Thinking of Buying a Childcare Business in Australia? Here Are 3 Vital Questions to Ask
With over 1.3 million children in childcare across Australia and parents collectively paying close to A$7 billion in fees annually, the childcare sector represents a compelling business opportunity.
Backed by approximately A$8 billion in government subsidies and driven by a workforce that's more active than ever, industry revenue has grown at an annualised rate of 3.3% over five years to 2023-24, reaching an estimated $17.4 billion.
Before diving into this thriving industry, savvy buyers should ask these three critical questions:
1. What are the current occupancy rates and staff qualifications?
Why It Matters: Occupancy rates directly impact revenue potential, while staffing issues represent the industry's biggest challenge.
Currently, many centres are capping enrolments due to staff shortages, with over 8,000 vacancies reported across the sector in late 2023.
Meanwhile, the National Quality Framework mandates specific educator-to-child ratios and qualification requirements that significantly affect operational costs.
What to Check:
- Request detailed occupancy data for the past 2-3 years and compare against licensed capacity
- Review staff qualifications, retention rates and compliance with educator-to-child ratio requirements
- Examine staff costs as a percentage of revenue (typically 60-70% of operational expenses)
- Assess whether the centre has had to turn away families due to staffing limitations
2. What is the centre's National Quality Standard rating and competitive positioning?
Why It Matters: The National Quality Standard rating reflects the quality of education and care provided and heavily influences parents' selection decisions.
Meanwhile, market saturation is becoming a significant challenge, with many catchment areas seeing multiple competing centres opening within close proximity.
What to Check:
- Obtain the official National Quality Standard rating reports for the facility
- Analyse the local competitive landscape, particularly competing centres within a 2km radius (since January 2017, over 300 G8 Education centres alone have been affected by new rivals opening within this distance)
- Evaluate what differentiates the centre from competitors (educational philosophy, specialised services, location advantages)
- Assess whether the centre offers early childhood education services to compete with traditional preschools (a growing trend, with more 4-5 year olds now enrolled in preschool programs at long day care centres than in dedicated preschools)
3. How will emerging industry trends and potential regulatory changes affect the business?
Why It Matters: The childcare sector is undergoing significant transformation, with potential universal childcare reforms on the horizon, increased consolidation through acquisitions, and changing parent expectations for digital services and educational offerings.
What to Check:
- Review the Productivity Commission's November 2023 draft report recommendations for universal childcare (up to 30 hours weekly for all children under five)
- Assess the technological infrastructure of the centre and any needed investments to meet parents' expectations for digital communication and management tools
- Understand how the centre is addressing market shifts toward premium services, holistic educational offerings and flexible care models
- Investigate whether the centre has a strategy to adapt to the ACCC's developing mechanism to monitor and regulate private childcare providers
Ready to Make a Big Splash in Little Puddles?
Despite challenges like staff shortages and intense competition, the childcare sector offers compelling advantages: consistent demand, government support, and meaningful community impact.
With industry revenue projected to continue growing, driven by urbanisation, workforce participation, and evolving government policies, childcare businesses present a unique blend of social purpose and financial opportunity.
For a more comprehensive exploration of this opportunity, read the full article here: Your Guide to Buying a Childcare Business
