Buying a Childcare Centre: Due Diligence Checklist

Buying an early childhood education and care centre is one of the larger transactions an investor or operator will ever make, and the value sits in places a standard business sale never tests. A centre can show healthy revenue on paper while carrying a fragile quality rating, an approval that does not transfer cleanly, or a lease that undermines the whole model. Good due diligence is about pricing those risks before settlement, not discovering them after. This checklist walks through the areas that matter most when assessing an Australian childcare centre, and how childcare consultants use CRMandGo to keep a buyer-side engagement organised from first enquiry to handover.

Approvals and the regulatory position

Childcare in Australia operates under the National Quality Framework and the National Law, administered in each state and territory by the relevant regulatory authority and overseen nationally by ACECQA. A centre that is trading lawfully holds both a Provider Approval (held by the operating entity) and a Service Approval (attached to the specific service at that address). Neither transfers automatically when you buy the business. The buyer almost always needs their own Provider Approval, and the Service Approval needs to be transferred to the incoming provider with the regulator's consent. Confirm the regulatory position in writing early, because approval timing often drives the settlement date.

• Current Provider Approval and Service Approval, including any conditions imposed on them
• Approved places (licensed capacity) and the approved age mix the service is permitted to operate
• Any compliance history: notices, directions, emergency actions or enforceable undertakings on the regulator's register
• Waivers in place (for example service or staffing waivers) and their expiry dates
• Whether the transfer of the Service Approval to your entity has been confirmed as feasible by the regulator

Quality rating and the NQS

Every approved service is assessed and rated against the National Quality Standard across seven quality areas, with an overall rating from Working Towards through Meeting and Exceeding to the national Excellent rating. The rating is public and it shapes both enrolment demand and your improvement workload. A Meeting or Exceeding rating is an asset. A Working Towards rating is not automatically a problem, but it tells you the regulator has found one or more areas below the standard, so you need to read the full assessment report, not just the headline. Ask when the service was last assessed, because a rating can be several years old and may not reflect the service you are buying today.

• The most recent assessment and rating report in full, including ratings for each of the seven quality areas
• The current Quality Improvement Plan and how actively it is maintained
• Date of the last assessment visit and whether a reassessment has been requested or is due
• Any gap between the rating on display and the day to day practice you observe on site

Occupancy, enrolments and waitlist

Occupancy is the single biggest driver of value, so test it hard. Utilisation should be measured against approved places and against the days actually offered, not a vague headcount. Look at the trend over at least the last twelve to twenty four months, the split between full and part time enrolments, and how concentrated the roll is in a few large families who could leave together. A genuine, contactable waitlist supports the price. A waitlist that is just an unmanaged list of old enquiries does not. Consultants running a buyer engagement in CRMandGo often load the enrolment and waitlist data into a deal room so the buyer can see the real pattern rather than a summary slide.

• Utilisation by room and by day of week, trended across recent terms
• Enrolment churn, average length of stay and any seasonal dips around school holidays
• Concentration risk: how much of the roll sits with a small number of families
• Waitlist quality, including how recently each family was contacted and whether places were actually offered

Financials and the Child Care Subsidy

Most family fee revenue flows through the Child Care Subsidy, paid to approved providers on behalf of eligible families. That makes the centre's CCS compliance and accurate session reporting part of the financial review, not a side issue. Reconstruct revenue from session reports and bank deposits rather than relying on a presented profit figure, and normalise the result by adding back any owner labour that a new operator would have to pay for. Wages are the dominant cost and they are governed by award rates and the educator to child ratios required under the National Law, so a centre cannot simply cut staff to lift margin.

• Two to three years of financial statements, BAS lodgements and session reporting reconciled to bank records
• Fee schedule, recent fee increases and how fees compare to nearby services
• Staff costs against award rates, plus the cost of meeting required ratios and any qualified educator shortfalls
• CCS standing, including any debts, overpayments or compliance flags on the provider record
• Add backs for owner labour and one off items, so you are valuing a normalised earnings figure

Premises, lease and physical compliance

For a leasehold centre the lease can matter more than the goodwill. Check the remaining term and options, rent and review mechanism, make good obligations, and whether the use is properly approved for childcare under the local planning scheme. A short remaining term with no option is a real risk to a long horizon investment. The building itself must meet the physical requirements that sit behind the National Law and your state regulations, including unencumbered indoor and outdoor space per child, fencing, nappy change and food areas, and safe sleep arrangements.

• Lease term, options, rent reviews, outgoings and make good obligations
• Planning and development consent for childcare use, plus any conditions on hours or numbers
• Indoor and outdoor space against the per child requirements for the approved places
• Building, fire safety and accessibility compliance, and the age and condition of major plant

Running the engagement with CRMandGo

A buy side due diligence file is a moving target of documents, and the deal usually stalls on the items still missing. CRMandGo gives childcare consultants a smart-form intake so a new buyer enquiry captures the brief once, AI lead scoring so the most serious buyers surface first, and a secure deal room where the vendor, broker and buyer exchange approvals, leases, session reports and financials in one place. The AI front desk answers first contact across web chat, SMS and phone so an enquiry is never missed, and because CRMandGo stores data in Australia in Sydney, sensitive financial and enrolment information stays onshore under the Australian Privacy Principles. The result is a checklist that lives in the system rather than a spreadsheet that goes stale.

None of this is legal or financial advice, and a childcare purchase should always be reviewed by a suitably qualified lawyer and accountant before you commit. But a disciplined checklist, run through a system built for it, turns a daunting transaction into a series of answerable questions. Price the approvals, the rating, the occupancy, the financials and the premises with evidence, and you will know what you are really buying before settlement, not after.