Preschool Valuation: 8 Factors That Determine Your Selling Price
When selling an early childhood education (ECE) business, the best outcomes come from preparing around the exact areas sophisticated buyers underwrite. Below are the key value drivers—and what to emphasize—so you can reduce buyer friction, protect price, and increase certainty of close.
Financial Performance: Buyers will underwrite both your historical results and the reliability of those earnings going forward. Make sure your financials are clean, consistent, and easy to diligence. Beyond accurate P&Ls, balance sheets, and cash flow statements, be ready to clearly explain revenue composition (tuition vs. subsidies vs. ancillary), seasonality, and any one-time items that should be normalized. If you’ve implemented tuition increases, improved collections, or expanded high-margin programs (aftercare, enrichment, summer camp), document the results and sustainability. Strong recordkeeping, clear add-backs, and a well-supported narrative around margin stability can materially improve valuation and speed up diligence.
Staffing and Management: In ECE, the business is only as stable as the team delivering the service. Buyers place meaningful value on leadership continuity, low turnover, strong teacher quality, and bench strength beyond the owner. Highlight tenure, credentials, and retention efforts—especially for the director, assistant director, and lead teachers. If the owner is deeply involved day-to-day, buyers will want a credible transition plan and proof the center can run without you. A defined organizational chart, documented roles, and repeatable operating routines (enrollment processes, staffing coverage models, training, curriculum oversight) help de-risk the deal and support a stronger multiple.
Facility and Location: Your physical plant affects both parent demand and buyer confidence. A well-maintained center with strong curb appeal, safe play areas, and compliant classroom layouts can be a differentiator. Buyers also care about expansion optionality: unused licensed capacity, ability to add classrooms, outdoor space, parking, or zoning flexibility. If the facility is leased, the lease terms matter a lot—remaining term, renewal options, rent escalations, assignability, and landlord cooperation. If you own the real estate, the transaction may involve a separate valuation framework, and you’ll want to think through whether you’re selling it with the business or retaining it and leasing it back.
Licensing & Compliance: Compliance is one of the first diligence filters—because it directly ties to continuity of operations. Ensure licensing is current, staff files are complete, background checks are documented, ratios are consistently met, and health/safety practices are well established. Be prepared to share inspection histories and any corrective actions taken. Buyers also look for strength in risk management: incident reporting, insurance coverage, child protection policies, and operational controls that reduce the likelihood of future disruptions. A clean compliance profile doesn’t just reduce liability—it increases buyer appetite and can expand the buyer pool.
Enrollment and Reputation: Consistent enrollment and predictable demand are major valuation drivers. Buyers will focus on enrollment trends, waitlists, attrition, and the age mix (infant vs. preschool) because margins and staffing requirements vary materially by classroom. If you have a waitlist, low churn, or long-tenured families, that’s powerful—document it. Reputation matters too: parent reviews, community partnerships, and local brand strength can support pricing power and faster enrollment. Anything that demonstrates “stickiness” and sustainable demand makes the business feel less risky—and therefore more valuable.
Market Conditions: Timing and market conditions can influence both valuation and deal structure. Understand what’s happening in your local market (population growth, new housing, competing supply, employer demand) as well as broader buyer dynamics (strategic operators vs. private equity platforms, appetite for multi-site portfolios, preferences for certain states or demographic profiles). In a strong market, competitive tension can drive better economics and better terms—not just a higher headline price.
Legal Considerations: Smooth deals are won in preparation. Make sure contracts and documents are organized: parent agreements, employee handbooks, vendor contracts, tuition policies, lease documents, corporate records, and any HR or claims history. Buyers will diligence for litigation, licensing issues, tax compliance, and “surprises.” A clean data room, clear ownership structure, and proactive resolution of loose ends reduces delays, minimizes retrades, and improves certainty of close.
Transition Plan: Even strong businesses can get discounted if the transition looks messy. Outline how leadership will transfer, what training/support you’ll provide, and what the post-close operating plan looks like. Also think through structure: asset sale vs. equity sale, working capital expectations, earn-outs or holdbacks, and how you’ll handle items like prepaid tuition, accrued PTO, or deferred revenue. Clear expectations here prevent late-stage friction.
By strengthening these areas ahead of a sale, you’re doing more than “getting ready to market”—you’re making the business easier to underwrite, reducing perceived risk, and positioning your center as a durable, high-quality investment that attracts stronger buyers and better terms.
About SchoolWise Partners
SchoolWise Partners (SwP) is the nation's leading sell-side advisory firm that provides strategic services to owners and operators of preschools, primary, and secondary schools. SwP's principals and its team have deep experience as former owners of 42 private schools combined with profound institutional knowledge in the fields of finance, private equity, investment banking, and accounting. It is uniquely positioned as the premier sell-side advisor to school owners and, since its founding, SwP has helped hundreds of owners throughout the U.S. realize value in excess of $900 million.
SchoolWise Partners' passion for education inspires us to not only create value for our clients. We exclusively assist owners of early childhood, primary, and secondary school owners realize value that is often left behind because they are under-represented. SwP's mission is to ensure all the hard work that school owners invest to educate America's children is returned to them at the appropriate time and in the appropriate manner. We strive to embody the highest standards of integrity, excellence, commitment, stewardship, and partnership.
If you have any questions, feel free to contact the SchoolWise team at info@schoolwisepartners.com.