile with photos of your space.
- Plan your first open house event, including a date and a special enrollment offer.
- Join two local parent groups on Facebook and prepare a post to introduce your program.
- Identify three local businesses, like a pediatrician or coffee shop, to partner with.
Step 9: Develop your pricing strategy
Set your tuition rates
Most preschools use a flat monthly tuition. You can also offer tiered pricing for part-time schedules, like two or three days per week. This flexibility appeals to many families. For example, you might charge $1,500 for full-time care and $1,000 for a three-day week.
To find your base price, first total all your monthly expenses. This includes rent, payroll, insurance, and supplies. Divide that total by your maximum enrollment number. Then, add a profit margin. A healthy margin for a new preschool is typically between 10% and 20%.
A mistake some owners make is to underprice just to fill spots quickly. This approach is not sustainable. Your price should reflect your program's quality. Research competitors, but do not just copy their rates. Use their pricing as a benchmark to position your school's value.
Incorporate additional fees
You might also want to charge separate fees to cover specific costs. A one-time registration fee, often between $75 and $200, covers administrative work. An annual supply fee of $100 to $300 helps pay for art materials and classroom consumables throughout the year.
Here are 4 immediate steps to take:
- Calculate your break-even point by totaling all monthly operating costs.
- Research the tuition and fee structures of three competing preschools.
- Create a pricing sheet that details your full-time and part-time rates.
- Decide on the amounts for your registration and supply fees.
Step 10: Maintain quality and plan for growth
Establish your quality benchmarks
To maintain a high standard, you can pursue accreditation from the National Association for the Education of Young Children (NAEYC). This is a rigorous process but signals top-tier quality to parents. It can take 12-18 months to complete.
You should also track key metrics. Aim for a staff turnover rate below 15% annually. Use a simple parent satisfaction survey twice a year to gather feedback. A score of 90% or higher shows you are meeting family expectations.
Plan your next phase of growth
Once your enrollment is consistently at 90% capacity with a waitlist of at least 10 families, it is time to think about expansion. This could mean adding another classroom or finding a second location.
Many owners wait too long to hire a center director. When you reach 30-40 children, bringing on a director to handle daily operations frees you to focus on business strategy. This is an investment in growth, not just an added cost.
Software like Procare Solutions or Brightwheel can help manage multiple locations or larger staff teams from a single dashboard, which simplifies scaling your operations.
Here are 4 immediate steps to take:
- Download the NAEYC accreditation self-study guide to review the standards.
- Create a 5-question parent satisfaction survey using a free platform.
- Define the enrollment capacity (e.g., 90%) that will trigger your expansion plan.
- Calculate the salary for a center director based on your local market rates.
A new preschool is a new community. Parents will choose you for the trust and care you offer, not just the curriculum. These steps are your guide. Now you can create a wonderful space for children to learn and grow.
As you handle the details, keep payments simple. JIM turns your smartphone into a card reader for a flat 1.99% fee, with no extra hardware. It is a straightforward way to accept payments on the spot. Download JIM and get ready for your first family.
