How to start a nursery business – key steps

Opening a nursery could be a good business idea as demand for quality childcare remains strong across the UK, driven by working families, the expansion of funded early education entitlements in England, and employers seeking reliable wraparound care options.

A 2024 government survey found that 64% of children aged 0 to 4 years in England received formal childcare, such as nurseries and childminders, which amounts to approximately 1.9 million children.

The sector is tightly regulated, and margins can be thin, but with careful planning and a clear understanding of the rules, a well-run nursery can be both financially viable and incredibly rewarding.

This guide examines the advantages and disadvantages of operating a nursery business, providing general information on establishing and managing a nursery.

Childcare is regulated differently in England, Scotland, Wales and Northern Ireland. 

Always check the latest official guidance for your location before making decisions or submitting applications.

Pros and cons of starting a nursery

As with any business venture, it’s important to consider if it is the right option for you.

Advantages could include:

• supporting children’s early development
• making a meaningful impact on families
• benefitting from reliable demand – many nurseries have waiting lists
• creating multiple models – full-day, wraparound, holiday clubs
• establishing a strong presence in the local community.

Disadvantages may include:

• strict compliance requirements and inspections
• recruiting and retaining qualified staff
• potentially small profit margins
• heavy administration load, with inspections, training, policies, and audits requiring time and attention.
• needing enough funds to cover wages and rent before your income becomes steady.

What type of nursery should you start?

There are several childcare models you could use in your nursery business, each with its own regulations.

Your model shapes staffing, premises, funding, and pricing – and common options include:

• full-day nursery (year round) – open most weekdays to a broad age range (9 months to 5 years), and has steadier revenue opportunities, but the highest staffing and premises requirements
• sessional pre school – shorter morning/afternoon sessions typically during term time only, with lower overheads and may better suit community premises
• wraparound and holiday clubs – before/after school and school holiday services for school age children, with different ratios and activities for early years settings and under 5s
• term time vs year round – term time may reduce costs but narrows revenue, while year round supports working parents.

Understanding nursery demand with market research

Conducting market research could help you understand the need for childcare in your area.

To determine a suitable location for a nursery, consider mapping the catchment area and identifying populations of families with children under five, areas with new housing, and spaces around schools or offices.

Market research may involve competitor analysis, such as examining nearby nurseries to determine the types of services they offer.

You could also look into their opening hours and fees to help inform your offerings.

Market research may involve gaining insights into what parents value in a nursery, how much they are willing to spend, and what they perceive as missing.

You might do this via short surveys or interviews.

Bear in mind that local authority data, such as childcare sufficiency assessments (CSAs), often highlight shortages by age group or geographical area.

Nursery start-up costs

Your start-up costs will depend on your location, the type of nursery you open, and its size.

Whatever you choose, you may need to budget for:

• premises costs (rent, deposit, business rates, utilities)
• security (alarms, door locks, and access controls)
• furniture (tables, seating, play mats, desks, toy storage, cots, and highchairs)
• regulatory items (fire extinguishers/blankets, emergency lighting, fencing/gates, first aid kits, radiator covers, safety glass, signage)
• indoor and outdoor toys
• soft furnishings
• staffing costs (DBS/PVG/AccessNI background checks, uniforms, training)
• professional fees (legal, HR/payroll, food hygiene advice)
• business insurance
• parking
• marketing.

If you are planning to equip your nursery from scratch, you may also need to factor in the costs of bathroom and kitchen appliances, as well as fitting costs, and regulatory design features such as fire doors and suitable flooring.

Finding appropriate nursery premises

According to the Early Years Foundation Stage (EYFS) guidance, there should be sufficient clear, usable space within your nursery – specifically 3.5 m² per child under 2, 2.5 m² for 2-year-olds, and 2.3 m² for those aged 3–5.

There should also be access to a safe outdoor play area or the opportunity for supervised daily outings to a park.

In terms of facilities, there must be:

• age appropriate toilets and wash basins
• nappy changing stations
• hygiene standard-compliant food prep areas
• sleep/rest areas
• secure entry and pickup arrangements
• a staff room/office.

Your nursery premises must have clear evacuation routes in case of an emergency, as well as adequate water temperature and infection control measures.

Under the Equality Act 2010, you may need to make reasonable adjustments to ensure accessibility.

Depending on the building you choose, a change of use to Class E (England) may be required.

Planning permission and building regulations approval may also be required, especially if you intend to alter a listed building.

Do I need qualifications to start a nursery?

If you open a nursery in England, but are not involved in the day-to-day care of the children, you don’t need any formal childcare qualifications.

However, if you are the manager, you’ll usually need a Level 3 childcare qualification and relevant experience.

You can be the Designated Safeguarding Lead (DSL), but you will need to complete the required training.

At least one person with a current full (12-hour) Paediatric First Aid certificate must be on-site whenever children are present, and must accompany them on trips.

Most nurseries train several staff in paediatric first aid, so there’s always cover.

Registering your nursery

If you’re opening a nursery in England, you must register with Ofsted (Office for Standards in Education, Children’s Services and Skills) before you can take children under the age of 8 for more than two hours per day.

Registering with Ofsted as a nursery also requires you to have robust safeguarding, health & safety, and risk assessment policies in place before you can open.

Ofsted will assess your suitability and typically carry out a registration visit (and checks) before granting registration.

You cannot open to children until Ofsted has confirmed your registration.

Nurseries that care for children from birth to age 5 typically register on Ofsted’s Early Years Register (EYR).

If you also care for children aged 5 to 7, you’ll usually need to join the compulsory Childcare Register as well.

If you provide food on-site, you must register with your local authority as a food business at least 28 days before opening, and implement food safety management procedures.

The process for registering a nursery is similar in Scotland, Wales, and Northern Ireland, but handled by different bodies:

• Scotland – Care Inspectorate
• Wales – CIW (Care Inspectorate Wales)
• Northern Ireland – Health and Social Care Trusts

Always follow the latest guidance for your country and register with the relevant authority.

Staffing your nursery

Recruiting staff for your nursery should involve careful screening and checks.

In England, at least 50 per cent of staff must hold a ‘full and relevant’ Level 2 or higher. 

A Level 3 practitioner should be present whenever children are on the premises. 

The manager typically has a Level 3 early years qualification plus suitable experience.

You will also need to run enhanced DBS checks (with barred list where appropriate), as well as identity and right to work checks.

Employees must receive safeguarding induction and regular safeguarding training, as well as first aid training.

Early Years Foundation Stage

The Early Years Foundation Stage (EYFS) is the statutory framework for early years education in England, covering children from birth to the age of five.

Under EYFS requirements, a ratio of 1:3 adults to children under the age of two is required, and a ratio of 1:4 for children aged two (or 1:5 where providers opt in and certain conditions are met).

For children aged three or over, a 1:8 ratio is required, or 1:13 if a qualified teacher, Early Years Teacher Status (EYTS), or Early Years Professional is present and certain conditions are met.

You will also need enough staff to ensure children are always within seeing or hearing distance of an adult.

Ofsted visits early years settings to ensure they are meeting the EYFS standards; therefore, it is essential to always check the latest official guidance to remain compliant.

Special Educational Needs

The EYFS framework requires all new nurseries to have a plan in place to identify and support children with SEN (Special Educational Needs).

It is a legal requirement to make reasonable adjustments so that children with SEN can access activities and care.

The nursery’s SENCO should work with the local council’s SEND team to ensure that children receive the right support and plans.

You should understand SEN support systems and Education, Health and Care (EHC) plans to ensure you receive the correct support.

Writing a business plan

A clear business plan can help turn your idea into a viable nursery, outlining how you’ll meet regulations, staff each room safely, and maintain financial stability.

It helps you assess local demand, set fees, plan occupancy by age group, and demonstrate to landlords and lenders that you can afford the rent, making it easier to secure premises and funding.

Regulators also gain confidence when they see clear policies, staffing models, risk assessments, and timelines.

Your plan should cover your goals, market research, services and sessions, pricing, marketing, startup costs, cash flow, and day to day operations.

It then acts as your roadmap, guiding hiring and training, equipment purchases, and enrollment, while highlighting risks such as low occupancy or rising wages and how you’ll manage them.

Download our free business plan template.

What business structure should you choose?

It’s a good idea to seek independent specialist advice when deciding which structure would suit your business the best.

A private limited company is the most common structure for nursery businesses, although a partnership/LLP could be more applicable.

You may also consider a not–for–profit structure, such as a charity or community interest company (CIC).

These receive grants and rate relief, but they must meet stricter requirements set by the Charity Commission or CIC Regulator.

Read our guide to business partnership structures.

Insurance

Business insurance you may want to consider for your nursery could include:

• employers’ liability insurance – required by law if you employ anyone, including part time and temporary staff
• public liability – covers injury or property damage to parents, visitors or children. Local authorities may require a minimum coverage amount
• professional indemnity – covers claims arising from your professional activities, such as educational advice
• buildings – if you own the premises, you will need building insurance
• contents – covers furniture, toys, IT, and any alterations you’ve paid for
• business interruption – protects income and fixed costs if you can’t operate due to an insured event, like a flood or fire.

Read our guides to business insurance for beginners.

Funding your nursery

There are several ways you might fund your nursery start-up.

You could use your own savings, borrow from friends and family, or apply for a bank loan.

If you choose to operate your nursery as a CIC or other not-for-profit business, crowdfunding or community shares might be an option.

You could also look into any grants from your local authority, community funds, and early years or regeneration programmes.

You may also consider obtaining a government-backed Start-Up Loan of up to £25,000.

How to market and grow your nursery business

Once you have clearly positioned what makes your nursery so special, here are several ways you could grow and market your nursery:

• set up a Google Business Profile
• create a business website
• host parent information evenings and taster mornings
• use social media to share updates and notices
• partner with health visitors, children’s centres and local employers
• attend local parenting and business networking groups
• post flyers in local community hubs and schools
• run targeted online ads.

With clear demand, compliant premises, the right funding, and a strong marketing strategy, you could create a setting that helps children thrive and build a resilient business for yourself.