How to Value a Childcare Centre in Australia
Most childcare centre valuations start with EBITDA — and most get it wrong. The headline number on a centre’s profit and loss statement almost never reflects what a buyer will actually pay. Owner salaries running through the books, above-market rent, one-off maintenance costs, and irregular Child Care Subsidy (CCS) income all distort the picture. Getting the valuation right is the single most important step whether you are buying, selling, or simply understanding what your asset is worth.
At ChildcareLink, we work across dozens of childcare transactions every year. This guide breaks down the three valuation methods that actually drive pricing in Australia’s childcare market, the adjustments that separate realistic valuations from wishful thinking, and the factors that push value up or pull it down.
The Three Valuation Methods
There is no single formula that spits out a childcare centre’s value. In practice, buyers, sellers, and their advisers use three methods — often in combination — to land on a price range.
1. EBITDA Multiple Method (Business Valuation)
This is the most common approach for leasehold childcare businesses — where you are buying the business but not the property.
EBITDA stands for Earnings Before Interest, Tax, Depreciation, and Amortisation. It measures how much cash a business generates from its operations before financing and accounting adjustments.
The formula is straightforward:
Business Value = Adjusted EBITDA × Multiple
In Australia, childcare businesses typically trade at 3× to 5× adjusted EBITDA. Single-site operations with solid occupancy and a clean lease commonly attract around 4× EBITDA, while multi-site groups or centres with purpose-built facilities and long lease terms can push higher.
The critical word here is adjusted. Raw EBITDA straight from the financial statements is almost never the number a buyer will use. We cover the essential adjustments below.
ChildcareLink Insight: In our experience, the gap between stated EBITDA and adjusted EBITDA on a childcare centre’s books can be 20–40%. That gap is where deals stall — or where informed buyers find value. Always adjust before you multiply.
2. Capitalisation Rate Method (Property Valuation)
This method is used primarily for freehold childcare properties — where an investor buys the land and building, tenanted by a childcare operator on a long-term lease.
Property Value = Net Rent ÷ Cap Rate
The cap rate reflects the return an investor expects relative to the property’s price. A lower cap rate means a higher price — it signals that buyers see the income stream as safe and reliable.
According to recent market data from Stonebridge Property Group and Burgess Rawson, childcare property yields have compressed significantly over the past 18 months. Metropolitan childcare properties now typically trade between 4.25% and 5.25%, while regional centres sit between 5.25% and 6.25%. Premium assets in high-demand locations have traded even sharper — a Vaucluse centre sold at just 3.31% in late 2025, one of the tightest yields recorded for the asset class nationally.
What drives the cap rate down (and the price up)? Three things: long lease terms with options, a quality tenant on a triple-net lease structure, and a location with strong demographic demand.
3. Asset-Based Valuation
Less common for going concerns, but relevant in specific scenarios: centres that are under-performing, newly built, or being sold as a development site with DA approval.
This method values the physical assets — land, building, fit-out, and equipment — plus any approved development entitlements. It sets a floor price. If a centre’s business earnings do not justify a higher figure, the asset value becomes the benchmark.
For DA-approved sites without an operating business, the land value plus the value of the development approval itself drives the price. The DA adds a premium because it removes planning risk for the buyer.
EBITDA Adjustments That Actually Matter
The raw EBITDA on a childcare centre’s profit and loss statement needs adjusting before it becomes useful for valuation. Here are the adjustments we see most often in our transactions.
Owner’s salary and benefits. Many owner-operators pay themselves a salary that is well above (or sometimes below) what a salaried centre director would earn. The EBITDA needs normalising to reflect a market-rate salary for the director role — typically $90,000 to $120,000 depending on location and centre size.
Above-market or below-market rent. If the lease rent is significantly above or below market, the EBITDA needs adjusting. A centre paying $2,500 per place when market rent is $3,500 per place is overstating its true earnings — that rent gap will close at the next review.
One-off costs. Major repairs, legal disputes, fit-out upgrades, or COVID-related expenses that inflated a particular year’s costs should be stripped out. These are not recurring operating expenses.
Related-party transactions. Family members on the payroll, vehicles run through the business, or management fees paid to related entities all need examining. Buyers want to see what the business earns on a standalone, arm’s-length basis.
CCS income normalisation. Changes in the Child Care Subsidy rate, temporary government top-ups, or transitional payments can inflate revenue in certain periods. Normalising CCS income to a sustainable run-rate is essential.
ChildcareLink Insight: When we prepare a business for sale, the adjusted EBITDA schedule is the first document sophisticated buyers ask for. If you cannot clearly justify every adjustment with evidence, expect buyers to challenge them — and discount their offer accordingly.
What Drives a Childcare Centre’s Value?
Beyond the valuation method, several factors determine whether a centre sits at the low or high end of the pricing range.
Occupancy Rate
Occupancy is the single biggest driver of revenue and, by extension, value. A centre running at 85%+ occupancy is in a fundamentally different position to one sitting at 65%. High occupancy means stable cash flow, proven demand, and less risk for buyers.
Centres below 75% occupancy are harder to sell at premium multiples. Buyers will either discount their offer or model a turnaround period into their pricing — both of which reduce what they will pay today.
Lease Terms and Structure
For leasehold businesses, the lease is the foundation everything else sits on. A lease with 15+ years remaining (including options) supports a higher multiple than a lease with five years left and no options. The logic is simple: a buyer needs enough runway to recoup their investment and generate a return.
Lease structure matters too. Triple-net leases — where the tenant pays all outgoings, insurance, and maintenance — are the gold standard for childcare property investors because they deliver a predictable net income. Rent-per-place is also a key metric. According to Cushman & Wakefield, inner Sydney childcare rents now reach $6,000 per place annually, while growth corridors in Sydney’s south-west and north-west sit around $5,000 per place. Regional NSW ranges from $3,000 to $3,500 per place.
Location and Demographics
A childcare centre in a growing suburb with strong family demographics, limited competition, and good transport access will command a premium. Buyers and valuers look at the ratio of licensed places to the population of children aged 0–5 in the local area.
Oversupplied areas — where new centres have been built rapidly without matching population growth — create pricing pressure. Even a well-run centre can see its value held back if three competing centres have opened within a two-kilometre radius in the past three years.
NQF Rating
Under the National Quality Framework (NQF), every childcare service receives a quality rating from the Australian Children’s Education and Care Quality Authority (ACECQA). According to ACECQA’s Q4 2025 snapshot, 92% of services now meet or exceed the National Quality Standard.
A rating of Meeting or above is essentially table stakes. An Exceeding rating can add a modest premium, particularly for corporate buyers or franchise groups who value brand reputation. A Working Towards rating, on the other hand, is a red flag — it signals operational issues that a buyer will need to fix, and they will price that risk into their offer.
Centre Size and Licensed Places
Larger centres with 80–120 licensed places generally attract stronger interest from institutional and corporate buyers. They generate enough revenue to absorb fixed costs efficiently and justify professional management. Smaller centres (under 40 places) tend to trade at lower multiples because the economics are tighter and the buyer pool is narrower — often limited to owner-operators.
Purpose-Built vs Converted Properties
Purpose-built childcare centres — designed from the ground up to meet current regulations — carry a premium over converted properties (such as former houses or commercial premises repurposed for childcare). Purpose-built facilities typically offer better indoor-outdoor flow, compliant outdoor play spaces, and more efficient room layouts, all of which support higher occupancy and lower ongoing capital expenditure.
Current Market Context (2025–2026)
The Australian childcare property market is in a strong position. According to Stonebridge Property Group, childcare property transactions totalled approximately $205 million in 2025, with a 58% rise in Q1 2025 volumes compared to the same period in 2024. Burgess Rawson’s auction results through 2025 consistently showed strong clearance rates and compressing yields, driven by institutional demand for essential-service assets with long-term government income support.
On the business side, well-run leasehold centres with strong occupancy and clean financials are finding ready buyers. The combination of a $24 billion industry (according to IBISWorld’s 2026 estimate), ongoing government subsidy support, and growing population continues to underpin demand.
That said, not every centre is attracting premium pricing. Centres in oversupplied areas, centres with short lease terms, and centres with occupancy below 75% are taking longer to sell and often require price adjustments to transact.
ChildcareLink Insight: We are seeing a clear two-speed market. Well-positioned centres with long leases and high occupancy are selling quickly at strong multiples. Centres with structural issues — short leases, low occupancy, or competition concerns — need more preparation before going to market.
Common Valuation Mistakes to Avoid
Using unadjusted EBITDA. This is the most frequent mistake sellers make. The number on your P&L is a starting point, not an answer. Every buyer will adjust — it is far better to do it yourself first, transparently, than to have a buyer discover the gap during due diligence.
Ignoring the lease. A business can have strong earnings, but if the lease expires in three years with no option, the value drops significantly. Buyers need certainty of tenure.
Overvaluing based on potential. “This centre could do 100% occupancy” is not a valuation — it is a projection. Buyers pay for demonstrated performance, not theoretical upside. If your centre runs at 70% occupancy, that is the number most buyers will use, regardless of how many families are on the waitlist.
Comparing to different markets. A centre in inner-city Melbourne trades at very different multiples to a centre in regional Queensland. Location-specific comparable transactions are the most reliable benchmark — not national averages or overseas data.
How ChildcareLink Can Help
Valuation is part art, part science, and entirely dependent on having the right market data. We work exclusively in childcare property and business transactions, which means we know the actual prices centres are trading at — not just the asking prices.
Whether you are thinking about selling your centre, considering a purchase, or simply want to understand your position in the current market, an accurate valuation is the starting point.
Key Takeaway
A childcare centre’s value comes down to three things: what the business actually earns (adjusted, not headline), the strength of the lease underneath it, and the supply-demand dynamics in its local market. Get those right, and you have a defensible valuation. Get them wrong, and you are negotiating blind.
Thinking about selling your childcare centre or understanding what it’s worth? Talk to ChildcareLink for a confidential, obligation-free valuation discussion. Visit childcarelink.com.au or contact our team directly.
Sources
- ACECQA — Q4 2025 NQF Snapshot
- Stonebridge Property Group — (2025) transaction data
- Burgess Rawson from CBRE — (2025) auction results
- Cushman & Wakefield — childcare leasing data
- IBISWorld — industry market size (2026)
- Benchmark Business Sales — industry transaction benchmarks
- Green Finance Group — childcare finance and valuation insights
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. ChildcareLink recommends seeking independent professional advice tailored to your specific circumstances before making any business or investment decisions.
