How to Value a Childcare Business: Education Valuation & School Appraisals
As an early education owner, having a trusted valuation of your school is mission-critical.
Without knowing the value of your childcare business you’ve so lovingly built, you’re missing critical information that can help you make sound decisions about reinvesting, growing, or maximizing your value when you’re ready to find a successor.
How to Calculate Your Childcare Business Value
In the early education industry, the starting point for business valuations is a calculation that multiplies the business’ EBITDA (Earnings Before Interest, Taxes (Income), Depreciation, and Amortization) by a “multiple.” This formula provides an estimated business value of your school or childcare center.
EBITDA x Multiple =
Estimated Childcare Business Value
Keep in mind, valuations are an art and not a science! Many factors have the potential to influence a valuation, including an understanding of potential buyer operations and growth objectives.
Get a Free, Confidential Valuation
Valuations that involve real estate ownership or larger ECE schools can get complicated quickly. If you own your school’s real estate or a multi-site company and are interested in receiving a custom valuation, please reach out and one of our advisors will be in touch!
For 20+ years, HINGE Advisors has set the gold standard for early education business valuations that are trusted by industry leaders, buyers, and investors.
Understanding EBITDA in Childcare Valuations
One of the key steps in an early education valuation is calculating go-forward or projected EBITDA, which represents the expected future earnings before interest, taxes, depreciation, and amortization. This process requires a deep understanding of current investment market trends and the ability to project historical financial performance into future expectations.
The valuation process starts with historical net income and creates a conversion to estimate go-forward EBITDA. Common adjustments include removing owner personal expenses, adjusting rent and/or property taxes, and projecting ramp of new schools.
$100,000
$5,000
$20,000
$10,000
$365,000
$XXX,XXX
$500,000
Net Income
Plus Interest
Plus Taxes (Income)
Plus Depreciation
Plus Owner Expenses
Plus/Minus Other Adjustments
EBITDA
Example of EBITDA Calculation
Wondering what your early education real estate is worth? Request a Free Valuation!
The Role of Multiples in Childcare Business Valuations
A multiple represents the number of years it will take a buyer to recoup their investment. This number varies based on factors such as market, leadership, quality of real estate, tuition models (private pay versus subsidy), and growth opportunities. Multiples follow the level of EBITDA.
For example, if your childcare business’s EBITDA is $500,000, your valuation multiple may be 6x or 7x, meaning your school would be worth between $3,000,000 and $3,500,000.
EBITDA of $500,000 x Multiple of 6 = $3,000,000
EBITDA of $500,000 x Multiple of 7 = $3,500,000
Get the Most Accurate Valuation for your Childcare Center
If you’re serious about exploring growth or selling opportunities, the best way to get the most accurate valuation of your school is to work with a seasoned, industry-specific partner like HINGE Early Education Advisors.
Our education valuation experts carefully analyze various data points, including Profit & Loss statements, tuition rates, and a variety of expenses, as well as industry trends and local market conditions. Using this analysis, we create competitive, robust valuations that owners can use to make strategic decisions about the future of their organizations.
What Owners Say About Our Valuations
"As a childcare owner, you need to know what your school and real estate is worth. HINGE's strategic valuation was instrumental in positioning us for a very successful sale. The HINGE team also came through with a strong buyer that recognized the full value of our portfolio, allowing us to exit feeling good about the transaction and the next chapter for our schools."
- Milan Patel, Little Learners
Request Your Free, No-obligation Confidential Valuation
We specialize in selling early education and swim school businesses and related real estate for owners with cashflows starting at $100k. Our expertise ranges from single locations to large multi-site organizations looking to exit or partner with an investor. To see if you qualify for a free valuation (even if you’re not ready to sell), please fill out the form below and one of our advisors will be in touch.