Selling your daycare business is a big decision. Whether you run one centre in Queensland or several across New South Wales, knowing what your daycare is worth is the first step to getting the best price. At Mollard Advisory, we help childcare owners understand how the sale process works and what makes a daycare centre valuable. This guide explains the most common valuation methods and gives you practical tips to prepare.
Why Valuation Matters
Before you sell, you need to know what your business is worth. A proper valuation helps you set the right asking price, attract serious buyers, and avoid underselling. In Australia, daycare centres are typically valued in the following ways:
1. EBITDA Method (Profit-Based)
Most buyers look at your EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. In simple terms, this is your profit before certain costs are deducted. In Australia, daycare centres usually sell for three to five times their EBITDA.
đź“Ś Example: If your EBITDA is $200,000 and you sell at four times, your centre could be worth around $800,000.
Factors that affect your multiple include:
- Location (metro vs regional)
- Centre size (number of licensed places)
- Occupancy rates
- Reputation and financial performance
2. Revenue Method (Sales-Based)
If profits are inconsistent, some buyers use a revenue multiple instead. This method looks at your total yearly income. Daycares may sell for 0.8 to 1.5 times annual revenue.
đź“Ś Example: If your centre brings in $1 million per year, the price could range from $800,000 to $1.5 million. Profit margins still matter, so this approach is best used as a rough guide.
3. Capitalisation Rate (Investment Method)
This method is more common when the business and property are sold together. It treats the daycare like an investment by dividing net income by a yield (a percentage based on similar recent sales).
đź“Ś Example: If your profit is $400,000 and the market yield is 16%, the value might be $400,000 Ă· 0.16 = $2.5 million.
A lower yield (10–15%) means a higher value, as the business is seen as safer. A higher yield (20%+) results in a lower value, as it is considered riskier.
4. Licensed Places Method (Per-Place Value)
Some buyers assess value based on the number of licensed places.
đź“Ś Example: If you have 75 places and your centre is worth $2.5 million, that equals about $33,000 per place.
Values per place can range from $20,000 in regional areas to more than $40,000 in major cities, depending on enrolment, fees, and profitability.
5. Other Methods
- Discounted Cash Flow (DCF): Used by larger buyers, based on future income predictions.
- Net Profit Multiple: Smaller centres may be valued at two to four times net profit, which usually aligns closely with EBITDA after adjustments.
Final Tip: Keep Your Books in Order
Regardless of the method used, clean and accurate financial records are essential. Prepare at least three years of profit and loss statements, enrolment and occupancy data, and a clear breakdown of income and expenses.
đź“Ś Pro Tip: Overpricing your centre can scare off buyers, while underpricing means leaving money on the table. A specialist broker such as Mollard Advisory can help you strike the right balance based on real market conditions.
At Mollard Advisory, we work with daycare owners across Australia, particularly in Queensland and New South Wales, to help them understand their centre’s value and find the right buyer. Thinking of selling? Start by knowing your numbers. The right advice can make a big difference in your final price.
Frequently Asked Questions About Valuing a Daycare Centre
1. What is EBITDA and why is it the preferred valuation method?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It represents profit before costs not tied to daily operations are deducted. Buyers prefer this method because it shows the centre’s real earning power before personal or one-off expenses are included.
2. Why would a daycare centre have unsteady profits?
Profits may fluctuate due to changing enrolment numbers, high staff turnover or sick leave, unexpected costs such as repairs or equipment replacement, seasonal trends like holidays, or new competitors entering the market. All of these factors can affect income stability.
3. Why does a lower yield mean higher value in the capitalisation method?
When investors accept a lower return (yield), they are willing to pay more for the same profit.
đź“Ś Example: A buyer happy with a 10% return will pay $1 million for a business that earns $100,000. A buyer seeking a 20% return will only pay $500,000 for the same income. Lower yield equals higher value because the investment is seen as safe and stable.
4. Why is there a higher yield for a riskier investment?
Riskier businesses require a higher return to attract buyers. For example, a centre with low occupancy, uncertain lease terms, or irregular profits may be valued with a higher yield, resulting in a lower sale price.
5. What is the optimal number of places to create value in a daycare centre?
Centres with 70 to 120 licensed places usually hit the “sweet spot.” They are large enough to benefit from scale, small enough to manage without excessive overheads, and easier to fill than very large centres. Smaller centres (30–50 places) can still be valuable if they are full and located in strong markets.
6. What if my daycare isn’t at full occupancy?
Buyers will consider occupancy carefully. Centres under 70% occupancy may be valued lower, but they can still sell if there is potential for growth. It helps to show that local demand is increasing, enrolments have been strong in the past, and there is a plan to boost numbers.
7. How can I increase the value of my daycare before selling?
You can improve value by increasing occupancy and building a waitlist, securing a longer lease if leasehold, hiring or training a strong manager so the centre runs without you, keeping accurate financial records, and refreshing marketing or online reviews to demonstrate strong reputation. Even small improvements in these areas can lift your sale price.
8. Should I include the property when I sell my centre?
It depends on your goals. Selling the business and property together (freehold going concern) often attracts more buyers and boosts the total price. However, if you want to continue earning rent, you could keep the property and lease it to the buyer. A specialist broker can help you decide which option best suits your circumstances.
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