How Much Do Daycare Owners Make?

How daycare income is actually quoted

Childcare centres are priced on seller’s discretionary earnings — net profit with the owner’s salary, personal expenses, interest, depreciation, and one-time items added back — at multiples that typically run 2.0–3.5× for a single site. The multiple lands in that range mostly on licensing history, lease security, and how much of the operation depends on the departing owner. A centre where the owner is also the licensed director is worth materially less than one with a credentialed director who is staying, because in most states the licence is tied to a qualified individual on site.

That distinction matters enormously to what “makes” means. An owner-director who reports $150,000 of SDE is being paid for two jobs at once: the return on the business and the wage for a full-time director role that would cost $55,000–$80,000 to replace. Subtract that replacement wage and the actual return on capital is often half what the listing implies. If you intend to own rather than operate, model the director salary as a real, permanent cost from day one. The broader mechanics are in how to value a business and SDE vs EBITDA.

Earnings by capacity and licence type

Licensed capacity is the headline number, but it functions as a ceiling rather than a forecast. The bands below assume stabilized enrollment in the high eighties or better and a market-rate director wage already deducted where the owner is not on the floor.

• Licensed in-home / family childcare, 6–12 children. Gross of $60,000–$180,000 and owner earnings of $25,000–$70,000. Very low entry cost and minimal capital, but the owner is the staff, the business rarely sells for more than the equipment, and a single week of illness stops revenue entirely.
• Small licensed centre, 30–60 children. Gross of $350,000–$1.0M and SDE of $45,000–$140,000. The awkward middle: large enough to require a full staff roster and commercial lease, not yet large enough to absorb a non-working owner comfortably. Most owners at this size still work in the business daily.
• Single-site centre, 60–90 children. Gross of $700,000–$1.6M and SDE of $70,000–$220,000. This is the core of the acquisition market and the first size where a hired director genuinely works. Enough classrooms to shift age mix as cohorts age up, which is the main in-house lever on margin.
• Multi-classroom or multi-site, 120+ children. Gross of $1.5M–$4M and SDE of $180,000–$600,000. Administrative overhead spreads across sites and enrollment marketing becomes efficient, but staffing becomes a permanent recruiting operation and one licensing incident at one site can put the whole group under scrutiny.

The cost structure

Childcare costs are unusually rigid, which is exactly why the category rarely produces outsized margins. As a share of gross revenue, a stabilized licensed centre runs roughly:

• Teaching payroll and taxes: 45–55%. The single defining line. State ratios set a legal minimum headcount per enrolled child by age, so this cost cannot be trimmed without breaking the licence. It also does not fall proportionally when a child withdraws — you keep the teacher until the room can be consolidated.
• Director and administrative payroll: 6–12%. Add this back out if the seller is the director and shows no salary. This is the most common overstatement in centre listings.
• Rent or mortgage and occupancy: 10–18%. Childcare needs specific square footage per child, fenced outdoor space, and a compliant build-out, so relocating is close to impossible. That gives the landlord real leverage at renewal — check the remaining term before anything else.
• Food and nutrition programs: 4–8%. Partly offset in many centres by federal food-program reimbursement, which is worth confirming is actually being claimed.
• Insurance, licensing, and background checks: 3–6%. Liability cover for childcare has risen sharply. Get a quote in your own name during diligence rather than assuming the seller’s premium transfers.
• Supplies, curriculum, software, and enrollment marketing: 5–9%. Modest in isolation, but a centre with a waiting list spends almost nothing here while one at 75% enrollment spends heavily and still may not fill.

Worked example: a 72-seat suburban centre

The centre is licensed for 72 children across five rooms: 8 infants, 12 toddlers, 16 twos, 20 preschool, and 16 pre-K. Blended enrollment sits at 91%, so about 66 children attend. Weekly tuition averages $310 across the age mix, producing roughly $1,064,000 of annual tuition, plus $34,000 of registration fees and food-program reimbursement, for about $1,098,000 of gross revenue.

Expenses: teaching payroll and taxes $560,000, director and admin $92,000, rent and occupancy $148,000, food $62,000, insurance and licensing $44,000, supplies, curriculum, software and marketing $68,000. Total $974,000, leaving about $124,000 of net profit. Add back the current owner’s $40,000 personal draw and $9,000 of vehicle and discretionary items and SDE is roughly $173,000. At a 2.7× multiple that supports a price near $467,000 plus any owned real estate.

Now the lever, and it is not tuition. Filling the eight open seats costs almost no incremental labour where the rooms are already staffed to ratio — two additional preschoolers in a room that already has its teacher are close to pure margin. Moving from 91% to 98% enrollment is worth roughly $82,000 of revenue and, after modest added labour, perhaps $60,000 of SDE — which is over $160,000 of enterprise value at the same multiple. Conversely, converting a preschool room to infants to chase higher tuition usually destroys margin once the ratio cost is counted.

The earnings claims to discount

Childcare diligence is half financial and half regulatory, and the regulatory half is the part buyers skip.

• Peak-season enrollment presented as the annual average. Enrollment typically dips in summer and again after the pre-K cohort graduates to kindergarten. Ask for month-by-month headcount for three full years, not a current roster.
• No director salary in the P&L. If the seller holds the director credential, that role has to be replaced at market wage and the credential may need to be re-approved by the state under new ownership. Restate before comparing.
• Subsidy revenue treated as equivalent to private tuition. State-subsidized seats can be a large and stable share of revenue, but reimbursement rates are set administratively, payment can lag, and program rules change. Find out what share of revenue it is and how promptly it has actually paid.
• A clean current licence with a dirty history. Request the full inspection and citation file from the state licensing agency, not just proof of a valid licence. Open corrective-action plans and substantiated complaints follow the site.
• Lead teachers assumed to stay. Parents choose a centre for its teachers. In a labour market this tight, a lead teacher leaving with a new owner can take several families along. Meet the staff before closing and understand what they are paid relative to the local market.
• A lease with under three years left. The build-out is not portable and the landlord knows it. A short remaining term is a pricing issue you should raise before diligence, not after.

Reconcile every revenue claim to three years of filed tax returns and to the centre’s enrollment management software rather than a spreadsheet the seller typed. Our due diligence checklist sets out which documents to request in what order, how to verify business financials covers the reconciliation itself, and red flags when buying a business lists the patterns that should end a conversation.

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