Childcare Centre Buyer Information

Seven things you probably need to know when buying a childcare centre...
1. Licensing
All states operate licensing for operators of Childcare centres. New centres require new licences, and if you buy an existing centre – you will have the licence transferred to you from the Seller.
Before obtaining a transfer of any child care licence you will be required to obtain a suitability card appropriate for the State or Territory in which the child care centre is located.
It is recommended that if you are serious about purchasing a child-care centre business that you obtain a suitability card before entering into a contract. This will expedite the transfer of the business, and reduce tension for you and the Seller.
2. Where to Get More Information
Contact the Child Care Owners Association in your State or Territory where you intend to buy. Owners Associations usually have annual conferences and offer regular training days for prospective child care owners.
State owner’s associations can offer great assistance to new owners of child care businesses, and it is wise to contact these associations before you buy a child-care centre.
The Commonwealth Government website is also a great source of information. You can visit Family Assist by going to . Family Assist deals with child care and the child care subsidy known as Child Care Benefit. Child Care Benefit is paid by the Commonwealth Governments to parents with children attending long day-care centres.
All State and Territory Government control licensing, staff ratios and qualifications, building and playground requirements.
3. Profitability
Often Child Care Centres are offered for sale on a "Price Per Place" valuation. This provides a rough guide to business value, but ultimately the most important criteria is profit, or return on investment. In childcare profit is determined by the number of licensed places, average occupancy, and the fees charged per child.
The return you can expect depends on a number of factors, primarily whether the business is a leasehold child care business, or a freehold child care centre, and whether you are buying both the buildings and the business, or the business only.
When buying a leasehold child care centre with a fairly long lease, say 10 to 20 years, you can usually expect a return of 18% to 25% on the purchase price.
The return on investment with a freehold going concern child care centre should usually be in the range of 12% to 16%. Passive freeholds yield between 7% and 10%.
4. Financing
A Purchase As a guideline, most banks will lend 40% of the purchase price towards the purchase of a leasehold child care centre, and around 60% of the value on a freehold child care centre.
Benchmark can assist buyers to source the best finance deals, and maximum LVR, through a network of banks and brokers that are familiar with the specific needs and requirements associated with buying and funding the acquisition of a childcare centre.
5. Management
Specialist child care management companies offer management schemes for the total management of childcare centres, including staffing, subsidy claims, marketing and the general administration of the centre. These companies provide regular financial, OH & S reports, and occupancy reports.
6. Confidentiality
Business owners have a right to feel confident that there private information is being treated in confidence by parties looking to acquire their business. Therefore all potential buyers are required to sign a Confidentiality Agreement before receiving any information about the business, or information that may reveal the identity of the child care centre being offered for sale.
7. Due Diligence
The contract for the sale of a childcare centre will usually allow a period of time for due diligence and finance approval to be completed. Once these steps have been completed it is usual to allow a further period of time (about 30 to 60 days) to allow for transfer of the child care centre licence, before settlement can be achieved.
Due diligence refers to the process by which a buyer (and their advisors) is given access to all financial and other record, to determine the profitability, and the suitability of the investment for the buyer. This can be completed either before signing a contract, or after signing. It is often preferred that the due diligence be conducted after the contract has been signed to allow the buyer to conduct enquiries whilst the business is 'off the market'.
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