FAQ'S

Most buyers will be attracted to your business by how closely it fulfills their needs and the opportunity for growth that they see in the business. However, they will value the business on how much profit it makes now. Few buyers will pay large amounts of goodwill for potential profits that may not materialize.Most businesses are sold on a multiple of the earning capacity of the business. The earning capacity is then multiplied by a figure that recognizes the risk and the opportunity for the new owner. (See Methods of Valuation) You will hear this talked about by accountants in terms of Capitalization Rate, Return on Investment or sometimes Earning Multiples.

What weíre talking about here is NOT the net profit figure that is shown on your tax return. Many expenses are not really necessary business expenses but are legally paid by the business having the effect of reducing the taxable income of the business. In addition there are non-cash expenses such as depreciation that lower the profit on which tax is paid. All of these charges can mask the true earnings ability of a business. So the profit figure weíre talking here is the total profit that the business generates that is available for the owner to both live on and pay back any loans taken out to buy the business.

This profit figure is generally referred to as Adjusted Net Profit, Discretionary Cash Flow (DCF) or Proprietors Earnings Before Interest and Tax (PEBIT). It is the net profit BEFORE deductions for items that are not really necessary business expenses, ownerís salary, non-recurring or personal expenses (personal computer upgrades, home office, home repairs, etc). depreciation and amortization, interest expense and any other items that a new owner would incur as a true business expense.

Child Care Sales Australia requires a signed agency agreement by law, and cannot commence marketing a property until an agency agreement is signed by the vendor.
Child Care Sales Australia market properties on an Exclusive Agency basis only, for a minimum period of 120 days.Childcare Sales Australia use industry standard agency agreements whether it is for a business sale or a freehold sale.

Yes. All potential buyers are required to sign a detailed, tailored Confidentiality Agreement in order to view any confidential information, or information that may lead to the identity of the child care centre for sale.After submitting and Agreement the potential buyer will receive an email inviting them to contact the concerned broker to obtain details to access the confidential Information Memorandum file.

We understand the need for confidentiality with staff and parents.

Quite simply, Childcare Sales Australia are the largest child care property and business brokerage in Australia. Dedicated exclusively to the sale of leasehold and freehold childcare businesses, land for childcare centres, and childcare property investments. With an extensive data base of qualified waiting buyers, we can often find a buyer or investor from within our existing database of buyers, with no need for expensive and timely print or other forms of advertising.

Childcare Sales Australia are proudly associated with all four of Australia’s largest banks and every Australian Childcare Centre Owners Associations. With satisfied clients and the industry claiming Childcare Sales Australia are the brokers to do business with, let us show you how to take the hassle out of your next transaction.

Our primary objective: to work in an honest, ethical and professional manner while maintaining the highest achievable sale price for you.

When you sell with us we will provide, at no cost to you:

1. The professional marketing of your property to our extensive database, targeted corporate advertising in child care industry journals and print advertising throughout.

2. Listing on ours and other internationally renowned commercial business websites, containing preliminary details of your property.

Note: that property information files containing addresses and confidential information is only made available to buyers following the signing of a detailed Confidentiality Agreement.

Click to view an article on ‘Negotiating the Purchase‘. Full of impartial advice on the in’s and out’s of purchasing a childcare centre in Australia.

Yes. All potential buyers are required to sign a detailed, tailored Confidentiality Agreement in order to view any confidential information, or information that may lead to the identity of the child care centre for sale.We would appreciate it if you could complete a Disclaimer, Acknowledgement and Confidentiality (DAC) Agreement for any property you are interested in although you may have completed Agreements for other properties previously.This is to honour commitments to the vendor that we will obtain agreements specifically for their property.

The Agreements have been made as user friendly as possible – no printing or faxing required. A simple on screen form only.

After submiting and Agreement you will receive an email inviting you to contact the concerned broker to obtain details to access the confidential Information Memorandum file.

In a simple answer – yes. Specialist child care management companies are available throughout Australia. Companies offer management schemes including the total management of the centre and the business including staffing, subsidy report claims and the general running of the centre. All reputable companies will ensure you receive regular financial and occupancy reports. If you’re looking for someone to manage your centre, take a look at Child Care Management section  Links. Management charges will depend on the number of licensed places and the location of the child care centre.

Before obtaining a transfer of any child care licence you are required to obtain a suitability card appropriate for the State or Territory in which the child care centre is located. Childcare Sales Australia recommends you apply for a suitability card immediately as it can take several weeks for your application to be processed. Your application for a licence transfer will be delayed if you do not have a suitability card. We would recommend that if you are serious about purchasing a childcare centre business that you obtain a suitability card before entering into a contract.   This will expedite the transfer of the business.

Due diligence is the contractual terminology used to define the process by which a buyer gains access to detailed financial and other records such as the lease, to determine the suitability of the investment.

At Childcare Sales Australia, our first priority is to settle all negotiations quickly and efficiently. A typical contract may allow 30 days for due diligence and finance, if it is required. A further 30 to 60 days is then allowed for transfer of the childcare centre service licence.

The larger four Australian banks, as a guideline, are willing to lend up to 50% of the purchase price of a leasehold childcare centre and up to 60% on a freehold childcare centre. Childcare Sales Australia though, has access to lenders throughout Australia and overseas that may be willing to lend up to 100% Finance (provided there is adequate other security) for most childcare freehold or business opportunities.

For further information we recommend you contact the Child Care Owners Association in your State or Territory, or the State or Territory you intend to buy in. Most State Associations have informative annual conferences and offer regular training days for prospective child care owners – an invaluable resource for a new owner. You will find links to all Australian State and Territory Associations by clicking here.
These associations offer help to new entrants to the child care business and it is a good idea to contact them before you buy a childcare centre. The Commonwealth Government website is also an invaluable source of information. You can visit Family Assist by clicking here. Family Assist deals with childcare and the childcare subsidy known as Child Care Benefit. Child Care Benefit is paid by the Commonwealth Governments to parents with children attending long day-care centres. All State and Territory Government control licensing, staff ratios and qualifications, building and playground requirements.
More useful Web Site Links can be found on the Links Page

The return you can expect depends on a number of factors, not the least of which is whether the opportunity is a leasehold childcare business, or a freehold childcare centre, and whether you are buying both the buildings and/or the business. When buying a leasehold childcare centre with a fairly long lease, say 12 to 20 years, you could expect a return of 16% to 25% of the purchase price. The return on a freehold childcare centre would generally be in the range of 14% to 20%. Many factors influence the Return on Investment (ROI) such as age, occupancy, location, growth prospects etc.

I hear people refer to a “factor” or “multiple” of net profit to purchase price when assessing the price and ROI, what does this mean? Simply if the profit after all appropriate adjustments is $200,000 per annum and it sells for $1,000,000 then the ROI is 20% or a multiple of 5. The returns listed on this website do not include management fees or owners wages for administration. Net profit is referred to as Proprietors Earnings Before Interest Tax Depreciation and Amortisation (PEBITDA). Childcare Centres offered for sale are often quoted on a “Price Per Licenced Place” basis. This is a rough rule of thumb but like most decisions of a buyer or an investor the important thing is profit. The profit is strongly influenced by average occupancy and the fees charged per child. If you have any questions please call our office on 1800 700 517.

Buying or selling a childcare centre is easier than ABC…
Childcare buying and selling made easy.
Here is a collection of TOP TIPS from Childcare Sales Australia to make the process a little less daunting for those thinking of buying or selling a childcare centre.
A
Auction is a common method of selling houses but is rarely used for the sale of businesses such as childcare centres. The exception to this rule is Mortgagee or Receiver sales when the Mortgagee and Receiver need to be seen to maximize the price.
B
Buyers Agents work on behalf of a buyer, and take commission from the buyer instead of the seller. Buyers Agents are relatively rare in childcare selection and tend to be buoyed by experienced buyers, corporate or institutional buyers.
C
Conveyancing is the process by which business and/or property ownership is legally transferred from one person to another. It involves gathering information concerning a property and/or business and preparing the documents for the transfer of the property and business.
D
Deposit is normally required at exchange of Contracts. It should be noted that according to the Act, the principal has no obligation to sell the business, or the purchaser to buy the business, and the deposit is refundable, if a contract for the sale of the business is not entered into. The Agent must promptly inform you when they become aware of any subsequent offers to purchase the business are received from any other person. An Agent must also advise you that you have the right to make further offers up until exchange of contracts has taken place.
E
Equity in your home will ensure you can build your commercial investment portfolio when the time comes. Put simply, equity is the difference between the market value of a property and the claims held against it.
F
Finance and the acquiring of it is an essential part of the centre buying process. A finance broker has access to a range of lenders and will source the best loan for your individual situation.
G
Genuine Profits are demonstrated where supporting records in the name of the business confirm the business has traded successfully and profitably by way of progressive and regular profit and loss statements over a period of not less than 12 months prior to the time of sale. Since the credit crunch, banks have become stricter in the requirement in childcare and as such, are often willing to borrow far less than the residential market.
H
House conversions, purpose built or land to build on, there are a number of different options to choose from when deciding upon a childcare investment. Most depend on your requirements and budget but there are a great number of places to research each of them – from specialist brokers, general real estate agents and online commercial property websites. A good agent will have access to details on the processes on all of them, and more, to save you the running around! Don’t be afraid to ask questions.
I
Inspections are an important way of educating yourself about what is currently available on the market and what the asking prices are relative to what is on offer. Under most circumstances staff are unaware that the centre is for sale so it is important you never attend a property without making appropriate arrangements with your Agent.
J
Journey as opposed to the destination. The process of buying a centre, whether it is your first or thirty-first, should indeed be considered a journey, and an enjoyable one at that. Make sure you take time to focus on the outcomes to ensure you don’t rush into a purchase.
K
Keep Perspective – get used to tuning out to the (well meaning) advice of the “industry experts” including your neighbours, current affairs media, the taxi driver and your in-laws. Rather consult with, and trust, a true professional who is familiar with your individual situation and has their finger on the pulse of the local and national markets.
L
Listing Types – including open listings, online, silent, tenders and auctions – can become confusing and confronting for buyers, as each needs its own strategy to ensure you receive the best price for the property. Agents have experience in all buying conditions and with each listing type, so ask questions and ensure you get some independent advice.
M
Mortgage Brokers can source the best finance solutions for you, due to independent access to a range of lenders. At Childcare Sales Australia we have forged relationships with one of ’s leading childcare specialist finance brokerages. For more information, visit the Finance page on our website.
N
Negotiation is key to achieving the best price, and a real estate agent’s job is to achieve the best price for the seller, leaving the buyer to negotiate on their own behalf in unfamiliar territory. Buyers who are not used to regular property negotiations are best advised to work with an specialist industry consultant. You can find details of professionals in your area by visiting the Links page on our website.
O
Orientation refers to the way the centre is facing and the impact of the sun on play and other key areas. Check whether the orientation of the property would best make use of the winter sun and minimise the impact of the heat of the summer sun if you are building a centre.
P
Price is often what makes the ultimate decision between whether or not you will buy a particular centre. However, how do you know if what you have offered, or the asking price, is indeed true market value? A market professional will be able to provide all the facts and figures to ensure you make the right decision. Further, there are industry standards for Returns on Investment in childcare so speak to your professional about what the industry standard is at the time of purchase.
Q
Qualifying Buyers for finance is often a very individual process, depending on the lending institution in question. While one lender may not qualify a buyer due to one particularity, another may well differ, making it all the more important to consult with a finance broker, who can source a lender right for you. We have specialist childcare brokers available at Childcare Sales Australia. Visit our website for further information.
R
Return on Investment. In finance, rate of return (ROR), also known as return on investment (ROI), rate of profit or sometimes just return, is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment. ROI is usually expressed as a percentage rather than a fraction.
S
Sales contract is an agreement by which the buyer and seller agree to the terms and conditions of a sale. A buyer should always seek independent legal advice before signing a contract, especially when dealing with the sale of a business.
T
Title is the term used whereby one has just and full possession of real property – in other words, it’s yours and you can take over straight away!
U
Under Contract is the term describing when a property or business for which a purchase offer has been accepted by the seller..Often a buyer will have specific conditions that allow them specific time to obtain finance approval, arrange due diligence and conduct other investigations. During that time, the seller cannot accept offers from other buyers.
V
Valuation is the estimated worth of a property or business, and is carried out by a qualified property valuer. If you are buying, remortgaging, or considering purchasing an investment, your home may also be valued along with the centre.
W
Wants versus needs – sometimes you will need to weigh them both up when determining the right centre or investment for you. And consider your future needs as well, such as expansion possibilities.
X
Xclusive opportunities are properties or businesses that are being exclusively marketed through an agency.
Y
Yield is a measure of investment performance of an investment property, gauging the percentage return on each dollar invested. It is also known as a rate of return.
Z
Zoning is a method of regulating use of real estate by dividing a city or other area into zones and designating which uses may be permitted for land in each zone.

There are specific ATO rulings around foreign resident capital gains withholding, this information can be found on the ATO website – https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Calculating-a-capital-gain-or-loss/Foreign-resident-capital-gains-withholding-payments—common-questions/ 

Whether it be a leasehold or freehold, investment or ownership property, we will keep you up to date of new opportunities in any area you’re looking to purchase a centre around Australia and New Zealand. If you are already receiving regular emails and newsletters from us, then you are registered on our database. Immediately a new childcare centre investment freehold or business becomes available, we will email the preliminary details to you. This way you are constantly alerted when a new property or business is for sale on our website.  If you are not on our database please register for the E-Newsletter.

A PDF file is a file format used in documents on the Internet. It is a format which can be read by anyone who has an up-to-date version of Acrobat Reader. The latest version of Acrobat reader can be obtained free of charge from Adobe. PDF files are used extensively on the Childcare Sales Australia website. If you are having trouble opening a PDF file, ensure you have an up to date copy of Acrobat Reader. If you’re still finding the file is not opening, please be patient as most files contain photos, and may take several minutes to load.