How To Open A Nursery Business
Get finance and open a new nursery business with our support
Starting a children's day nursery can be a great business opportunity, but it's one that requires the right research, industry experience and financial backing to make successful. Learn how to get your nursery business underway with Rangewell.
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Working parents need someone to take care of their pre-school children. Nurseries provide that care. In the UK, children's day nurseries are the most popular form of pre-school care. Whilst they are mostly operated privately, they are still regulated by Ofsted.
Running a nursery may not be for everyone. Children are demanding and so are their parents. In addition, there are lots of rules and regulations that you must work to. But if you have patience and a passion for working with children, running a nursery could be a rewarding business for you.
“I come from a large family, and looking after young children seems to have come naturally to me. So a nursery was the natural choice for a business.”
The first choice you need to make is to decide between buying an existing nursery business or starting up your own. Both have their advantages, but one is simpler than the other.
When you're looking at opening a nursery from scratch, you face a far steeper uphill challenge when compared to buying an existing nursery business. We can help you find the finance you need for either scenario, but buying is often the more straightforward route. Click here to read our guide on how to buy a nursery.
What qualifications do you need to open a nursery?
Technically, you don’t need to have any childcare or nursery qualifications to open a nursery, as long as you appoint a manager who meets the criteria set down by the government and maintained by local authorities.
However, if you plan on managing the nursery yourself and being involved in its everyday running, you will need a significant level of childcare qualifications and experience. The manager of a nursery must have at least two years experience as a qualified nursery nurse, 1-2 years experience in a supervisory role, and a relevant nursery qualification.
Everyone who works for you must be ‘suitable’ to look after children. That means they’ll have had the appropriate police checks. At least half of your staff will need to hold a minimum level 2 qualification for a day-care setting.
When you apply for finance, lenders will scrutinise your working history to determine if you're a suitable candidate to manage the nursery. If there's any doubt in your mind about your existing experience, consider partnering with an experienced nursery manager to run the nursery itself so you can focus on growing the business side.
“There is much more to looking after children than following an instinct. I got the qualifications I needed at the start of my career. Setting up a business was the next step.”
What profits can you make?
There are profits to be made from running a nursery, but you will need to work hard to make real money.
To determine how much profit you could make, first check how much other nurseries in your area charge - the national average is around £7,729 per child under 2 for 25 hours of care. Then work out how many children you will have in your care to determine gross revenue.
The numbers in your care can fluctuate throughout the year, and you are likely to have fewer children at the start of the school year in September. All 3 and 4-year olds are eligible for up to 30 hours a week free childcare. You’ll get a payment from the government to cover this at a rate of £4.30. But this does not have to cover snacks and meals, or activities like trips out.
Some of the costs involved will include:
- Staff costs
- Rent - or the cost of buying your premises
- Utilities - water and electricity
- Toys and craft materials
- Your salary.
Make sure that the income you expect to make is higher than the total costs – and allow a margin for unexpected expenses. Most nurseries can expect to 20-30% profit margins.
“You won’t get rich running a nursery, although, if you love children you may very well love operating a nursery business.”
Perhaps the biggest barrier for entry to nursery ownership and the reason many managers aim to buy an existing nursery business is sourcing and equipping suitable premises.
Some nurseries start out small, either in your existing home or in a small building with suitable facilities. You'll need to seek planning permission to operate a building as a nursery and any local objections or planning worries can lead to failure.
Planning officers, future clients (parents) and Ofsted all have expectations around a nursery premises. Minimum standards must be hit in terms of cleanliness, space, equipment and more. This means most standard buildings and homes won't be suitable - which explains why we just said planning permission can be hard to get.
For the reasons stated above, most budding owners have to explore a development project to get a nursery up and running. Small outfitting/conversion projects to existing homes and premises are the most cost-efficient route - though some ambitious nursery owners also build their premises from scratch using development finance.
Building and converting property
To start a nursery business from scratch, you'll need a suitable property. Unless you're buying an existing nursery, this usually means incurring some form of development work. Some domestic homes and other similar properties can be used as nurseries with very little conversion work required, whereas others may need more significant overhauls.
Development finance can help you fund these conversions, but there will be certain restrictions and considerations you need to make for your nursery project.
Certain advantages, such as having planning consent to convert a residential home into a nursery, will help improve your chances of securing a good lender offer, but you should talk to the team here at Rangewell first to help make sure you can present your project in the best possible light in order to secure the optimal finance agreement.
You can also build from scratch, but this is a far more involved task that requires an understanding of every aspect of property development. Lenders will want to see evidence of past development experience, though there are some options for financing first-time development projects.
Whilst building from the ground up may seem overly ambitious, there is some rationale to financing a scratch-build, because lenders enjoy added value from the bricks-and-mortar value of the finished property as well as the future gains of the business itself.
If building from scratch, the agreements you need to make with lenders will be totally bespoke to the project and will be dependent on your past development expertise, your chosen contractors, your project plan etc. Consult with our team here at Rangewell to plan your approach early to help ensure you're successful.
What facilities do you need?
Whichever route you choose, you will need plenty of space, and some special facilities. The National Standards for Day Care and Childminding regulations state that you need to provide at least one hand wash-basin with hot and cold water for every ten children over the age of 2 years old.
You may need to look at potential premises in your area and location should come first. You need to ask if the proposed venue is conveniently near to plenty of family homes which could provide your customer base. Look to ensure that there is easy parking for staff and for parents to drop off and pick up. Is it close to a bus route? Some children will be dropped off on the way to work - or by parents already on a school run for older children.
Is there safe outside space? And is there enough space for your projected numbers? Guidelines require:
- Up to 2 years old: 3.5 square metres per child
- Aged 2-3 years: 2.5 square metres per child
- Aged from 3-7 years: 2.3 square metres per child
Remember, your premises must be ‘safe and secure’. You will need secure doors as well as fire escape provisions.
Additionally, you must also ensure the nursery has access to suitable outdoor space. Competition is growing across the UK, with nurseries that offer gardens and sensory play areas able to offer more to parents and therefore win their business.
Planning ahead for external spaces is crucial - you can't expect to open the nursery and then open a garden later down the line unless you already own additional land and have planning permission agreed to do so. Instead, incorporate plans for a garden into your initial planning application and finance discussions so you can build a more competitive nursery.
“You can’t run a nursery just anywhere. Mothers want to bring their little ones to somewhere that looks clean and bright, is safe and, above all, fun. Open space if you can get it - but plenty of space is a must.”
Registering your nursery
You will need to register your nursery business and, to be approved, you need to meet national standards. You must be aged 18 years or older and have the right to work in the UK. You must also undergo a Disclosure and Barring Services (DBS) check. Bear in mind that you can apply as an individual or as an organisation.
If you care for children aged under three years old, you’ll need to apply for the Early Years Register. If you only have children older than three years old, apply for the Childcare Register.
The cost of registration depends on the type of childcare you offer and whether you are applying for the Early Years Register, The Childcare Register or both. The maximum cost to apply for both is currently £220, although this figure could change (still current as of 2023).
Finding the staff you need
The number of staff you need to employ will depend on the number of children you have in your care. The National Standards for Day Care and Childminding regulations (2003) demand:
- For children aged up to 2 years: 1 member of staff for every three children
- Children aged 2-3 years: 1 member of staff for every four children
- Children aged from 3-7 years: 1 member of staff for every eight children
You can advertise for staff in your local paper or on a dedicated website for nursery staff. You should then use the government's early years qualifications tool to check if someone’s qualifications allow them to work in an early years setting.
All members of staff will need to undertake full Health and Safety training and induction in Child Protection procedure within a week of starting working for you.
If you’re preparing food or drinks for the children you’ll also need to pay very close attention to food safety. You are obliged to have a written food safety management system in place. This could include such things as monitoring and recording fridge and freezer temperatures daily as well as ensuring that any staff who handle food have the full training to avoid contamination and deliver food safety.
As the manager, you will be responsible for developing and maintaining your nursery’s food safety management system, so you will need to have the appropriate training yourself.
“Cleanliness is essential. You don’t want a nursery full of young children with bad tummies. Getting the proper training can really help.”
Equipment and furniture
All nurseries need to provide adequate furniture for the children and staff, but also specialist play equipment that encourages learning. There is no set definition of what this looks like, but the EYFS framework does encourage furnishings and toys that boost learning opportunities for communication, physical development, literacy, personal and social development etc.
Additionally, you must also ensure all the chosen furniture is as safe as possible - choose robust, long-lasting options that can withstand the rigours of childcare and provides the highest in safety standards. At a bare minimum, this means all nurseries face significant up-front costs when furnishing their premises.
Fortunately, you can fund the most expensive parts of your nursery furniture purchases through asset finance, where a lender issues funds secured against the value of that asset. If you've already taken out other finance to get your nursery up and running, asset finance provides a route to financing with less burden on your personal or business assets.
Find out more about funding nursery furniture here.
No matter how well-trained your staff are and how strictly you follow health and safety procedures, things can go wrong. The costs could be ruinous – you must have insurance to help you manage the costs and protect your livelihood.
You will need several different types of cover:
- Employer’s liability - this is a legal essential if you employ staff. It pays your legal fees if a member of the team is hurt or their property damaged
- Public liability - this will pay your legal costs in the event of injury to a member of the public including the children you look after
- Commercial property insurance - this covers your premises against fire, flood or theft and should include your contents too
- Loss of Registration insurance and Business interruption insurance - this pays out if your business is forced to close for a period of time, for any reason
- Personal Accident cover - if your business relies on you, personal accident cover will ensure you’ll be compensated if you have an accident and can’t work
“Nobody expects things to go wrong, but they can, and do, and you can be in trouble if you don't have the cover you need.”
How to finance opening a nursery
The set-up costs to start a nursery can vary, but it's worth remembering that all costs are likely to be higher in a busy city area than they are in a rural location.
Equipment will also need to be paid for. Younger children may need beds. Older children will need a large variety of toys to keep them occupied.
There are high costs to deal with, and profits may not be spectacular - but because the nursery business is always in demand, it can be relatively easy to get the funding you need. A call to Rangewell might be the first step to arranging it.