Daycare Valuation Template

Start with the Business Inputs sheet. Pull your trailing twelve-month revenue from your accounting software, broken out by source — tuition by age group, government subsidies, and any ancillary revenue like enrichment programs or summer camps. You'll also need your annual expense breakdown, owner compensation including any personal expenses through the business, your licensed capacity and current enrollment by age group, and a note on whether you own or lease your facility. If your books don't separate tuition from subsidy revenue clearly, your childcare management software (Procare, Brightwheel, HiMama) will have that data — subsidy revenue as a percentage of total is one of the most important inputs in the model.

Work through the SDE Multiple Approach and Value Drivers Scorecard together. The SDE normalization is critical for childcare because owner-directors frequently pay themselves below the market rate for a replacement director, or run personal vehicle and phone expenses through the center. The replacement director wage used in the model defaults to $55,000–$65,000, which reflects what a qualified, licensed childcare director with center management experience earns in most U.S. markets — adjust this to your local market if needed. The Value Drivers Scorecard is where childcare centers either earn or lose their premium: license transferability alone can swing the multiple by half a turn, and buyers consistently cite staff credential depth and occupancy rate as the two factors that most affect their offer. Work through each scoring dimension honestly, as this is what a buyer and their broker will verify during due diligence.

Review the Valuation Summary before any buyer conversation or broker engagement. Pay particular attention to how the model separates business value from real estate value — this distinction matters because many buyers structure childcare acquisitions as a business purchase plus a separate real estate lease or purchase, and conflating the two leads to misaligned offers. The sensitivity table shows the full valuation range across SDE multiple increments so you understand where an aggressive buyer will anchor versus what a fair-market transaction looks like. Most childcare business owners are surprised by how significantly the occupancy rate and subsidy composition affect the multiple — running the model at different enrollment scenarios shows exactly what hitting 90% occupancy or reducing subsidy dependency is worth in dollar terms.

Daycare business valuations are shaped by three factors that don't exist in most other service businesses: licensed capacity, regulatory compliance history, and subsidy dependency. Licensed capacity is worth real money — in many markets, obtaining a new childcare license takes 12–24 months of inspections, facility modifications, and compliance documentation. A buyer acquiring an existing licensed center is also acquiring that regulatory history. But the license is only as valuable as it is transferable: some state licenses are tied to the director's credentials or the physical facility configuration, and a sale that requires a full new license application carries transition risk that buyers discount heavily. Centers where the license transfers cleanly to a new owner with qualified staff in place command meaningfully higher prices than those where the buyer faces a licensing gap.

The typical SDE multiple range for profitable daycare centers is 2.0–3.5x, but most transactions close between 2.2–3.0x. Centers above 90% of licensed capacity, with a majority of private-pay enrollment (rather than subsidy-dependent), NAEYC accreditation, and a teaching staff that isn't likely to leave in the transition routinely reach the upper end of that range. Subsidy revenue itself is not a disqualifier — many highly profitable centers run 40–50% subsidy enrollment — but buyers want to see long-term contracts or stable participation history with the subsidy program, not annual renewals that depend on state budget cycles. Gross margins in well-run daycare centers typically run 30–50%, and net margins land around 10–16% for owner-operators. SDE as a percentage of revenue often falls in the 15–25% range for centers that sell at the high end of the multiple.

The most important thing a daycare owner can do in the 12–24 months before a sale is make the center demonstrably operational without their daily presence. Buyers of childcare businesses worry about two things above all else: parents pulling enrollment after the transition, and staff leaving because they were loyal to the current owner. Both of these are reduced by the same preparation — building operational systems that the center runs on, not personal relationships. Document your curriculum planning and family communication processes. Install a center director or lead teacher who can handle compliance, staff scheduling, and parent relations day-to-day. Formalize any informal subsidy relationships. Push enrollment to 90%+ if it isn't there already, because that single metric does more to improve a childcare valuation than almost anything else you can control.