Start a nanny referral agency by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your nanny referral agency. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a nanny referral agency?
Start-up costs for a nanny referral agency are minimal. Since much of the work is done online, many start-up agencies choose to forego the cost of renting office space, working out of their home instead.
You’ll need the following items to get started, regardless of where you decide to set up shop:
- Telephone line
- Marketing materials
- Standard office supplies
Much of your work entails running background checks on nannies you’re looking to place. Spend some time finding out what you have to do to run driving reports, etc in each jurisdiction.
What are the ongoing expenses for a nanny referral agency?
As a nanny referral business owner, you’re facing low overhead expenses. Below are a few items you’ll want to budget for in your monthly expenses
- Fees for background and driving record checks (varies from state to state)
- Insurance $250
- Internet/telephone costs $150
- Advertising and website maintenance $250
- Payment/merchant fees $200
Who is the target market?
While the nanny is, in a sense, your customer, the families are your true clients. Your goal is to connect the right nannies and families together, building long-lasting relationships. Thus, your preferred customer is the family or individual who understands the intricacies and financial implications of hiring a nanny and is committed to ensuring their child(ren) receive the best possible care.
How does a nanny referral agency make money?
All fees are paid for by the family and are set depending upon the services they require. For example, a family seeking a live-in nanny will be charged a higher fee than one that requires a part-time nanny. Fees can be either a fixed percentage of the nanny’s salary or a flat-rate cost.
How much can you charge customers?
Nanny placement fees vary depending upon location and specific services needed. Many referral agencies report charging approximately $1,500 per client, $2,100 for live-in nanny placement.
How much profit can a nanny referral agency make?
If you place 4 clients per month, each with a referral fee of $1,500, your agency will earn $72,000 annually. Assuming your overhead costs are $1,000/month, that’s $60,000 in annual profit.
How can you make your business more profitable?
The following are a few strategies other agencies have implemented to ensure a more profitable business:
- Offer nanny training courses
- Expand your services to include babysitting.
- Offer new parent training classes
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Nanny Referral Agency Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your nanny referral agency is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
A nanny agency typically must obtain a referral agency license. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Release of Liability
Nanny agencies should have contracts with both their nannies and clients to decrease liability and increase transparency. An example of an agency-nanny contract can be found here and an example of an agency-client agreement can be found here
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market a nanny referral agency
Word of mouth will be your strongest marketing tool. However, due to the niche industry you’re a part of, you shouldn’t rely solely on this strategy.
Agencies have found success implementing the following marketing strategies:
- Partner with local schools, children’s retail stores, and pediatricians’. This recommendation will take you farther in gaining valued clients.
- Purchase ads in local publications, particularly those geared towards families.
- Google and Facebook ads are a great way to get your name out in the community.
- Host nanny training workshops
- Feature a blog on your website and share on social media. Focus on topics your target audience would inquire about, further establishing yourself as a leader in your industry.
How to keep customers coming back
Word of mouth will take you far in this line of work. Parents want to know their children are receiving the very best in childcare. For each success story, ask your clients (both nanny and family) to write a testimonial. This could be featured on your website and on social media. While a nanny might work out wonderfully, you never know what changes will occur in one’s life. Treat your families with the respect and attention they deserve, and they’ll look to you for guidance when and if their needs change.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Nanny Referral Agency In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
This is a wonderful opportunity for someone who enjoys working with adults and children, helping them navigate through the challenges of parenthood. The individual looking to start a nanny referral agency should also enjoy spending time on the computer conducting research. In addition, those who enjoy connecting and interacting with people will find this type of work enjoyable and rewarding.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a nanny referral agency?
Given the sensitivity of the services your agency provides, you’ll want to take a hands-on approach to your work. There are a number of activities that will keep you busy day in and day out.
Most days will include the following activities:
- Conduct interviews with families to get a feel for what their needs are
- Check nanny’s professional and personal references, passing that information on to the family
- Verify nanny’s background history, including identity, education and employment history, perform state and county criminal searches, including the sex offender registry, review candidate’s driving record
- Conduct personal interviews with nannies
- Identify which nanny would be a good fit with each family
- Perform periodic screening updates to ensure nothing has changed since placement
- Market your business
- Research to ensure your business is current with nanny referral business best practices
In addition, there will be administrative duties to attend to. Once your business has grown and you’ve built a team of trusted employees, you can delegate these responsibilities to your staff.
What are some skills and experiences that will help you build a successful nanny referral agency?
From the nannies you’re considering, to the parents and children who’ve hired you, each day will require you to interact with people. Thus, it is critical that you possess strong interpersonal skills. Your role is to place the best nanny with the best family, so it’s critical that you’re also able to listen to the subtleties expressed from all parties and confident enough to ask difficult questions. This ensures you extract important information that could be instrumental in identifying the best fit. Strong interviewing skills is a must.
Your customers are entrusting the nanny you place with their most prized “possession” - their child. Each job requires your undivided scrutiny. Attention to detail and strength in research are also valuable qualities to possess as the owner of a nanny referral agency owner. The International Nanny Association has a wealth of information available to its members for every step of starting your small business.
What is the growth potential for a nanny referral agency?
The value of nanny care has grown exponentially over the last decade, offering great opportunity for success in the referral agency industry. Growth opportunities are dependent upon demand, affordability of services, and availability of quality nannies in your area.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a nanny referral agency?
Before getting started, contact agencies in other areas of the country. They can provide useful information and tips to ensure the start-up process goes smoothly.
The following are a few insider tips from well-established agencies:
- Conduct interviews in person whenever possible. If this isn’t possible, then you can turn to phone or Skype interviews.
- Check into a registry for families new to the area, as these are potential clients.
- Network within the community to stay on top of the latest changes and trends in your industry.
- Screening of candidates is critical to the safety of your families, as well as your success. Develop an efficient strategy to ensure no stone is left unturned. A basic skills and assessment test is also advisable.
- Your website can be simple and straightforward, but is essential for your success.
How and when to build a team
Much of this work can be done by you, so many nanny referral agency owners choose not to hire employees. Whether you decide to hire employees or work solo, you’ll need the assistance of a reputable attorney to help your customers with their contracts. Once business starts picking up, you’ll also want to consider adding an accountant to your team to ensure the books are kept accurately.