HINGE Advisors and EY-Parthenon Reveal 2025 State of the Early Education Industry

To help early education leaders navigate today’s ever-changing childcare landscape, industry experts Kathy Ligon, Founder and CEO of HINGE Early Education Advisors, and Phil Vaccaro, Partner at EY-Parthenon, have teamed up to reveal what’s new in the industry in their latest annual update. 

Combining insight from HINGE’s extensive experience advising private early education owners across the United States and EY-Parthenon’s data-driven research, analysis, and consulting work, HINGE’s 2025 State of the Early Education Industry webinar highlights key trends, including:

• Revenue growth for early education centers
  Though margins remain slim, early education centers at large indicate seeing higher revenues due to several factors. Tuition rates have increased to cover higher operational costs and support center sustainability. It’s important to note that according to a recent HINGE poll, tuition rate increases have generally returned to historic levels of 3-5% per year, compared to 8-12% in 2022-2024. In addition, there has been a movement to decrease tuition discounts in all categories except for staff childcare.

•  Shifting trends in demand
  While the percentage of children enrolled in private early education centers remains consistent at 15%, there are now about 1 million fewer children ages 0-5 in the United States compared to 2016. This means there are approximately 200,000 fewer children at these locations overall.
  
  Additionally, the COVID-related birth dip in 2021 is specifically affecting demand for 3-5 year old classrooms. The good news is there’s greater participation in the 0-2 year old segment, offsetting lower enrollment in older preschool age groups. Many schools report strong interest with waitlists for infant and toddler classrooms, presenting opportunities to boost enrollment.

Pricing fatigue among parent groups is also affecting occupancy. In fact, according to data from the National Household Education Surveys Program, cost has increased in importance since 2019 for parents considering every type of childcare arrangement. The availability of public Pre-K programs is another factor influencing occupancy, but right now, it is highly situational based on the local market. The best thing early education owners can do is be prepared with a game plan to pivot if Pre-K students are drawn out of the system, as those changes can happen quickly.

•  Significant investment in staffing
  Staffing continues to be a priority and a challenge for the early education industry. There has been a slight easing in the ability to hire staff, but recruitment and retention strategies remain crucial. To support these necessary efforts and a 30-50% increase in childcare staff salaries since 2020, leaders are shifting marketing dollars away from enrollment and toward staff. This includes providing tuition discounts for staff children and investing more heavily in training programs, credentialing, mentoring, and providing career paths within their organizations.

• Strong interest from investors and buyers in early education
  Continuing the trend of increased interest among investors and buyers in the early education industry over the past several years, these groups remain tremendously active in seeking out opportunities to invest in or acquire existing schools and subsequently grow their footprint or offerings. Early education business and real estate values are stable, with a slight increase in real estate values since interest rates have started to drop. However, deal structure, diligence, and selling processes have gotten significantly more complicated, underscoring the need for early education owners to have the proper support for a successful exit.

• Increased greenfield growth and acquisition opportunities
  High building costs aren’t slowing down early education leaders in pursuing plans for more greenfield growth and new school builds. The current market also presents more opportunities for owners who are looking to acquire existing schools as many operators reach retirement age or look to transition ownership amid the growing operational complexities of running an early education business. Sellers are in a unique position to capitalize on the current state of higher-than-usual business values, and buyers are in a prime market to build their portfolio of schools.

The webinar also provides insight into various operational trends in the early education industry from insurance and licensing challenges to branding, technology, and specialty curriculum. This analysis ultimately helps early education owners strengthen their organizations and continually improve how they serve children, teachers, and the community.

Watch the full 2025 State of the Early Education Industry webinar above for more details and let us know what you think!

Are you an early education owner who wants to know more about what the current state of the industry means for your business? Our team at HINGE Advisors would love to connect and help you stay ahead of the curve — no cost or obligation. Get in touch!