A daycare or childcare center is typically worth between roughly 2.2 and 4.1 times its seller's discretionary earnings (SDE), with an established single-site center under a non-owner director landing around 3.2 times. A small center where the owner still counts toward classroom ratios sits near the bottom of that range; a multi-site operator with a director bench sits near the top. Publicly available transaction data across all sold centers puts the median closer to 2.7 times, with the middle half of transactions falling between roughly 1.9 and 4 times.

That spread is the real story. Two centers with identical earnings can be worth amounts that differ by hundreds of thousands of dollars, based on how the business runs without the owner and how well it operates under its license. One more thing before the details: the multiple applies to the operating business only. If you own the building, the real estate is valued separately, on top of the business, and we cover that below.

Why every guide quotes a different multiple

Search this question and you will find numbers that appear to contradict each other completely. One rule of thumb says 1 to 2 times cash flow for small centers. Transaction data says the median center sells around 2.7 times SDE. Valuation firms cite 3 to 4.5 times EBITDA. Childcare M&A advisors publish examples at 6 or 7 times EBITDA. Some rules price per licensed child, anywhere from $1,000 to $2,500 per slot for the business alone, or $6,000 to $14,000 per slot with the building included. And a few guides apply textbook capitalization rates built for large public companies, which quietly imply multiples north of 10 times that no actual daycare transaction supports.

None of these numbers is exactly wrong. They are answers to different questions, on different earnings bases, at different scales. Three distinctions reconcile nearly all of it.

SDE versus EBITDA. SDE includes the owner's full compensation, because the assumption is a working owner-director. EBITDA subtracts a market-rate salary for a director, because the assumption is professional management. For a typical single-site center, SDE might be $135,000 while EBITDA after a market-rate director salary is $70,000 to $80,000. A 2.7x SDE multiple and a 4x EBITDA multiple can describe the same center at a similar price. Quoting an EBITDA multiple against your SDE overstates your value by half or more.

Owner scale versus platform scale. The 6 and 7 times EBITDA figures come from consolidator and private equity transactions: multi-site platforms with $500,000 or more in EBITDA, professional management, and audited books. Those numbers are real, and they are not available to a single center with an owner in the building. Larger childcare operators buy independent centers precisely because the multiple they pay for a single site is far below the multiple their own platform commands.

Business versus real estate. Childcare is one of the few small-business categories where the building routinely equals or exceeds the value of the operating business. Any number that includes the real estate, like the $6,000 to $14,000 per licensed child rule, is answering a different question than a business-only multiple. When you see a wide, confusing range, the first thing to check is whether the building is in it.

Want the market's ballpark for a center your size? The free valuation calculator gives you a size- and industry-adjusted range in about two minutes. Where you land inside it is what the full assessment measures.

What counts as earnings: SDE for a daycare

Seller's discretionary earnings is net profit plus everything the owner personally takes out of or runs through the business: the owner's salary, personal expenses paid by the company, depreciation, interest, and true one-time costs. For a daycare owner-director this is usually a much larger number than the profit line on the tax return, because most owner-directors pay themselves modestly and let the rest sit in the P&L as apparent profit.

The reverse pattern matters even more in childcare than elsewhere. If you would have to pay a qualified director $55,000 to $65,000 to replace what you do, and you pay yourself $35,000, your business looks more profitable than it is by the difference. A buyer will make that adjustment in the first pass. It is better to make it yourself, before the number surprises you.

For context, publicly available transaction data shows the median sold center generating roughly $130,000 in discretionary earnings on about $580,000 in revenue, around 22 to 23 percent of revenue. A healthy owner-run center typically lands between 15 and 27 percent. If your SDE margin is materially below that band, the value problem is usually operational, and it is usually one of two lines: labor or pricing.

The license is the ceiling. The multiple measures what you do under it.

Here is the thing most valuation guides miss about this industry: a daycare cannot simply sell more. Your capacity is capped twice, by the square footage on your license and by state-mandated staff-to-child ratios, commonly around 1 adult to 4 infants, 1 to 7 toddlers, and 1 to 10 preschoolers, varying by state. The binding ceiling is whichever cap you hit first at your current mix of ages.

That changes what well run means. A daycare is not a fill-more-seats business. It is a manage-labor-against-a-regulated-ceiling business, and the operating numbers a buyer reads tell them exactly how well you do it.

Occupancy against licensed capacity. Enrollment as a percentage of licensed slots is the single most important operating metric. Most centers break even somewhere around 65 to 75 percent of capacity; well-run centers sustain 80 to 90 percent. A center at 70 percent occupancy is spreading its fixed costs, rent, insurance, and administration, over too few tuitions, and the earnings show it. Note that "we're full" usually means full in the rooms you can staff, which is not the same as full against the license. The gap between those two numbers is often the largest hidden opportunity in the building.

Labor as a share of tuition revenue. Teaching and director labor is the dominant cost, and a healthy center runs it at roughly 45 to 55 percent of tuition. Above 60 percent, the center is structurally unprofitable no matter how full it is. Wage pressure since the expiration of pandemic-era stabilization funding has pushed many independent centers into the stressed band, which is exactly why this line deserves a hard look before any valuation conversation.

Age mix. Infant rooms at a 1-to-4 ratio barely break even at most tuition levels; preschool rooms at 1 to 10 carry the building. Two centers with identical enrollment can have very different earnings purely because of which rooms the children are in. Buyers who know the industry read the age mix like a second income statement.

These three numbers, more than any generic list of value drivers, determine where in the 2.2 to 4.1 times range a center actually lands.

Owner-in-ratio: the question that moves the multiple most

Every industry has its version of owner dependence. In childcare it has a precise, physical form: are you a named ratio adult on your own license?

If you count toward a classroom ratio, the center cannot legally operate a room without you present. Every sick day is a compliance event. A surprise licensing inspection on a day you are out is a risk. And a buyer looking at the center is not buying a business; they are buying your job, with a state regulator watching attendance.

The same dependence shows up in softer forms: the owner is the only one who holds the relationship with the licensing agency, personally runs every enrollment tour, and is the de facto substitute when a teacher calls out. Each of those is a reason the number comes in lower than the earnings alone suggest.

The counterweight is one hire: a credentialed, non-owner director, plus enough float coverage that the owner is never the ratio backstop. It is the single most valuable move in this industry, for the owner's life and for the multiple at the same time. A center that can pass an inspection, staff its rooms, and enroll new families without the owner in the building is a business. Everything else is a well-paid position.

What moves a daycare up or down the range

Up: high, stable occupancy with a waitlist; tuition billed as seat-hold, which makes childcare revenue recurring in everything but name; a credentialed non-owner director; low staff turnover in an industry where 30 to 40 percent annual turnover is common; a clean licensing history; a diversified family base; a long, assumable lease if you rent.

Down: the owner counted in ratio; open licensing violations or a safety incident on file; heavy concentration in state subsidy revenue, where reimbursement rates are capped and payment timing is slow; chronic open teaching positions, because an unfilled lead-teacher slot does not just cost productivity, it closes a room and takes every tuition in it with it; a short lease with no renewal option; enrollment records that cannot be tied to attending, paying children.

One plain caution on the demand side: tuition is recurring, and demand for care is resilient, but it is tied to local employment. When a parent loses a job, the child comes out of care. Buyers price that local-economy exposure, and diversification across employers and payer types is the protection.

If you own the building

Value the operating business and the real estate separately, always. The business gets the SDE multiple. The building gets a market-rent appraisal like any other commercial property, and the business's earnings must be restated with a market rent in them before the multiple is applied, since an owner who charges themselves below-market rent is inflating the business's earnings with the building's subsidy.

Done this way, an owner with a paid-down building often finds the combined number is dominated by the real estate. That is not a disappointment; it is clarity. It tells you which asset you actually built, and it opens options a single blended number hides: sell the business and keep the building as a tenant-paid asset, sell both together to a buyer who wants the whole package, or lease the real estate to the business's next owner to widen the buyer pool.

What is your daycare worth right now?

You can get most of the way with an afternoon and your own numbers. Work out your SDE from your latest return: net profit, plus your salary and benefits, plus interest, depreciation, and one-time costs. Apply the range above with your size and structure in mind. Then be candid about the three operating reads: where is occupancy against the license, where is labor against tuition, and whose name is on the ratio sheet.

The step most owners cannot do alone is the comparison: what do the cost lines, margins, and staffing economics of a center like yours normally look like, and which gap between your numbers and those is costing the most value? That is what the assessment measures. It takes your actual financials, benchmarks them against businesses like yours, and returns your valuation with the drivers ranked by dollar impact, so the number comes with its own to-do list.

How do you know if it is growing in value?

You do not need to be selling to want this number. The owners who end up with options are the ones who tracked the value of the business the way they track enrollment: yearly, in writing, against their industry. The drivers here move slowly and quietly. A year of wage drift, a director who leaves, a slide from 85 to 76 percent occupancy that nobody names out loud: each one changes your number without ever appearing on a monthly tuition report. Owners who re-measure on a cadence catch the drift early, and owners who improve one driver a quarter, occupancy this quarter, the director hire next, compound the multiple the same way enrollment compounds tuition. The moves that raise the number are the same moves that make the center steadier to own now.

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Common questions

How much is a daycare worth?
Most daycare and childcare centers are worth roughly 2.2 to 4.1 times their seller's discretionary earnings (SDE) for the operating business, with the median sold center in publicly available transaction data landing near 2.7 times. A center generating $130,000 in SDE would typically be worth roughly $290,000 to $530,000 before any real estate, and where it lands in that range is driven by occupancy, labor cost, owner involvement, and licensing history.
What is the average multiple for a daycare business?
Across all sold centers, publicly available transaction data shows a median around 2.7 times SDE and an average around 3.3 times, with the middle half of transactions between roughly 1.9 and 4 times. Larger centers with higher revenue reliably command higher multiples than small owner-run centers, and centers sold together with their real estate transact on a different basis entirely.
How do you value a childcare business if the building is included?
Separately. The operating business is valued on an earnings multiple, with a market rent restated into its expenses. The real estate is appraised on its own as commercial property. Rules of thumb that blend the two, such as dollar-per-licensed-child figures that run several times higher with the building included, describe a package price, not a business value.
What is a fair price per licensed child?
Per-slot rules of thumb commonly run $1,000 to $2,500 per licensed child for the business alone and $6,000 to $14,000 with real estate included, but they are blunt instruments. They ignore occupancy, age mix, labor cost, and owner involvement, which is why roughly half of centers sell above any given rule of thumb and half below. Use them as a sanity check, never as the answer.
Should I use SDE or EBITDA to value my daycare?
If you work in the business, use SDE. EBITDA applies when a market-rate director runs the center without you, and it is always the smaller number, typically by about the amount of a director's salary. The most common valuation mistake in this industry is applying an EBITDA multiple, especially one quoted from large multi-site transactions, to an SDE figure.
Does subsidy revenue lower the value of a childcare center?
Not by itself. Subsidy programs bring reliable demand. What buyers price is concentration: a center where most revenue depends on one state program is exposed to rate ceilings and payment timing it cannot control. A mixed base of private-pay and subsidy families reads as stability; heavy dependence on any single source reads as risk.
How does licensed capacity affect what my daycare is worth?
Capacity is the ceiling on the whole valuation, because you cannot enroll past it without more building, more qualified staff, or a different age mix. What buyers pay for is not the license itself but the utilization of it: a 100-slot license running at 88 percent occupancy with labor at 50 percent of tuition is a fundamentally different asset than the same license at 68 percent.
Do I need a formal appraisal to value my daycare?
For a legal purpose such as a divorce, a partnership dispute, or certain SBA loans, yes, and a credentialed appraisal typically costs several thousand dollars. To understand what you own, what drives the number, and whether it is growing, you need your SDE, your operating metrics, and a defensible multiple range, which is what an owner-side assessment provides at a fraction of that cost.

Multiple ranges reflect Honest Assessment's valuation model for owner-operated centers, expressed on an SDE basis. They are size-spanned ranges, not observed sale prices, and where a specific center lands depends on the factors above.