The Buyer’s Checklist: 10 Things You Must Check Before Buying a Childcare Centre
Buying an existing childcare centre can be a fast track to entering a market with established revenue and community presence. But behind the headline profit numbers can lie hidden risks that only surface after you have settled.
A successful acquisition is not a leap of faith; it is the result of disciplined, rigorous due diligence. At Mollard Property Group, we provide the strategic analysis that uncovers a centre’s true value and future potential. This is our essential 10-point checklist for every prospective buyer.
Part 1: The Commercial Viability
This section assesses the core financial health and market position of the centre.
1. Deconstruct the Occupancy Profile
Occupancy drives revenue. Look beyond the headline percentage.
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Analyse by Age Group: Is the desirable 0-3 age group full, or is the centre propped up by lower-fee kinder rooms?
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Verify Actual Attendance: Compare enrolments to actual sign-in data to understand revenue consistency.
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Red Flag: A long waitlist for only one age group may signal an imbalanced business model.
2. Scrutinise the Financials
A profit and loss statement can be misleading. Dig deeper into the numbers.
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Benchmark Key Metrics: Is the wage percentage of revenue sustainable (typically 50-60%)? Are fees aligned with local competitors?
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Normalise the Earnings: Identify and remove any one-off expenses or personal costs paid by the current owner to find the true underlying profit.
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Red Flag: Unusually low maintenance or resource spending may indicate that essential costs have been deferred, leaving you with the bill.
3. Map the Competitive Landscape
Your centre’s future success depends on its position in the local market.
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Analyse Competitor Performance: Are nearby centres full with waitlists, or are they offering heavy discounts to attract families?
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Investigate the Development Pipeline: Check local council applications for new centres being approved nearby.
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Red Flag: A “strong” centre in a market with two new, larger centres approved for development within a 1km radius is a high-risk investment.
Part 2: The Operational Risk
This section evaluates the quality of the operations, the team, and the brand.
4. Review the Compliance & Rating History
A poor regulatory history is a major liability.
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Examine the Full History: Don’t just look at the current rating. Review the centre’s entire compliance history for any recurring issues or formal warnings.
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Red Flag: A centre that has bounced between “Working Towards” and “Meeting” NQS suggests underlying systemic problems.
5. Assess Workforce Stability
The quality of your staff, especially the Centre Director, is your most valuable asset.
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Check Staff Turnover Rates: High turnover is a sign of poor culture and is disruptive for children and families.
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Evaluate the Leadership Team: How long has the Director been in place? Do they have strong community relationships?
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Red Flag: A centre that is highly dependent on a long-serving owner-operator may struggle significantly when they leave.
6. Validate Brand & Community Reputation
A strong brand makes it easier to attract families and staff.
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Talk to the Community: Look beyond online reviews. What is the centre’s reputation among local primary schools and community groups?
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Analyse Family Retention: Are families staying for the long term, or is there a high churn rate?
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Red Flag: A centre with a poor local reputation will have to spend significantly more on marketing to achieve full occupancy.
Part 3: The Property & Asset Integrity
This section looks at the physical building and the legal tenure.
7. Interrogate the Lease Agreement (If Applicable)
If you are buying the business but not the building, the lease is your most critical document.
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Review Rent & Increases: Is the rent at market rate? Are the annual increases fixed, or are they linked to CPI, which could be volatile?
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Understand Your Obligations: Check the “make good” clause and responsibility for capital expenditure.
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Red Flag: A short remaining lease term with no further options gives you no long-term security.
8. Commission a Building & Asset Report
A compliant building may still require significant future investment.
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Assess the Physical Condition: Get an expert report on the state of the roof, plumbing, and major structures.
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Audit Outdoor Equipment: Playground surfaces and equipment have a limited lifespan and are expensive to replace.
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Red Flag: An aging building that just scrapes by on compliance may require a multi-hundred-thousand-dollar upgrade to meet modern standards.
9. Audit All Contracts & Documentation
Disorganised paperwork is a sign of a disorganised business.
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Review Employee Contracts: Ensure they are compliant with modern awards.
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Check Enrolment Agreements: Confirm that policies are up-to-date and legally sound.
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Red Flag: A lack of documented policies and procedures means you are inheriting unknown risks and will have to spend time and money creating them from scratch.
10. Model the Future, Don’t Just Buy the Past
Build your own financial model based on realistic future assumptions.
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Factor in Known Changes: Incorporate any planned fee increases, rent hikes, or upcoming wage rises.
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Stress-Test Your Assumptions: What happens to your profit if occupancy drops by 10% or if wages increase by 5%?
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Red Flag: A purchase price based solely on last year’s profit, without factoring in future market changes, is a recipe for overpaying.
Execute Your Due Diligence with an Expert Partner
Conducting this level of due diligence requires deep industry knowledge and specialist expertise. Mollard Property Group provides the strategic analysis that uncovers the true story behind the numbers. We help you assess market fundamentals, analyse financial performance, and forecast future returns so you can invest with confidence.
An acquisition should be an evidence-based, commercially justified decision—not a leap of faith.
