Due Diligence Checklist: Buying a Childcare Centre

Buying an existing childcare centre can be a faster path into the sector than building from scratch, but the value sits in details that are easy to miss. A centre that looks healthy on a tour can carry compliance baggage, a fragile lease, or enrolments propped up by a few families about to leave. Thorough due diligence protects you from inheriting problems you did not price in.

This checklist walks through the core areas to review before you sign. Work through each one methodically, verify what the seller tells you against independent records, and bring in your own advisers.

Compliance and assessment and rating history

The regulatory standing of a service is the foundation everything else rests on.

• Confirm the National Quality Standard rating and when it was last assessed. A long gap since the last assessment can mean a reassessment is due.
• Read the most recent assessment and rating report in full, not just the headline rating. Look at which quality areas were marked as working towards or significant improvement required.
• Ask for the history of compliance notices, breaches, and any enforcement action. Patterns matter more than a single old issue.
• Review the Quality Improvement Plan and judge whether it is a living document or a box-ticking exercise.

A poor or stale rating is not always a dealbreaker, but it changes the work you inherit and how families and the regulator view the service.

Provider and service approvals, conditions and notices

Approvals do not transfer automatically when ownership changes.

• Confirm the provider approval and service approval are current and identify exactly who holds them.
• Check for conditions on the approval. Conditions can restrict numbers, hours, or operations and will bind you too.
• Understand the approval transfer process with the regulator and build the timeline into your settlement plan. A sale can be derailed if approvals cannot be transferred cleanly.
• Verify the nominated supervisor and certified supervisor arrangements.

If you are new to these terms, the glossary explains the approval framework in plain language.

Occupancy, enrolment trends and waitlist

Enrolment is the engine of the business, so look at the trend, not just today’s snapshot.

• Request utilisation data over several years broken down by room and by day. Many centres are full on Tuesday to Thursday and quiet on Mondays and Fridays.
• Examine the waitlist closely. Ask how it is maintained, whether entries are recent and genuine, and how many convert to enrolments.
• Look for concentration risk, such as a large share of places held by a single employer or a cohort of children about to transition to school.
• Check the enrolment pipeline and recent withdrawals for early warning signs.

Financials

Treat the seller’s figures as a starting point for your own analysis, verified by your accountant.

• Reconcile reported revenue against enrolment records and subsidy data, not just the profit and loss statement.
• Separate genuinely recurring revenue from one-off items, and review the cost base, particularly wages, which are the largest line.
• Understand how government subsidy arrangements flow through the accounts and whether any are at risk.

Avoid anchoring on a single valuation rule of thumb. Engage qualified financial and tax advisers to assess the real earnings and a defensible price.

The lease and property

For leased centres, the lease can be worth as much as the business.

• Check the remaining term and renewal options. A short tail with no secure options is a serious risk for a long-life childcare investment.
• Review rent review mechanisms, outgoings, make-good obligations, and any personal guarantees.
• Confirm the permitted use and zoning allow childcare and the approved number of places.
• If property is included, commission building, pest, and structural inspections.

Staffing and key-person risk

Educators are the heart of the service and a major source of risk in a handover.

• Assess qualifications, ratios, and staffing levels against requirements across all rooms.
• Identify key-person dependency. If families stay because of one beloved director or educator who plans to leave, enrolments may follow them out the door.
• Review turnover, current vacancies, reliance on agency staff, and employment liabilities such as accrued leave.
• Confirm working with children checks and mandatory training are current.

Physical condition, licensed places and reputation

• Confirm the approved number of places and that the physical space genuinely supports them, including indoor and outdoor space requirements.
• Inspect the condition of the building, equipment, and outdoor areas, and budget for deferred maintenance.
• Review the centre’s reputation: online reviews, standing in the local community, and relationships with families.

The big red flags

Treat any of these as a signal to slow down and dig deeper:

• A stale or declining rating, or unresolved compliance notices.
• Conditions on the approval, or uncertainty about whether approvals can transfer.
• Declining utilisation, a thin or inflated waitlist, or revenue concentrated in a few families.
• A short lease tail with weak renewal options.
• Heavy dependence on one key person who is leaving.
• A seller who is reluctant to share records or rushes the timeline.

This guide is general information, not legal, financial or investment advice.

Buying well comes down to verifying the things that drive value and risk before you commit. If you are weighing up a centre and want an experienced eye across the compliance, enrolment, and operational picture, get in touch. Our acquisition and expansion support helps investors and operators assess opportunities, structure a sensible offer, and move to a confident decision.