What do you buy when you buy a childcare centre?
A childcare centre's value rests on licensed places filled by enrolled families. You acquire:
- The service approval. Permission to operate a centre with a set number of licensed places. A new owner usually needs approval as the provider. Check the rules in your state/country.
- Enrolments and occupancy. Families booked in for regular days. Occupancy is the share of licensed places filled across the week.
- The waitlist. Families waiting for a place, which signals demand.
- Educators and the centre director. Qualified staff needed to meet required educator-to-child ratios.
- The premises. Usually a long lease, sometimes freehold. Outdoor play space, fencing and building compliance matter.
- Quality and compliance record. The centre's quality rating and its history with the regulator.
- Systems and relationships. Enrolment software, programs, parent communications and any government funding arrangements.
What makes a good childcare centre to acquire?
| Feature | Strong target | Weak target |
|---|---|---|
| Occupancy | High and stable, with a waitlist | Patchy, with empty days early and late in the week |
| Leadership | Experienced director runs the centre | The owner is also the director and lead educator |
| Compliance | Good quality rating, clean history | Recent notices or conditions on the approval |
| Premises | Long lease with options, compliant building | Short lease, overdue maintenance |
| Local supply | Limited new centres planned nearby | New large centres opening down the road |
The best target is often the centre in the next suburb, where families already know your name and educators can move between sites.
What are the due diligence risks in childcare?
Add these to the general due diligence red flags:
- Provider and service approvals. The regulator may need to approve you as the provider before settlement. Start early and check the rules in your state/country.
- Ratio and qualification compliance. Review rosters against required ratios and educator qualifications, especially at opening and closing times.
- Educator retention. Qualified educators are hard to replace. A change of owner can unsettle a team, so meet key staff before signing.
- Director dependence. If the owner is the director, plan who will hold that role after settlement.
- Compliance history. Read assessment reports, incident records and any regulator correspondence.
- Lease and premises. Check term, rent reviews and who pays for building upgrades required by regulation.
- Occupancy trend. Look at weekly occupancy over at least two years, not a single good month.
Why do childcare centre owners sell?
Many childcare owners are former educators who opened a centre decades ago and now want to retire. The compliance load has grown, staffing is harder, and running a centre means being on call for every educator absence. Some own one or two centres and lack the scale to keep investing. Most care deeply about the children, families and educators, and want a successor who will look after them. That priority makes them open to seller finance and staying on during the transition.
How do the no-money-down structures fit a childcare centre?
Funding combines senior (commercial) debt, seller finance and seller rollover:
- 70/20/10 is often the natural fit. A centre with stable occupancy has predictable fee revenue, which lenders tend to understand. The 20% seller note is paid from fees over a few years, and the 10% rollover keeps the owner supporting families and staff through the change.
- 60/40 suits an owner-director who wants to stay involved. A 40% seller rollover means they share in the centre's continued success.
- 100% vendor finance suits a retiring owner of a single centre who wants a steady income and the right successor.
We structure deals at a DSCR of around 1.5x, leaving room for a dip in occupancy or a higher wage bill.
What synergies come from buying a nearby centre?
- Shared waitlists. Families who can't get a place at one centre can be offered the other.
- Relief educator pool. Staff can cover absences across sites, reducing agency staff costs and helping ratio compliance.
- Central administration. One enrolments, billing and payroll team.
- Purchasing. Food, consumables and resources bought for multiple centres.
- Career paths. Educators can progress to lead and director roles across a group, which helps retention.
Illustrative example: a 70/20/10 centre acquisition
Illustrative only. An owner of one centre buys a centre in the next suburb for $1.8M. It has steady occupancy, a waitlist and earns $600k a year before owner wages and debt.
| Part | Amount | How it's paid |
|---|---|---|
| Commercial debt (70%) | $1.26M | Lender, secured on business assets |
| Seller finance (20%) | $360k | Paid to the owner over four years from fees |
| Seller rollover (10%) | $180k | Owner keeps a 10% stake |
If yearly repayments come to about $400k, coverage is roughly 1.5x. The lender adds a working-capital line, so the deal is over-financed and the buyer contributes no cash. The seller stays for six months to introduce families and support the director. Sharing waitlists and relief educators then lifts occupancy and cuts staffing costs at both centres. For the wider process, see how to buy a business with no money down.
If you run an established childcare or education business doing $1M+ in revenue and want a signed LOI within 90 days, see if you qualify for an acquisition strategy call.