Licensed places and occupancy set the revenue ceiling
A centre is approved for a fixed number of places, often split by age group, and it cannot earn beyond that capacity without a further approval. Revenue is the product of places, occupancy and fee, so the first task is to establish each. Occupancy should be measured as places filled against places licensed, by room and by day, because a centre can be full on Tuesday and half empty on Friday.
Look at occupancy over at least two years to see the seasonal pattern and whether the trend is up or down. A centre that has recently opened or expanded may still be filling, and its current earnings understate a mature position, while a centre losing enrolments may show earnings that will not hold. Waitlist records, where they exist, indicate demand beyond current occupancy.
Fees and subsidy dependence
Daily fees vary with location, age group, hours and the services included. Compare the centre's fee with nearby centres and ask when it was last increased. A fee well below the local range may signal room to lift earnings or a market that will not bear more, and the distinction needs local evidence.
Most families pay a fee that is partly funded by government subsidy paid to the centre. That makes demand less sensitive to price than it would otherwise be, but it also makes the centre's cash flow dependent on the subsidy system, its eligibility rules and its administration. The valuation describes that dependence in general terms and does not predict policy. Ask how the centre manages subsidy claims and whether any amounts are in dispute.
Staffing ratios drive the cost base
Regulation sets minimum educator-to-child ratios by age group and minimum qualifications, so wages rise with enrolments in a way the operator cannot avoid. Wages are usually the largest cost and the one most affected by occupancy, because a room that is half full still needs its minimum staffing. Examine the roster against the ratios and check whether the centre relies on agency staff, which costs more and signals recruitment difficulty.
Review the qualifications held, the director's role, staff turnover and any award or enterprise agreement in place. An owner who works as director or educator should be costed at a market wage, as our guide on EBITDA adjustments explains. Unfilled positions that keep wages low are a cost the buyer will face once filled.
Regulatory rating and compliance history
Centres are assessed and rated under a national framework, and the rating is public. A higher rating can support enrolments and fees, while a rating below the expected standard, or a history of compliance actions, is a risk that affects both demand and the buyer's regulatory standing. The valuation does not audit compliance, but it records the current rating, the date of the last assessment and any conditions or notices.
A change of ownership usually requires approval of the incoming provider. Your lawyer should confirm the process and timing, because a transaction that cannot settle until approval is granted carries a different risk from one that settles on signing.
Lease, freehold and the single-centre question
Many centres lease purpose-built premises, and the lease is often long with fixed increases. Examine the remaining term, options, rent reviews, make-good obligations and whether the landlord is related to the operator. Where the operator also owns the freehold, the business and the property are valued separately, with a market rent charged to the business so that operating earnings are not overstated.
A single centre depends on one site, one director and one local market. A group spreads that risk and may carry central management costs that a single-centre buyer would not. State which is being valued and whether any group overhead has been allocated. Corporate and fund buyers tend to assess centres on a portfolio basis, while an owner-operator assesses the centre they will run.
EBITDA per licensed place needs context
Buyers and advisers often compare centres on earnings per licensed place, because it normalises for size. The metric is useful, but it hides the reason for the number. A centre with high earnings per place may be running at full occupancy with no room to grow, or charging a fee the market is about to resist, or benefiting from a below-market rent that will reset. A centre with low earnings per place may be new and still filling.
Use the metric to ask questions rather than to answer them, and read our guide on valuation multiples before applying one. As a hypothetical example, a centre licensed for 80 places at 90 per cent occupancy earns from 72 places, not 80, and its earnings per licensed place will look lower than a full centre's without being a worse business.
Records and the questions they answer
| Record | Valuation question it answers |
|---|---|
| Occupancy report by room and period | How full the centre is against its licensed places, and which way it is trending |
| Fee schedule and enrolment records | What families pay, when fees last rose and how much unmet demand exists |
| Subsidy claim reports | How much of revenue depends on government funding and whether any claims are in dispute |
| Staff roster with qualifications | Whether ratios are met, what wages cost and whether agency staff fill gaps |
| Service approval and rating history | What the centre is licensed for and how it has performed under assessment |
| Lease or freehold and rent records | Whether the site is secure and the rent charged to the business is at market |
Tell us whether the matter concerns a sale, a shareholder exit or another purpose. The purpose determines whether we value the centre alone, the business and the property, or an interest in a group. Our business valuation service covers all three.
Before we begin
Your industry information checklist
- Financial statements and monthly management accounts
- Occupancy reports by room and period
- Fee schedule, enrolment and waitlist records
- Staff roster with qualifications and wage rates
- Service approval, rating history and lease
We confirm the documents needed once the purpose and scope are clear. For the common starting documents, see our valuation preparation guide.
General business valuation guidance. Service suitability, specialist input and fee are assessed for the individual matter.