How to Value a Childcare Centre in Australia

Most childcare centre valuations begin with a number on a P&L — and most of them get that number wrong. The gap between the EBITDA a seller presents and the EBITDA a buyer actually models can be 20–40%, and that single adjustment drives every dollar of the sale price. Whether you are buying your first centre or preparing to sell one you have operated for a decade, understanding how valuation actually works in this sector is the single most important step you can take.

This guide covers the three valuation methods used in real childcare transactions across Australia, what drives the multiples and yields, and where deals come apart because one side misunderstood the numbers.

Two Different Assets, Two Different Methods

The first thing to understand is that a childcare centre is not one asset — it is potentially two.

A leasehold centre is a business operating from a leased property. The operator owns the business (goodwill, equipment, licences, enrolments) but not the building. This is the most common structure for childcare acquisitions in Australia.

A freehold centre includes the land and building as well as the business. Sometimes these sell as a “freehold going concern” — property plus operating business in a single transaction.

The valuation method depends on which asset you are valuing:

• Leasehold business → valued using EBITDA multiples
• Freehold property (tenanted) → valued using capitalisation rates (yields)
• Freehold going concern → valued using a blend of both, or a single capitalisation approach

For a detailed comparison of how each structure affects price, risk, and financing, see our guide to leasehold vs freehold childcare.

Method 1: EBITDA Multiples (Leasehold Businesses)

This is the standard method for valuing a leasehold childcare business in Australia. The formula is straightforward:

Business Value = Adjusted EBITDA × Multiple

In the current market, Australian childcare businesses generally transact at 3–5 times adjusted EBITDA, according to Benchmark Business Sales and Hinge Early Education Advisors. A single quality centre with strong occupancy, compliance, and governance typically targets around 4x. High-performing centres with an established reputation, long lease, and occupancy above 85% can push toward 5x or beyond.

What Moves the Multiple

Not every centre earns the same multiple. The difference between 3x and 5x on an EBITDA of $300,000 is $600,000 — so the drivers matter.

Higher multiple (4.5–5x+):

• Long remaining lease term (15+ years including options)
• Occupancy consistently above 85%
• NQF rating of Meeting or Exceeding
• Low staff turnover and minimal agency reliance
• Growth suburb with limited competing supply
• Clean compliance history

Lower multiple (3–3.5x):

• Short lease remaining (under 5 years)
• Occupancy below 70% without a clear recovery path
• Working Towards NQF rating
• High staff turnover or heavy agency dependence
• Saturated market with new centres in the pipeline
• Owner-dependent operations with no second-in-charge

The Adjusted EBITDA Problem

The number that matters is not the EBITDA on the P&L. It is the adjusted EBITDA — the figure after normalising for owner-related expenses that will not exist under a new buyer.

Common adjustments in childcare valuations include:

• Owner’s salary: If the owner-operator draws $180,000 but a replacement centre director costs $100,000–$120,000, the difference is an add-back. Benchmark Business Sales notes that industry practice normalises the owner salary to approximately $75,000 per annum for a single-site operator.
• Related-party rent: If the operator pays rent to a property they also own, and that rent is above or below market, it must be normalised to a fair market rate. See our guide to fair rent for childcare centres for current benchmarks.
• Family on payroll: Salaries paid to family members who do not work at the centre, or who are paid above-market rates, need adjusting.
• Personal expenses through the business: Cars, travel, meals, phone plans, and subscriptions that will not continue under new ownership.
• One-off costs: Renovation spend, legal disputes, fit-out depreciation, or insurance claims that are non-recurring.
• CCS reconciliation timing: Child Care Subsidy payments from Services Australia can create lumpy revenue depending on reconciliation cycles. Buyers should annualise CCS revenue rather than relying on any single quarter.

In our experience across dozens of transactions, the gap between stated EBITDA and adjusted EBITDA is typically 20–40%. This is where most valuation disputes originate. For a deeper look at reading the financials behind these adjustments, see our guide to reading childcare financial statements.

Method 2: Capitalisation Rate / Yield (Freehold Properties)

When the property is sold — either as a tenanted investment or as a freehold going concern — the valuation uses a capitalisation rate (cap rate), also called a yield.

Property Value = Net Operating Income ÷ Cap Rate

The net income is the annual rent (for a tenanted property) or the net business income (for a going concern), and the cap rate reflects the return an investor expects for the level of risk involved.

Current Market Yields (2025–2026)

According to Stonebridge Property Group’s 2025 market data, childcare property yields have compressed significantly:

• Metropolitan centres: 4.25–5.25%
• Regional centres: 5.25–6.25%
• Prime assets: Sub-4.25% — Stonebridge reported the sale of Giggle & Learn Belmore in Sydney at $5.42 million reflecting a yield of 4.23%

Yields have compressed by 90–130 basis points compared to recent years, driven by institutional demand for essential-service assets with government-backed income streams.

Burgess Rawson and CBRE data confirm the trend: total childcare investment transactions reached $241.6 million in FY2024–25, with strong auction results and record individual sales including Sydney transactions above $10 million.

What Moves the Cap Rate

A lower cap rate means a higher price for the same income — so understanding what drives yield compression matters.

Tighter yield (lower cap rate, higher price):

• Prime metropolitan location
• Long WALE (Weighted Average Lease Expiry) — 15+ years
• National or institutional tenant (e.g., Goodstart, G8, Affinity)
• Modern, purpose-built facility
• Strong demographic catchment with limited competing supply

Softer yield (higher cap rate, lower price):

• Regional or secondary location
• Short remaining lease
• Independent operator or single-site tenant
• Older converted building
• High supply area or declining demographics

Method 3: Per Licensed Place

Some valuers and agents use a per-licensed-place metric as a cross-check or quick benchmark. Burgess Rawson data shows the average price per childcare place in Western Australia has risen 54% since 2014–15 to approximately $38,172 per place.

Per-place values vary enormously depending on location, building quality, and lease structure — a metro Sydney 120-place purpose-built centre will command a very different per-place rate than a regional 40-place converted house. This method works best as a sanity check alongside EBITDA or cap rate analysis, not as a standalone valuation tool.

Freehold Going Concern: The Hybrid

When a childcare centre is sold as a freehold going concern — land, building, and operating business together — the valuation combines elements of both methods.

One approach separates the two components: value the business using EBITDA multiples and the property using a cap rate, then combine. The other approach treats the whole package as a single income-producing investment and capitalises the net business income at a blended rate.

The going concern approach often produces a higher total price than selling the components separately, because it offers the buyer a simpler transaction and eliminates the tenant/landlord relationship entirely. In a market where childcare transactions reached $205 million in calendar year 2025 alone (Stonebridge Property Group), freehold going concern assets are attracting strong institutional and private investor interest.

The Five Factors That Actually Drive Price

Regardless of which valuation method applies, five factors consistently determine whether a centre sells at the top or the bottom of the range:

1. The lease. Term remaining, rent escalation structure, option clauses, assignment rights. For leasehold businesses, the lease is the asset. See our complete lease guide for what each clause means.

2. Occupancy. A centre running at 90% occupancy is worth materially more than the same centre at 70%. The ACCC Childcare Inquiry Final Report found that breakeven occupancy for Australian childcare centres ranges from 50–85% depending on cost structure — so the margin between breakeven and current occupancy is what buyers are really paying for. For strategies to improve occupancy before a sale, see our occupancy guide.

3. Staffing. Wage costs represent 55–85% of total operating expenses (median around 70%) according to the ACCC. A centre with stable, qualified staff and low agency reliance will command a premium. A centre where the buyer inherits high turnover and agency dependency will be repriced — in our experience, by 15–20%. See our staff ratios guide for the workforce data buyers examine.

4. Compliance and NQF rating. A rating of Meeting or Exceeding the National Quality Standard signals to buyers (and their bank valuers) that the centre is well-governed. A Working Towards rating creates due diligence risk and almost always results in a lower multiple.

5. Location and competition. Demographic demand (population growth, birth rates, female workforce participation) versus supply pipeline (new DAs, centres under construction). A centre in a growth corridor with no competing new supply will attract a premium. A centre surrounded by three new builds will not.

Common Valuation Mistakes

Mistake 1: Using unadjusted EBITDA. The stated P&L figure is almost never the figure a buyer will model. If you are selling and presenting unadjusted numbers, you will either attract the wrong buyers or lose credibility during due diligence.

Mistake 2: Ignoring the lease. A $400,000 EBITDA centre with three years left on its lease is not worth 4x. Buyers and their financiers discount short leases heavily — and some banks will not fund a purchase with fewer than 10 years remaining.

Mistake 3: Relying on a single valuation method. A good valuation cross-checks EBITDA multiples against per-place benchmarks and, where applicable, cap rate analysis. If the methods produce wildly different numbers, that is a signal to investigate further — not to pick the highest one.

Mistake 4: Benchmarking against the wrong market. A transaction that made headlines in inner Sydney is not comparable to a regional centre in the Hunter Valley. Multiples, yields, and per-place rates vary significantly by geography, building quality, and scale.

Mistake 5: Overlooking the operational handover. A centre’s value is partly embedded in its team. If key educators leave during the sale process and occupancy drops 15%, the buyer will renegotiate — or walk away. Protecting staffing continuity through the transaction is a valuation issue, not just an HR issue.

When to Get a Professional Valuation

A formal valuation from a registered valuer or a specialist childcare broker is recommended in these situations:

• Before listing a centre for sale — to set the right price expectations and avoid costly mispricing
• Before making an offer as a buyer — to confirm the asking price is supported by the fundamentals
• For bank financing — most lenders require an independent valuation before approving a commercial loan
• For partnership disputes or estate planning — where an arm’s-length figure is legally required
• For rental appraisals — where the rent needs to be benchmarked against market. See our rental appraisal guide

Key Takeaway

Childcare centre valuation is not a formula — it is a negotiation anchored to data. EBITDA multiples of 3–5x, cap rates of 4.25–6.25%, and per-place benchmarks all provide reference points, but the actual price depends on the lease, occupancy, staffing, compliance, and competition dynamics of the specific centre. Get the adjusted EBITDA right, understand which method applies, and pressure-test against all three benchmarks. That is how you avoid overpaying — or underselling.

Sources

• Benchmark Business Sales — EBITDA multiple ranges; owner salary normalisation
• Hinge Early Education Advisors — single-site multiples
• Stonebridge Property Group (2025) — market report ($205M transacted; yield data; specific sales)
• Burgess Rawson / CBRE — $241.6M FY2024–25; per-place data
• Mollard Property Group — valuation methodology
• Green Finance Group — leasehold vs freehold framework
• Cushman & Wakefield — Property Playground (market analysis)
• ACCC Childcare Inquiry Final Report 2024 — breakeven occupancy; cost structures

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.