Child care centres are one of the most misunderstood business types in Australia when it comes to valuation. Owners frequently assume that because their centre is profitable, it will sell at a straightforward earnings multiple. The reality is more complicated — and more interesting.
Why EBITDA alone doesn't work
The fundamental asset in a child care centre is not the earnings — it is the approved places. The number of places approved by the Australian Children's Education and Care Quality Authority (ACECQA) determines the maximum revenue the centre can generate. A centre with 90 approved places and 70% occupancy has a clear path to higher earnings simply by filling the remaining 27 places. A centre with 60 approved places and 95% occupancy has limited upside without a costly expansion.
Buyers price this capacity premium directly. Two centres with identical EBITDA but different approved place counts will sell at different prices.
Current multiples for child care centres in Australia
Child care centres currently trade at 4.0× to 7.0× EBITDA, with the wide range reflecting the significant variation in occupancy, approved places, lease terms, and regulatory history.
| Occupancy rate | Approved places | Typical multiple |
|---|---|---|
| Below 70% | Any | 3.5–4.5× (occupancy risk) |
| 70–80% | Under 60 | 4.0–5.0× |
| 80–90% | 60–90 | 5.0–6.0× |
| Above 90% | 90+ | 6.0–7.5× (capacity premium) |
The CCS dependency question
The Child Care Subsidy (CCS) is the primary revenue mechanism for most Australian child care centres — it represents 50–85% of total fee revenue for most operators. This creates a specific risk that buyers assess carefully: the business is dependent on a government subsidy program that can be restructured, means-tested more aggressively, or reduced.
Buyers do not typically discount heavily for CCS dependency — it is a structural feature of the sector, not a specific business risk. But they will assess the centre's fee structure relative to the CCS cap, and centres that are priced significantly above the CCS cap (meaning families pay large gap fees) face a more limited market.
What kills value in a child care sale
- Short lease. Child care centres are location-dependent — parents choose a centre based on proximity to home or work. A lease with less than five years remaining (including options) is a serious problem. Buyers need certainty that the centre will remain in its current location.
- Director dependency. If the approved provider's compliance history is tied to a specific nominated supervisor who is leaving with the owner, the buyer faces a regulatory transition risk. ACECQA approval transfers, but the compliance record stays with the centre.
- Compliance history. Any history of significant non-compliance, improvement notices, or enforcement action will be disclosed in due diligence and will affect the price. Buyers will conduct a detailed review of ACECQA records.
- Low occupancy with no clear recovery path. A centre at 65% occupancy with a clear explanation (new competitor opened nearby, COVID impact, temporary staffing issues) is different from one at 65% with no explanation. Buyers need to understand the occupancy trajectory.
The approved provider transfer process
Selling a child care centre involves an approved provider transfer — the buyer must apply to ACECQA to become the approved provider for the service. This process typically takes three to six months and must be factored into the settlement timeline. Deals that don't account for this timeline often run into problems at settlement.