Look beyond sector growth when assessing a childcare opportunity. Explore the local demand, occupancy and waiting-list questions worth investigating before buying.
In this article
A busy neighbourhood and a long waiting list can make a childcare centre look like an appealing opportunity. If you're considering a purchase, the next question is what that interest means for the particular centre, the places it can offer and the business you're buying.
National childcare figures can provide context, but you'll need local information and service records to understand an individual opportunity. Who needs care nearby? Which ages and days are they looking for? Can the centre meet those needs with the rooms, staff and resources available?
The ACCC’s childcare inquiry describes childcare markets as highly localised and identifies occupancy as an important factor in revenue and viability. Those findings provide a useful starting point for the questions you ask before buying.
Start with the families who would use the centre
Look closely at the area a centre could realistically serve. Consider nearby housing, schools, employment hubs and the routes parents might take during their working day. Visit at drop-off and pick-up times if possible. How easy is the centre to reach, and what does access look like when the surrounding streets are busy?
Then look beyond a general count of young families. Ask which age groups need care, which days are being requested and whether the service hours suit those families. A request for an infant place on two particular days raises different questions from interest in a preschool program later in the year.
New housing or an employment development may be relevant, but check its status and expected timing. Ask what evidence supports any forecast of extra enrolments. A proposed project and an occupied neighbourhood should be considered on their own terms.
Look at occupancy by room and weekday
An overall occupancy percentage is only the beginning of the conversation. Ask how it's calculated, what period it covers and what information sits behind it.
For example, a centre could have strong bookings in one room on Tuesdays and Wednesdays, while other rooms or days have more availability. Ask for enough detail to see those patterns, rather than relying on a single average.
Compare bookings, attendance records and fees billed. Look at how they change over a consistent period and ask about anything that needs explaining, such as room closures, a change in operating hours or families moving between age groups. Review fees collected as well, so your assessment doesn't stop at the number of bookings.
It's worth checking what capacity means in the figures you're given. Is the calculation based on approved places, rooms currently in use or places the centre can offer with its available staff? Your accountant and other advisers can help you assess how the records fit together.
Ask what a waiting list represents
A waiting list is worth investigating. Find out when families last confirmed their interest, their preferred start dates and the ages and days they need.
Ask whether the list has been checked for duplicate or outdated enquiries. Have some families already found care elsewhere? Are others waiting for a combination of days the centre can't currently offer?
The useful detail is the match between a family's request and an available place. A list of names alone won't tell you how many enrolments are likely to follow. Ask what records the service has of enquiries becoming bookings, and be cautious about treating every enquiry as future income.
Understand nearby supply and the centre's ability to respond
Look at other services in the area and the families they aim to serve. Consider their locations, hours, age groups and programs, using information you can verify. Check the status of any proposed developments rather than assuming every announced centre will open as planned.
Then bring the focus back to the centre you're considering. If families are asking for more places, what would be needed to offer them? Ask about staffing, room availability, resources and any relevant approvals. An opportunity to expand should be supported by a clear explanation of what is possible and what it would involve.
The ACCC’s inquiry also examined workforce constraints and their effect on services. Use that historical work as a reason to investigate the centre's actual situation: its roster, qualifications, vacancies and ability to retain staff. Avoid assuming that a building's capacity is the same as the places a service can consistently offer.
Connect demand with the purchase you're considering
Understanding demand is one part of assessing a childcare opportunity. You also need to know what you're buying and how the proposed transaction works.
For an operating business, ask how enrolments and fees collected relate to staffing, operating costs and lease obligations. If the opportunity is a property investment, consider the tenant and lease alongside the property's suitability for childcare use. Where both interests are offered, have your advisers assess each and explain how they fit together.
Before you go further, make sure you can answer these questions:
- Which families, ages and days does the evidence of demand relate to?
- What do the room-by-room and weekday records show?
- How current and relevant are the enquiries on the waiting list?
- What nearby supply or developments need investigating?
- What would the centre need to maintain or increase the places it offers?
- How does that information relate to the business or property interest being sold?
Clear answers give you a more useful basis for further investigation than a broad claim that the childcare sector is growing. If you're exploring an opportunity, get in touch with Childcare4Sale to discuss the listing and the next steps.