Official SBDC Advisor Login Here All Other Site Areas Are Open to the Public.

Daycare Business 2014

Learn about trends in the Daycare Business and where to find more info about how to start a Daycare Business. Don’t forget you can receive free or low-cost training and free professional business advice, from your local SBDC. your local Small Business Development Center!

Get a free Daycare Business business plan template on our Business Plans page.

Yellow Daycare/Preschool Building

Daycare Business Overview & Trends, 2014

SIC Code: 8351 NAICS Code: 624410

This Daycare Business industry summary is from First Research which also sells a full version of this report.

The US child care services industry includes about 53,000 commercial facilities with combined annual revenue of $20 billion, plus about 21,000 facilities run by nonprofit organizations with combined annual revenue of about $13 billion. Major companies include Bright Horizons Family Solutions, Knowledge Universe, and Learning Care Group. The industry is highly fragmented: the top 50 companies generate less than 20 percent of revenue.


Demand is driven primarily by growth in the youth population, and secondarily by employment and income. The profitability of individual child care facilities depends on good marketing and efficient operations. Large companies have economies of scale in advertising and administration. Smaller companies can compete effectively in local markets by owning convenient locations. The industry is labor-intensive: annual revenue per worker is about $38,000.


Child care centers provide supervision and educational programs for pre-school and school-age children. Most commercial companies operate child care centers that are open to the public, but some operate employer-sponsored centers for employees’ children. Likely hosts of employer-sponsored centers include companies, universities, and military bases. In addition, some operators of traditional child care facilities have opened child care/entertainment facilities at shopping malls, gyms, and casinos to provide hourly care.

A typical facility includes kitchen, bathrooms, and play areas. In addition to the physical building, facilities typically include outdoor play space. States often have minimum square footage requirements, typically 35 square feet per child excluding kitchens, bathrooms, …

This Daycare Business market research report summary is from IBISWorld which also sells a full version of this report. Below we highlight a few of the key findings of this IBISWorld report:

  • Revenue across the day care industry is projected to reach $46.8 billion in 2012. Daycare business revenues have not suffered over the past five years despite generally slower business conditions in the economy as a whole. Stable or rising daycare business revenues, despite a general business slowdown, are thought to be linked to the must-have nature of daycare, especially for middle- and working-class households.
  • Average annual revenue growth, while still positive, was expected to moderate at 2.3% from 2007-2012, due to rising unemployment over the past 5 years. Higher unemployment means more parents are able to care for their children at home. Even this negative influence on industry revenues is offset somewhat by a general societal preference for more formalized child development activities. As the economy continues to strengthen during 2012, daycare business revenues are expected to increase by 3.1% as a reviving labor market increases the demand by parents for daycare services..
  • The number of daycare operators in 2012 is estimated be 832,782, an average annual increase of 2.1% from 2007 – 2012. IBISWorld further estimates that more than 90% of operators are “non-employing operators,” meaning they are sole proprietors. Reasons cited for the large number of “non-employing operators” include steady demand for child care services and the ease of opening a daycare.
  • Powering the expectations for continued strong growth in child care demand include a resurgent economy, large numbers of women workers expected to enter and/or return to the workforce, and a continued awareness about the importance of early childhood education and development. A growing economy is projected to encourage parents to spend more on these child development services, believing these are investments made in their children’s future prospects.
  • IBISWorld posits that the larger chains will try to capitalize on this preference for day care educational enrichment by offering “personalized development services for children.” These services are projected to bolster marketing efforts but also contribute to expanding day care business revenues, which are estimated to rise by an average annual rate of 2.8% from 2012 to 2017, reaching $53.8 billion by 2017.
  • The Day Care industry is expected to show solid returns during the next five years. As the economy slowly gains strength, more parents will return to the workforce, leading to greater demand for child care services. Additionally, economic growth is anticipated to put more money into families’ pockets and allow them to spend on necessary services such as child care. As a result of these trends, industry revenue is forecast to grow at an average annual rate of 2.8% to $53.8 billion in the five years to 2017. Since the economy is expected to recover slowly and unevenly across different sectors, the bulk of employment increases and associated spending on daycare services may occur toward the end of the 5 year forecast interval.

Daycare Business Customer Demographics

The following is an excerpt from IBISWorld on daycare customer markets that should be considered by Daycare operators:

Employers and parents make up the major markets for this industry. Industry players market directly to families or to employers. There are some players that cater to both market segments, although this does not constitute the typical firm in this industry.

Households make up the largest market segment. Parents ultimately decide where to take their children for day care services. Parents can either choose employers or non-employers for day care services. This market segment can be further analyzed by income. Customers whose yearly household income falls into the zero to $25,000 range make up 28.2% of the potential household market. These households typically use government assistance to access child day care services. Often, industry operators access tax credits and other industry assistance to provide services to this segment. The largest client segment includes households with incomes exceeding $25,000. Some households in this category use government assistance to access day care services, but the majority pays out of pocket. In general, this segment has declined over the past five years, as parents who were out of work took care of their children themselves or had a relative help out.

Employer-sponsored day care services make up the rest of the major markets. Employers in this segment provide child day care services as part of the employee benefits package. The employer contracts with a local day care center or facility and pays for the service on behalf of the employee. This segment has increased over the past five years as employers are increasingly providing this benefit for new employees. Employers are using this strategy to attract employees that are interested in staying with the same company for an extended period of time.

Additional Daycare business statistics can be found at the U.S. Census, Business Patterns:

Daycare Business Startup Costs

Daycare Business Plans

Daycare Business Articles

Daycare Business Media Outlets

Daycare Business Associations

Trade associations often are excellent sources of information on an industry. Here are some relevant industry associations:

Daycare Business Licensing Requirements

Daycare Business Employment Trends

Here is a Daycare Business labor market summary from the Bureau of Labor Statistics.

Job Outlook

Employment of childcare workers is expected to grow by 20 percent from 2010 to 2020, faster than the average for all occupations. Parents will continue to need assistance during working hours to care for their children. Because the number of children requiring childcare is expected to grow, demand for childcare workers is expected to grow as well.

In the past decade, early childhood education has become widely recognized as important for children’s development. Childcare workers often work alongside preschool teachers as assistants. This continued focus on the importance of early childhood education, in addition to increases in the number of children in this age group, will spur demand for preschool programs and thus for childcare workers as well.

Job Prospects

Workers with formal education should have the best job prospects. However, even those without formal education who are interested in the occupation should have little trouble finding employment because of the need to replace workers who leave the occupation.


The median hourly wage of childcare workers was $9.28 in May 2010. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $7.65, and the top 10 percent earned more than $14.08.

Pay varies with the worker’s education and work setting. Those in formal childcare settings and those with more education usually earn higher wages. Pay for self-employed workers is based on the number of hours they work and the numbers and ages of the children in their care.

Although many childcare workers work full time, a large portion, about 39 percent, work part time.

The following table shows the median hourly wages of childcare workers in the industries employing the most childcare workers in May 2010:

Elementary and secondary schools     $10.75
Religious, grantmaking, civic, professional,
and similar organizations    9.00
Child day care services    8.82
Childcare workers’ schedules vary widely. Childcare centers usually are open year round, with long hours so that parents can drop off and pick up their children before and after work. Some centers employ full-time and part-time staff with staggered shifts to cover the entire day.

Family childcare providers usually have daily routines, but they may work long or unusual hours to fit parents’ work schedules.

Live-in nannies usually work longer hours than do childcare workers who live in their own homes. However, although nannies may work evenings or weekends, they usually get other time off.


Childcare Worker Wages Table


For the full text of any content in this Small Business Market Research Report from SBDCNet, the link has been provided for the report publisher, while a database article can be obtained from the local public or academic library or purchased from a document delivery service for a nominal fee.

photo by: teofilo
Photo Credit