Echo a lot of Watersign says. And sorry, this is going to be long, really long!
I have worked as a children's entertainer for 10 plus years as a sideline to my 'real' job as a music teacher - I work with under fives and also as a private instrumental music teacher.
As well as all the factors Watersign has pointed out, you also need to consider you will probably only be working 2 days a week as most parties are at weekends. It will take some time to build up a sufficient reputation to make it profitable (most of my parties are booked word of mouth) even if you set up with minimum expenditure.
Also please consider this - some parties are great, the children are well behaved, the parents appreciative, the venue easily accessible and all is well, but can I share a few of my personal horror stories with you. I have done in excess of 1500 parties with, fortunately, only a few nasty ones but you need to be prepared for the worst:
(a) being booked for a christening party to entertain the children. Despite having informed the parents beforehand that a ratio of at least one adult for every 4 childen under 3 was required unless paying for additional staff to be present, I turn up to find all the parents completely bladdered, with 30 children under 3, expecting me to keep them all busy for 90 minutes. Lesson: make sure they don't expect you to be a cheap version of a creche and check your adult to child ratios carefully for children under 5.
(b) being asked to do a party for a 3 year old (and preparing for such) only to have everyone else at the party being 5 or older despite having asked in advance the age range of the children attending. Party was totally unsuitable for the older children who were bored and the 3 year was completely confused by the whole thing. The parents weren't happy and bounced their cheque. Lesson: ask and ask again, the age range of the children attending the party.
(c) doing a recent party for a 5 yr old. Lovely parents, I know them well through my music classes, but the other parents in her year really took the piss - only 20 out of 30 replied, but on the day all 30 turned up, with siblings in toe. Not just little ones but older kids too. The worst offender was one mum who turned up with 3 of which only 1 was invited. The other 2 were older and a complete pain in the arse. The oddest thing is the mum never left - she sat in a corner with her eyes closed, while the 7 and 9 year olds ran amok until I asked them to sit out. Then she had a go at me at not letting her children enjoy themselves - bearing in mind they weren't actually invited I think I did a pretty good job at not having a go back but merely stated that they were being disruptive and needed to stay away from the younger children. Lesson: people are odd!
So yes, you may be able to do better than people you've seen but please be prepared for a lot of stress on the day, long hours of preparation, time spent sorting out your advertising and promotional work, oh and did I mention a lot of stress on the day?