Short answer
Public marketplace observations can provide a broad reference, but they mix different child care models and sizes. A multiple only makes sense when its numerator excludes or includes the same assets and its denominator uses the same SDE, EBITDA, or revenue definition as the subject company.
Key Takeaways
- Closed-sale evidence is more probative than asking-price listings.
- SDE and EBITDA multiples cannot be compared without converting the earnings base.
- Child care model, size, management depth, and real-estate inclusion must be labeled.
- Revenue multiples are a cross-check because revenue ignores labor and occupancy economics.
- A published range does not replace company-specific normalization and risk analysis.
Longer answer
BizBuySell publishes aggregated reported sales for a mixed day-care and child-care category. That is primary marketplace data, but it is not a census and does not isolate every license type, geography, owner role, site count, franchise status, or real-estate arrangement. IBBA and M&A Source publish cross-industry survey results by purchase-price band. Those figures help explain why market practice shifts from SDE toward EBITDA as deals become larger and more professionally managed, but they are not child-care-specific multiples.
Before using a comparable, determine whether sale price includes inventory, working capital, vehicles, debt, cash, real estate, or seller financing. Then identify the measurement period and earnings adjustments. A 3x multiple on $150,000 of properly normalized SDE is not comparable to 3x on EBITDA after paying a director and management team.
For an owner-operated single-site center, SDE may capture one working owner's economic benefit. For a professionally managed multi-site group, adjusted EBITDA should include market compensation for all roles required after closing. A family child care home, preschool, franchise resale, employer-sponsored center, and platform acquisition each need their own comparable logic.
What it depends on
| Comparability field | Question to answer | Common failure |
|---|---|---|
| Earnings base | SDE, EBITDA, or revenue? | Mixing denominators |
| Model and size | Home, single site, preschool, franchise, or group? | Treating all child care alike |
| Owner role | Which duties and compensation are normalized? | Ignoring replacement labor |
| Facility | Owned, leased, or included in price? | Double-counting real estate |
| Period | Which trailing or calendar period? | Capitalizing an unusual month |
| Closing price | Reported sale or asking price? | Presenting asks as transactions |
| Risk | Licensing, staffing, concentration, lease, and capital? | Applying an average mechanically |
The selected multiple should reflect the durability of collected earnings. Enrollment quality, tuition collections, staff retention, director dependence, subsidy approvals, compliance history, lease term, and deferred capital needs may affect the result. They are diligence factors, not automatic percentage adjustments.
Example
Assume a hypothetical owner-operated licensed single-site center produces $140,000 of normalized SDE after a market-rent adjustment. An analyst selects 2.8x only as an arithmetic illustration, producing $392,000 for the operating business before debt, working capital, and closing adjustments.
If the same business is described as having $90,000 of EBITDA after replacement management, applying 2.8x to EBITDA produces $252,000. Neither answer is automatically correct: the multiple and earnings basis must come from comparable evidence. The assumed 2.8x is not a recommended or local market multiple.
What to do next
Create a comparable-sales grid with sale date, location, model, revenue, SDE, EBITDA, owner role, sites, capacity, enrollment, lease, real estate, and transaction structure. Reject records with ambiguous denominators or property inclusion. Reconcile the subject earnings before selecting a range, then disclose the data limitations.
Use the valuation hub, valuation methods, SDE and EBITDA guide, single-site versus multi-site guide, and per-slot cross-check guide.
Frequently asked questions
How much is a daycare business worth?
Value depends on normalized buyer-era earnings, the applicable multiple, working capital, debt, facility economics, and transfer risk. The building is normally analyzed separately from the operating company.
Is a daycare valued on SDE or EBITDA?
Owner-operated centers are commonly analyzed on normalized SDE; managed groups are more commonly analyzed on adjusted EBITDA. Never compare a multiple without confirming which earnings definition it uses.
How do I calculate SDE for a daycare?
Begin with pretax business earnings, add one working owner's documented compensation and supported discretionary or nonrecurring items, then deduct missing buyer-era labor, market rent, deferred work, and recurring costs.
Is the daycare building included in the business value?
Not unless the analysis and transaction expressly include it. Value the operating company and real estate separately, and charge market occupancy cost to the business before applying an earnings multiple.
Sources
Related
Read how to value a center and separate real estate from business value.