Childcare centre valuations that reconcile per-place pricing with earnings.

A childcare centre valuation determines what a long day care or OSHC service is worth by testing a per-licensed-place benchmark against capitalised maintainable earnings — the two must reconcile. Prismi prepares evidence-led valuations for centre sales, partnership exits, related-party transfers, CGT concession claims and finance, concluding at the most supportable position with CCS dependence, occupancy maturity, NQS rating and lease terms priced in.

When a childcare centre valuation is required

Childcare is one of the most transaction-active SME sectors in Australia, and it is also the sector where asking prices and defensible values diverge most. Brokers quote per-place asking prices built for competitive tension; a valuation has to conclude at what the evidence supports. Beyond sales and purchases, valuations are required when partners or unitholders enter or exit, when the operating entity or freehold moves between family entities, when the small business CGT concessions are claimed on exit, when a group restructures, and when a lender wants the business value behind its security tested. In each case the question is the same — what a willing but not anxious buyer would pay a willing but not anxious seller, the Spencer principle — and the answer has to survive whoever reviews it: the other side's accountant, the lender's credit team, or the ATO.

• ·Sale or purchase of a centre, including price-testing a broker's information memorandum
• ·Partnership, shareholder or unitholder entry and exit
• ·Related-party transfer of the operating entity or freehold between family entities
• ·Small business CGT concession claims on exit (Div 152, including the s 152-40 active asset test)
• ·Restructures under Subdiv 328-G and Division 7A compliance where loans sit between entities
• ·Bank finance, refinancing and lender security reviews
• ·Family law property settlements, estate planning and succession

Per-place pricing and capitalised earnings must tell the same story

The market talks about childcare in dollars per licensed place; valuers talk in capitalised maintainable earnings. Both are legitimate evidence, and each is a cross-check on the other. A per-place figure embeds assumptions about achievable occupancy, daily fee rates and operating margin — a 90-place centre trading at 60 per cent occupancy holds the same approval as its full neighbour but nothing like the same earnings. Where the implied per-place price and the capitalised earnings point to materially different values, something in the file is wrong: earnings are under- or over-normalised, the place count includes places that cannot be staffed or filled, or the comparable transactions are not comparable. Prismi runs both methods and reconciles them explicitly — the report concludes at the position both can defend, and documents why. A number that only one method supports is not the most supportable position; it is an argument waiting to lose.

CCS dependence is a regulatory revenue risk, and it is priced

At a typical long day care service the majority of gross fee revenue arrives as Child Care Subsidy paid directly to the provider. That is simultaneously a strength — the Commonwealth is the counterparty for most of the revenue — and the sector's defining risk, because a single policy change moves every centre's top line at once. Current settings support baseline demand: from 5 January 2026 the activity test was replaced by the 3 Day Guarantee, giving all CCS-eligible families at least 72 hours of subsidised care per fortnight, with up to 100 hours where activity requirements are met, and CCS meets up to 90 per cent of fees for the lowest-income families, subject to the hourly rate cap. Rate caps and income thresholds are indexed each July. The valuation treats CCS dependence as a risk priced into the capitalisation rate or multiple rather than a footnote: where a centre's fees sit well above the hourly rate cap, families carry the gap and demand becomes more price-sensitive, and where a provider carries Family Assistance Law compliance history, it is documented in the working file because a buyer's due diligence will find it.

Young centres: the occupancy ramp is normalised, not ignored

A centre under three years old rarely trades at mature occupancy, which breaks both standard methods at once: trailing earnings understate the mature business, and the developer's pro forma overstates it. The supportable approach is to normalise to a mature-trading position the evidence can carry — the centre's own ramp to date by age room, the enrolment pipeline and waitlist, local supply of approved places including centres under construction nearby, and the demographics of the catchment. Room mix matters as much as the headline number, because educator-to-child ratios make a nursery room's cost structure very different from a kindergarten room's; a centre can be nearly full and still be trading below its mature margin. The report states the ramp assumption explicitly — occupancy by period, the date maturity is assumed, and the evidence for it — because an unstated ramp assumption is where immature-centre valuations fail under review.

NQS ratings and the service approval transfer

Every approved service carries a published rating under the National Quality Standard — Exceeding NQS, Meeting NQS or Working Towards NQS, with a small number rated Excellent or Significant Improvement Required. The rating is public on the national register, parents read it, and buyers price it: a Working Towards rating or recent compliance action weighs on the supportable position because the incoming operator inherits the remediation work and the reputational drag. The approval itself is the other regulatory gate. A centre cannot lawfully operate without a service approval under the Education and Care Services National Law, and the approval does not simply follow the sale contract — the outgoing and incoming approved providers must jointly notify the state regulatory authority well before completion, and the transfer proceeds only where the authority does not intervene within the statutory window. The valuation records the rating, the compliance history and the transfer mechanics because they bear directly on transferability, and transferability is what separates enterprise value from a licence to keep working.

Freehold, leasehold and why broker multiples mislead

No comparable is usable until it is sorted into the right pile. Single-centre leasehold businesses transact as business-only sales on capitalised earnings. Freehold going-concern and portfolio transactions often price the combined property and operations on a passing-yield basis, and the headline metrics from those deals cannot be read across to a leasehold business — much of the price is real estate. Developer-led centres add a further trap: long leases with fixed annual uplifts set to support the yield at which the developer sells the freehold. Rent that compounds ahead of fee growth strips value out of the business every year, which is why rent-to-revenue is a core test in the file, not an afterthought. Sale-and-leaseback transactions distort the record from the other direction — a vendor who takes capital out of the freehold by accepting above-market rent leaves behind a business whose earnings are not comparable to its own history, let alone to conventionally rented peers. Brokers quoting per-place asking prices rarely make any of these distinctions. A valuation must, and the report shows its workings.

Which Prismi tier fits

For preliminary planning or an internal sense-check of a broker's information memorandum, Essential (from $1,495 + GST, 10–14 business days) establishes a supportable range. For a centre sale, partnership change or small business CGT concession claim, Comprehensive (from $3,995 + GST, 15–25 business days) is the standard tier — full methodology, the CCS, occupancy and lease analysis documented, senior-reviewer signed, with the working file retained for ten years. Where the position is likely to be scrutinised — higher-value centres, multi-centre groups, related-party transfers, disputes, or CGT positions the ATO may review — the Defensible Valuation File (from $8,995 + GST, 25–35 business days) is built for exactly that, prepared with ATO market valuation expectations in mind. Operators weighing freehold retention against sale-and-leaseback, or a single-centre exit against holding for a portfolio sale, are suited to the Valuation Range & Scenario Review. Retrospective valuation dates add $495 per historical date and additional entities $750 each. Fees are fixed at engagement and never contingent on the outcome — if a target number cannot be supported, we will say so and decline the engagement on those terms.