EBITDA and profitability
Earnings before interest, taxes, depreciation, and amortization — adjusted for owner compensation and non-recurring items — is the primary basis for most valuations. How your books are kept matters enormously here.
Licensed capacity utilization
How much of your licensed capacity are you filling? A center at 90% capacity is more valuable — and commands a premium — over one at 60%, even with the same revenue.
Payer Mix
Private-pay tuition is valued more highly than subsidy-dependent revenue. The proportion of your revenue from each source affects your multiple materially.
Licensing history and star ratings
A clean licensing record and high quality ratings in your state’s quality system reduce buyer risk and support higher valuations. Unresolved violations or low ratings create negotiating leverage for buyers.
Enrollment trends
Stable or growing enrollment signals a healthy business. Declining enrollment — even at a profitable center — raises buyer concerns about sustainability and future earnings.
Lease terms and real estate
Long remaining lease terms are a liability. Short terms create uncertainty. Owned real estate can significantly increase total transaction value — but requires careful handling to maximize both the business and property outcomes.
Staff tenure and management
Centers with long-tenured directors and stable teacher staff have lower transition risk. A business that depends entirely on the owner-operator to function is worth less than one with a team in place.
Unreported income and personal expenses
Income that doesn’t appear on your tax returns cannot be used to support your valuation. Personal expenses run through the business reduce reported earnings — and thus your calculated value — even if they’re legal.