How to start a nursery business

Do you have a background in childcare and fancy running your own nursery? This comprehensive guide will explain everything you’ve ever wanted to know about how to start a nursery business. 

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Why consider starting a nursery?

Running your own nursery business can be a highly rewarding experience. After all, you’ll be heavily involved in children’s early development and can help to give them a good start in life. 

Demand for new childcare settings is also high. With more parents going back to work after having a baby, and as new government schemes are introduced to help parents with costs, demand for nurseries is going up all the time. 

Of course, starting your own business also means you get to be your own boss, so once your business is up and running, you might have more flexibility in choosing your working hours. 

So, if you have a love for children’s learning and development, you’re good at managing people and you’re capable of managing everything from looking after children to marketing to bookkeeping, starting a nursery could be the perfect solution.

Are nurseries profitable?

Running a nursery can be profitable but it needs to be managed well. Startup and running costs can be very high which means you need to find ways to keep costs down and boost your profit margin.

Your nursery premises will likely be your biggest expenditure and prices will vary depending on your location and the type of premises you’re buying or renting. You might want to buy a building and convert it into a nursery, for example, or you could buy land and build your nursery from scratch. Buying an existing nursery business is another option. 

On top of this, you need to factor in any necessary renovation costs as well as all the equipment you need to purchase for your nursery. You’ll need appropriate toys and equipment for different age groups and it’s best to buy this new rather than second-hand as safety will be a top priority. Overall, you could be looking at costs of between £10,000 and £100,000, depending on the size of your business.

Other costs to think about include staffing costs, running costs such as energy bills, water and taxes, and food and ingredients. You’ll also need to spend money on marketing and advertising.  

To help you assess whether your nursery will be profitable, weigh up all these costs and then decide how much you’re going to charge families. Take a look at other nurseries’ fees to help you. You could charge more if you plan to offer other services such as nappies and baby wipes, snacks, meals and days out. You also need to think about how many children you will need to have at the nursery to cover your costs and make sure you’re profitable. 

It’s best to create a cash flow forecast for the first year of your business and predict how much money you’ll have coming in. Also think about whether you will offer both full-time and part-time places and what you policy will be for late payments.

It can be sensible to speak to an accountant or an Early Years specialist who will be able to advise you on all the costs you need to consider and make sure you’re taking a realistic approach to getting your business started. 

What are the steps to opening a nursery?

If you’ve done your research and decided to pursue your dream of opening a nursery, take a look at the steps below to get your business up and running:

Registering your day nursery 

Your first step is to register your day nursery. The correct regulator will depend on whether you live in England, Scotland, Wales or Northern Ireland. But before you go ahead, make sure your nursery meets the standards of the Early Years Foundation Stage (EYFS) framework. You might also require DBS checks and health checks. 

Taking out the relevant day nursery insurance cover

Another important part of running a day nursery is making sure you have the correct insurance in place. Policies you’ll need include:

  • Public liability insurance: This covers you against costs resulting from third party injury or damage to property while they are on your premises. This could include a child becoming ill due to staff administering non-prescribed medication or a child injuring themselves on play equipment. 
  • Employer’s liability insurance: This pays out if an employee becomes ill or injured as a result of the work they do for you. 
  • Professional indemnity insurance: This covers you in the event you give out the wrong advice to parents or children. It can cover legal fees and compensation payments. 
  • Commercial property insurance: This pays out if your property is damaged by flooding, fire and theft. 
  • Business interruption insurance: This covers you for loss of income if your nursery has to shut for a period of time due to an unexpected event such as flood or fire damage. 
  • Personal accident insurance: This pays out if you have an accident and cannot work for a set time. 

You also need to make sure your insurance covers staff and children when they are away from the premises – for example, if you’re on a nursery trip. 

Food safety and hygiene

It’s essential that you follow the correct food safety and hygiene standards. If you’ll be responsible for preparing and handling the nursery’s meals and snacks, you will need to have the correct qualifications as stated by the Food Standards Agency (FSA). Your nursery needs to have a food hygiene policy that adheres to Ofsted food hygiene requirements.  

It’s also the responsibility of the nursery manager to make sure all members of staff receive full training around food hygiene guidelines. 

You can find out more about food safety requirements on the website. There is also a food safety management pack that you can download that will tell you about the regulations needed for storing, cooking and chilling food.

Health and safety requirements

You’ll need to adhere to strict health and safety requirements as well. As part of this, you must have health and safety policies in place that cover how you will deal with:

  • Risk assessments
  • Evaluation procedures
  • Maintenance
  • Storing and handling hazardous substances
  • Fire safety 
  • Risks and reporting injuries

These policies will need to be shared with staff and nursery families.

The Health and Safety Work Act 1974 outlines the nursery manager’s responsibility to identify possible risks within the nursery setting and use risk assessments to eliminate that risk. Take a look at section three of the Early Years Foundation Stage statutory framework which will set out exactly what you’re expected to do to ensure children are safeguarded, the staff working with the children are suitable and safe to do so, good health is promoted, and all mandatory policies are accessible.

Some points to be aware of include:

  • there must be an adequate number of toilets and hand basins available;
  • child and adult toilet facilities must be separate;
  • children must have access to an outdoor play area or outdoor activities must be planned and taken daily;
  • you must meet set indoor space requirements;
  • staff must only release children into the care of individuals who have been notified to the provider by the parent.

At least one member of staff on the premises must have paediatric first aid training at all times.

Staffing regulations

Make sure you fully understand how many staff you need to have present in your nursery per child (this will depend on their age), as well as the number of staff you need to have with specific qualifications.

For children aged under two, you need:

  • at least one member of staff for every three children;
  • at least one member of staff with a full and relevant level 3 qualification and experience working with this age group;
  • at least half of all other staff members with a full and relevant qualification of at least level 2;
  • at least half of all other staff members with training specifically relating to the care of babies;
  • the person in charge of an under-twos room must be suitably experienced in working with this age group.

For children aged two you need:

  • at least one member of staff for every four children (this is changing to every five children from September 2023);
  • at least one member of staff with a full and relevant level 3 qualification and experience in working with this age group;
  • at least half of all other staff members with a full and relevant qualification of at least level 2.

For children aged three and over, you need:

  • at least one member of staff for every eight children;
  • at least one member of staff with a full and relevant level 3 qualification and experience in working with this age group;
  • at least half of all other staff members with a full and relevant qualification of at least level 2.

Note that if a member of staff has a suitable level 6 qualification and they work directly with the children, you can have at least one member of staff for every 13 children when they are aged three and over. 

Securing funding for your nursery

Unless you have a stash of cash hidden away somewhere, it’s likely you’ll need to apply for funding to get your nursery up and running. It’s important that you have a business plan ready to help you secure this funding. Your business plan should include:

  • a market analysis; 
  • financial projections;
  • your marketing and sales strategy;
  • how much you plan to charge customers;
  • your management team, including the key players involved and what qualifications they have. 

Once you have this ready, you can start exploring the different funding options. As a starting point, it’s worth looking into whether you qualify for a startup loan. These loans are designed specifically to help new businesses launch and expand and can offer a lump sum of up to £25,000. You then repay this money in monthly instalments, with interest added. 

To qualify, your business must have been trading for no more than 36 months. You must be able to prove that you were unable to obtain a loan from alternative sources and that you can afford the repayments. 

If you can’t get a startup loan, you might be able to get a business loan from a high-street bank or online lender. These work in a similar way as you borrow a lump sum and then repay it over a set term in monthly instalments. 

It can also be worth checking whether you are eligible for a business grant. This is a sum of money awarded to a business to help it grow and develop. Business grants are usually awarded by the government or other companies and don’t need to be repaid. There are hundreds of different grants you can apply for across the UK, but they are often targeted to specific industries, community groups or types of business, so you’ll need to check whether you qualify. 

You might also want to try your luck with crowdfunding. This could work well if your local area desperately needs a new nursery. It works by letting you collect money from a large number of people via online platforms like Seedrs, Crowdfunder and Crowdcube. Depending on the type of crowdfunding you use, these people might get a share in the company or a reward in exchange for their investment. 

Finally, a business credit card could be a useful option for buying new equipment for the nursery or covering unexpected expenses. You can borrow flexibly up to your agreed credit limit and then repay the balance in flexible monthly instalments, with interest usually added.

Get started with Swoop

When deciding which finance option is best for your nursery, you’ll need to think about how much funding you actually need, taking into account how much it will cost to get your business up and running as well as your operating costs for the coming year. 

If you’re not sure which funding option is right for you, the team of experts at Swoop will be happy to talk through your options and help you find the best solution. Get in touch today.


Written by

Rachel Wait

Rachel has been writing about finance and consumer affairs for over a decade, helping people to get to grips with their finances and cut through the jargon. She's written for a range of websites and national newspapers including MoneySuperMarket, Money to the Masses, Forbes UK, and Mail on Sunday. Rachel has covered almost every financial topic, from car insurance and credit cards, to business bank accounts and mortgages.

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