The short answer
Most Australian childcare centres are valued on a multiple of normalised EBITDA — typically 3 to 5 times, rising toward 4.5–5x for a strong, high-occupancy metropolitan long day care centre with an Exceeding rating and a long lease, and sitting nearer 3–4x for a smaller or regional centre. A secondary cross-check values the business per licensed place: broadly $30,000–$45,000 a place in metro markets and $15,000–$25,000 regionally. Both figures describe the operating business — the goodwill, the service approval and approved places, the fit-out and the maintainable earnings — not the land and buildings. If the operator owns the freehold, that property is a separate valuation on top. As an illustration, a 100-place metro long day care running in the high-80s per cent occupancy might carry roughly $700,000–$850,000 of normalised EBITDA; at about 4.5x that is a business worth around $3.1m–$3.8m, and the per-place cross-check ($31,000–$38,000) lands in the same territory. The multiple is the easy part. What decides where a centre sits in the band — and whether the two methods even agree — is the quality of the earnings and the durability of the licence behind them, and that is where a benchmark stops and analysis begins.
Method one: three to five times normalised EBITDA
The primary approach for a trading centre is capitalisation of maintainable earnings — a multiple applied to normalised EBITDA. The word doing the work is normalised. Reported profit almost always has to be adjusted before a multiple means anything. Three adjustments dominate in childcare. First, a market wage for the owner's role: most single centres have a working owner or owner-nominated supervisor drawing something other than a commercial salary, and a buyer will either do that work or pay a director to, so the cost of a replacement director has to sit in the earnings before any multiple is applied. Second, rent. Where the operator leases the premises, the actual lease rent is a real cost and stays in. Where the operator owns the freehold, a market rent must be deducted to isolate the operating business — otherwise the property's return is counted twice, once in the business earnings and again when the freehold is valued. That rent-adjusted figure is sometimes described as EBITDAR reduced to EBITDA on a notional-rent basis. Third, one-off and non-arm's-length items — family members paid above or below market, personal expenses, grant income or COVID-era support that will not recur — are stripped out so the base reflects maintainable, not peak, trading. The multiple then reflects risk and durability: 3–4x for a smaller, single-owner, leasehold centre, moving toward 4.5–5x for a larger metro centre with high occupancy, an Exceeding rating, a long lease and a manager already running the floor. Large corporate portfolios trade higher again, but a portfolio multiple is not evidence for a single centre. The standard the number is tested against for tax and formal purposes is market value — the willing but not anxious buyer and seller from Spencer v Commonwealth (1907), carried through IVS 104 — which asks what a knowledgeable purchaser would actually pay, not what an asking price hopes for.
Method two: value per licensed place
The per-place benchmark — roughly $30,000–$45,000 a place metro, $15,000–$25,000 regional — is the cross-check every childcare buyer and broker reaches for, because places are the one unit that is comparable across centres. It is quick and it is useful, but it measures the business (goodwill, licence and fit-out on leased premises), not the freehold, and it carries a hidden assumption: that the centre is trading at a normal occupancy and a normal margin. That assumption is exactly what fails in the centres where value is most contested. A centre licensed for 90 places but running at 60% occupancy is not worth 90 places at the metro rate — its maintainable earnings say otherwise, and the EBITDA method will price it well below the per-place figure. A centre paying rent at 20% of revenue is over-rented, and no per-place rule captures that drag. So the discipline is to run both methods and interrogate any gap between them. When the EBITDA valuation and the per-place cross-check bracket a similar range, the conclusion is well supported. When they diverge materially, one of three things is usually the cause — occupancy below capacity, an unusually thin or fat margin, or a lease that is out of line with the market — and the divergence is information, not a rounding error. A supportable valuation reconciles the two and explains the difference; a rule of thumb quotes whichever number is higher.
The value drivers behind the number
Where a centre lands inside the 3–5x band, and whether the per-place cross-check holds, is decided by a short list of drivers. Each one is a real earnings-and-risk question, not a scoring gimmick:
- ·Occupancy against approved places. Utilisation is the single biggest driver. A centre running in the high-80s to 90s with a waitlist has both higher current earnings and lower risk than one at 60%, even where headline revenue looks similar — and the trend over the last two to three years matters as much as the current figure, because it shows whether today's earnings are the maintainable norm or an anomaly.
- ·ACECQA quality rating. Under the National Quality Framework, a centre is rated by its state regulatory authority against the National Quality Standard — from Significant Improvement Required and Working Towards, up through Meeting and Exceeding, to the Excellent rating awarded by ACECQA. A Working Towards rating or an unresolved compliance notice is a direct earnings risk: it can dampen enrolments and, in serious cases, threaten the approval itself, so it compresses the multiple. An Exceeding rating supports the top of the band.
- ·Child Care Subsidy exposure. CCS funds the majority of most centres' fee revenue, and it is income-tested and activity-tested at the family level with an hourly rate cap. A centre whose families are heavily subsidy-dependent carries more policy and demographic sensitivity than one with a broader fee base — not a defect, but a risk factor a buyer prices.
- ·Lease quality. On leased premises the lease can matter as much as the profit and loss: remaining term plus options, the rent as a proportion of revenue (a healthy centre generally sits under about 13–15%; much above 18% is a drag a buyer inherits), the review mechanism (fixed, CPI or market), and whether landlord consent is needed to transfer the service with the business.
- ·Management independence. A centre that trades on a competent director and educators, without the owner on the floor, sells as a business. One that depends on the owner personally for enrolments, staffing and compliance carries personal goodwill that does not transfer, and the multiple reflects it.
- ·Local supply and staffing. A pipeline of new centres approved nearby is a real threat to future occupancy, and the sector-wide difficulty attracting and retaining qualified educators — against the National Regulations' ratios, such as one educator to four children under 24 months — is a structural cost pressure that a purchaser weighs into maintainable earnings.
Freehold versus operating business: don't value the same dollar twice
The most common error in childcare valuations is conflating the business with the building. They are two assets, valued two different ways, and mixing them either double-counts or leaves value on the table. The operating business is the licence, goodwill, fit-out and maintainable earnings — valued on the EBITDA multiple above, after a market rent has been charged so the earnings stand on their own regardless of who owns the premises. The freehold is a commercial property — a purpose-built childcare asset with use-specific fit-out, outdoor-space ratios and parking — valued as an investment on a capitalisation rate against its passing or market rent. Prime metro childcare property has in recent years transacted on relatively firm yields, with regional assets requiring a higher return; the applicable rate depends on the lease covenant and current market evidence, not a fixed number. Where an owner holds both, the total is a freehold going concern: the business value plus the property value, built up separately and then combined, never estimated as a single blended figure. The double-count trap is specific and expensive — if the business EBITDA has not had a market rent deducted, the property's income is already sitting inside the business number, and adding a separately valued freehold on top counts the same rent stream twice. Developer and sale-and-leaseback structures, increasingly common as purpose-built centres are sold to investors and leased back to operators, sit in the same frame: the leaseback rent directly sets the operator's maintainable earnings, so it has to be modelled, not treated as a side issue. Getting this split right is often the difference between a defensible figure and one that falls apart the moment a buyer's accountant reads it.
From a benchmark to a figure you can defend
Everything above is a framework for thinking about value, and for early planning it is often enough on its own — running your own centre through the EBITDA and per-place methods costs nothing and will get you into the right postcode. A formal valuation earns its fee when the number has consequences someone else will test: preparing a centre for sale, where a defensible figure anchors the campaign and survives buyer due diligence; a partner or shareholder exit, where one side buying out another needs a number both advisers can stand behind; family law property settlements, valued to a standard that withstands the other side's expert; and CGT events, including small business CGT concession claims under Division 152, where eligibility can turn on the $6m maximum net asset value test, and related-party transfers into a family trust or succession structure, where market value substitution under s 116-30 ITAA 1997 can apply because there was no arm's-length price. Across more than 3,000 business valuations in our lead valuer Jackson Wilson's career, the childcare files that survive review are the ones that build the earnings base from verified occupancy and licence facts, run both methods, split freehold from business cleanly, and conclude a supportable range with the most supportable position identified within it — every report senior-reviewer signed under APES 225 and IVS 104, with the working file retained for ten years. Oliver Group's fees for this work are fixed and published before we start: most single trading centres sit at the Comprehensive tier from $3,995 + GST, while multi-centre groups, freehold-plus-business structures and matters likely to face ATO or lender review sit at the Defensible Valuation File from $8,995 + GST. We take no referral fee or commission from your accountant or broker — paying for referrals would compromise the independence that makes the report worth commissioning, so we do not do it. For how those fees are built, see /insights/how-much-does-a-childcare-centre-valuation-cost, and for the multiples evidence across sectors, /insights/ebitda-multiples-by-industry-australia. One boundary stated plainly: Oliver Group prepares independent valuations only. We are not a registered tax agent and do not provide tax, legal or financial advice, and we do not assess regulatory compliance or predict a regulator's decisions — those matters sit with your accountant, lawyer and the relevant authority. Our part is a supportable value for the asset you actually hold.