From Playtime to Profits: Starting a Nanny Agency

Important elements to think about when starting your nanny agency:

1. Build a network of qualified and reliable nannies — Recruit experienced and certified nannies. Conduct thorough background checks, interviews, and reference checks to ensure they meet your standards for reliability and competence.
2. Obtain necessary licenses and permits — Ensure you have all required licenses and permits to operate legally. This includes business licenses, childcare licenses, and any other local or state-specific requirements.
3. Choose a strategic location or offer on-site services — Decide whether you will have a physical office location or primarily offer on-site services. A convenient location can help attract clients, while on-site services provide flexibility and convenience for parents.
4. Develop a professional website — Create a user-friendly website that showcases your services, provides information about your nannies, and allows parents to book appointments or consultations online. Include client testimonials and success stories to build trust.
5. Encourage word-of-mouth marketing — Provide excellent service to encourage satisfied clients to refer your agency to others. Implement a referral program to incentivize word-of-mouth marketing.
6. Build a referral network — Establish relationships with local schools, pediatricians, community centers, and other organizations to create a strong referral network. Partner with these entities to promote your services.
7. Provide educational materials and resources — Offer educational materials and resources for both parents and nannies. This can include parenting tips, child development information, and training resources for nannies.
8. Register your business — A limited liability company (LLC) is a good legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
9. Legal business aspects — Register for taxes, open a business bank account, and get an EIN. Ensure you comply with all legal requirements and industry regulations.
10. Equip your agency with necessary supplies — Provide necessary equipment and toys for nannies to use while caring for children. Ensure these items are safe, age-appropriate, and enhance the caregiving experience.
11. Specialization — Consider specializing in specific areas of nanny services, such as newborn care, special needs care, or bilingual nannies. Specialization can help attract a targeted client base.
12. Marketing and promotion — Use a mix of online marketing, local advertising, and community events to promote your nanny agency. Highlight your network of qualified nannies, comprehensive services, and commitment to child safety and development.
13. Learn from real entrepreneurs who run a childcare business:

Michelle Kelsey’s Entrepreneurial Journey in the World of Childcare

Step 1: Decide if the Business Is Right for You

Pros and cons

Nanny agency industry trends

Industry size and growth

Nanny agencies are part of the maids, nannies, and gardeners industry.

• Industry size and past growth – The U.S. maids, nannies, and gardeners industry is worth $30.9 billion in 2023 after growing 1.8% annually for the last five years.((https://www.ibisworld.com/industry-statistics/market-size/maids-nannies-gardeners-united-states/))
• Growth forecast – The U.S. maids, nannies, and gardeners industry is projected to grow 1.3% in 2023.
• Number of businesses – In 2023, 214,571 maids, nannies, and gardeners businesses are operating in the U.S.((https://www.ibisworld.com/united-states/market-research-reports/maids-nannies-gardeners-industry/))
• Number of people employed – In 2023, the U.S. maids, nannies, and gardeners industry employs 237,125 people. 

Trends and challenges

Trends

• Parents are increasingly seeking nannies who can offer early education to their children.
• Salaries for in-home nannies have increased 20% in the last five years, meaning higher nanny placement fees for nanny agencies.

Challenges

• Nanny shortages are making it difficult for nanny agencies to find qualified candidates.
• Civil suits against nanny agencies from injuries or even the death of a child are negatively impacting the reputation of nanny agencies in general. 

Demand hotspots

• Most popular states – The most popular states for nannies are Washington, Colorado, and Maine.((https://www.zippia.com/nanny-jobs/best-states/))
• Least popular states – The least popular states for nannies are Mississippi, Georgia, and Florida. 

How much does it cost to start a nanny agency business?

Startup costs for a nanny agency range from $5,000 to $9,000. The largest expenses are a computer and a marketing budget.

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$100 - $300	$200
Insurance	$100-$500	$300
Website	$500 - $1,000	$750
Computer	$1,000 - $2,000	$1,500
Sales and Marketing budget	$3,000 - $5,000	$4,000
Total	$4,800 - $9,300	$7,050

How much can you earn from a nanny agency business?

Nanny placement fees are generally either 10% to 20% of the nanny’s salary, or a flat fee which averages about $2,500. Your profit margin after the costs of marketing and background and driving record checks should be about 70%

In your first year or two, you could to three placements per month, bringing in $90,000 in revenue. This would mean $63,000 in profit, assuming that 70% margin. 

As you gain traction, you might have eight placements per month. With annual revenue of $240,000, you’d make a tidy profit of $168,000.

What barriers to entry are there?

There are a few barriers to entry for a nanny agency. Your biggest challenges will be:

• Breaking into a competitive market
• Funding the necessary marketing expenses

Step 2: Hone Your Idea

Now that you know what’s involved in starting a nanny agency, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Why? Identify an opportunity

Research nanny agencies in your area to examine their services, price points, and customer reviews.

• Make a list of nanny agencies that offer similar services. 
• Review your competitors’ services – their features, pricing, and quality – and marketing strategies.
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

You’re looking for a market gap to fill. For instance, maybe the local market is missing a nanny placement agency that also places babysitters, or a nanny referral agency that provides nannies who offer newborn care. 

This could jumpstart your word-of-mouth marketing and attract clients right away.

What? Determine your services

In addition to nanny placement, you could also connect parents with babysitters. You could even expand to other types of in home service providers like housekeepers or cooks. 

Recruit nannies/childcare workers

Starting a nanny agency requires strategic recruitment of qualified childcare workers:

1. Define Criteria: Look for experience, qualifications, background checks, first aid/CPR training, and family compatibility.
2. Use Online Platforms: Post on childcare job sites (Care.com, Sittercity), social media, and professional networks like LinkedIn.
3. Partner with Educational Institutions: Connect with colleges for early childhood education and attend job fairs.
4. Leverage Community Networks: Engage with local parent groups, schools, and encourage referrals.
5. Advertise Effectively: Create an online presence and utilize local media.
6. Screen Thoroughly: Conduct in-depth interviews, verify qualifications and references.

How much should you charge for nanny placement?

Your placement fees should be based on market prices in your area, but also on your costs.

Once you know your costs, use our profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

You’ll have two target markets – nannies and parents. Both could be in any demographic group, so you should market on both Instagram and Facebook.

Where? Choose a location for your nanny agency

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

Step 3: Brainstorm a Nanny Agency Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “nanny agency” or “nanny referral agency”, boosts SEO
• Name should allow for expansion, for ex: “Guardian Grace Caregivers” “FamilyHelp Universe” over “Newborn Nurture Nannies” and “Bilingual Buddies Nanny Agency”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Nanny Agency Business Plan

Here are the key components of a business plan:

• Executive Summary: A brief outline of your nanny agency, highlighting its focus on connecting families with qualified, reliable nannies.
• Business Overview: Introduction to your agency, which specializes in recruiting, vetting, and placing nannies with families based on specific childcare needs.
• Product and Services: Description of services like nanny placement, background checks, training programs for nannies, and ongoing support for families.
• Market Analysis: Analysis of the childcare market, focusing on the demand for nannies, demographic trends, and the needs of working parents.
• Competitive Analysis: Assessment of other nanny agencies or childcare services in your area, their offerings, and pricing.
• Sales and Marketing: Strategy for reaching potential clients through online marketing, community engagement, and partnerships with local businesses.
• Management Team: Information about your team’s expertise in childcare, human resources, and business operations.
• Operations Plan: Overview of daily operations, including nanny recruitment, client consultations, and matching processes.
• Financial Plan: Financial projections including pricing models, anticipated revenues, operating costs, and profitability analysis.
• Appendix: Supplementary documents such as sample contracts, nanny training materials, and client testimonials.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to nanny agencies. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your nanny agency will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a nanny agency business. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for Nanny Agency Business Licenses and Permits

Starting a nanny agency business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

While you likely don’t need a nanny agency license, you may want to consider only placing nannies that have a certification from the U.S. Nanny Association.

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your nanny agency business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked, yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as KANTATA or NannyLogic, to manage your applicants, clients, and placements.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Find Nannies Now” or “Apply”. This can sharply increase placements and nanny applications. 

Marketing

Here are some powerful marketing strategies for your future business:

• Social Media Presence: Leverage platforms like Facebook, Instagram, and LinkedIn to share engaging content, testimonials, and showcase your agency’s commitment to quality childcare.
• Local Partnerships: Collaborate with local businesses, schools, and community centers to establish partnerships, allowing you to reach a wider audience through shared promotions or events.
• Educational Workshops: Host workshops on topics like child safety, early childhood development, and parenting to position your agency as an expert resource in the community.
• Targeted Advertising: Use targeted online advertising on platforms like Google Ads and Facebook to reach specific demographics in your area searching for childcare services.
• Testimonials and Success Stories: Showcase success stories and testimonials from satisfied families and nannies on your website and marketing materials to build trust and credibility.
• Community Involvement: Participate in local events, sponsor community activities, and engage in philanthropy to enhance your agency’s visibility and community standing.
• SEO Optimization: Optimize your online content for search engines, ensuring that your agency ranks well in local searches for nanny services.
• Special Promotions: Offer limited-time promotions or discounts to attract new clients, encouraging them to choose your agency over competitors.
• Quality Content Creation: Regularly create and share valuable content, such as blog posts, videos, or infographics, addressing common parenting concerns and showcasing your agency’s expertise.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your nanny agency meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your nanny agency business could be:

• Nanny placements that you can trust
• Nannies that are the next best thing to you
• Feel confident with our thoroughly vetted nannies

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a nanny agency business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in nanny agencies for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in nanny agencies. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a nanny agency business include:

• Nanny Screeners – review applications, run background checks
• Marketing Lead – create and implement marketing strategies
• General Manager – scheduling, accounting

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Nanny Agency – Start Making Money!

A nanny can be a great addition to a household, but parents need to feel confident in the nanny they hire. With your own nanny agency, you’ll be doing the hard work for those parents, ensuring that the nannies you place are qualified and trustworthy. You’ll also be making a nice living.

You’ve got the business savvy now, so you’re ready to get your successful nanny agency going!

Reader Questions

Is a nanny agency profitable?

Whether a nanny agency is profitable depends on various factors such as location, competition, demand for services, and pricing strategy. However, nanny agencies can be profitable businesses if they are run efficiently and effectively.

What is the growth potential of a nanny agency?

The growth potential of a nanny agency can be significant, especially in areas with a high demand for childcare services. As more families seek quality and reliable childcare, the demand for nanny services is expected to increase.

What type of business is a nanny agency?

A nanny agency is a service-based business, providing a matching service between families and qualified nannies. It falls under the category of the childcare industry.

Can you start a nanny agency on the side?

Starting a nanny agency on the side is possible, but it may require significant time and effort to get the business off the ground. Starting small, by focusing on a specific geographic area or a particular niche, and gradually expanding the business as it grows may be a good strategy for starting a nanny agency on the side.