THE PROCESS FOR BUYING A CHILDCARE CENTRE
Are you looking to enter the childcare industry and buy a childcare business? Or are you already qualified or experienced in the industry and want to own your own center?
The steps below outline the process to follow:
1. Entity Details: Consult with an accountant
2. Enroll Childcare qualification on-line course: complete the National Law & Child Care Subsidy Approval Course. While not legally required, the certificate is submitted with your PA01 form to strengthen your Provider application.
3. Apply for Provider Number : Submit your Provider application in the name of the established entity, such as a company or trust. Once you receive your Provider number, you have approximately one year to secure or open a business, or your Provider number may be canceled.
4. Business Selection: Decide whether to buy or establish a business. For first-time buyers, purchasing an existing business provides far more security and less risk. An existing business will have qualified staff, management in place, established resources, and has already been approved by ECRU with a Service Approval. With a start-up, there’s no guarantee of obtaining a Service Approval or how long that process will take. From completion of building construction it can take up to 12 months for ECRU to finally approve new locations – ensuring they meet resourcing/safety requirements etc
5. Conditions of Business Contract / Service Approval / CCS/Finance : Finalise the conditions of the business offer and complete any necessary contract requirements, including the transfer of Service Approval.
6. Settlement: You now own a business in the childcare sector, one of the most in-demand industries in Australia. With guaranteed government funding, high demand, and potential profitability, it is also a sector that is resilient to automation.
Step One – Entity Details
The first step in purchasing a childcare business is deciding on the entity under which you wish to purchase it.
This could be a company, a company and trust, or another entity structure. A company can be established through ASIC or with the help of your accountant. Establishing a company and trust will require assistance from an accountant or lawyer. The best option for you should be discussed with your accountant.
If the company has three directors, ECRU will require all three directors to undergo the exam/interview process. Therefore, if there is someone in the company who is trained in childcare or has educational experience, it is advisable to have that person as the sole director.
This way, they will be the only individual required to go through the approval process, improving the chances of success. If there are multiple directors and, for example, two directors are required to take the exam and one of them fails, ECRU will usually fail both directors. Shareholders, on the other hand, are not required to go through the approval process but will be vetted.
ECRU requires the director (the person applying for approval) to hold shares in the company. The percentage of shares required will depend on the entity structure and should be confirmed with ECRU before submitting the provider application.
Step Two – Enroll Childcare qualification on-line course
Prior to applying
Prior to applying to become an approved Provider it is now required that you complete the National Law & Child Care Subsidy Approval Course.
Create a profile on the ACECQA Learning Portal
https://joinedupapprovals.learnupon.com/users/sign_in?next=%2Fdashboard
You will be automatically enrolled in the first module in this course after you register.
Enrolment may take up to 30 minutes, and you will receive an email notification when the first module is available.
Complete ACECQA LMS TRAINING
This course provides important information about becoming an approved Provider and your responsibilities under the National Law and Family Assistance Law. These five eLearning modules unpack how to submit your application, your responsibilities as an approved Provider and an overview of the approvals process.
If you would like to review the courses before registering in the LMS, you can access the modules from the links below:
Module 1 – Child care approval in Australia
This first module will provide an overview of the course, introductory information about laws that apply, and the child care approvals process.
Module 2: Education and Care Services National Law (NL) approval
A child care provider who is approved under the National Law has a range of obligations. This module helps you to understand all the requirements you must meet under the National Law when operating your service.
Module 3 : Child Care Subsidy (CCS) approval
Child care provider approval may also require approval under the Family Assistance Law (FAL) to administer Child Care Subsidy. This module will explore how the Family Assistance Law affects your application.
Now that you are familiar with the two parts of the approvals process, Module 4 will explore the application process in more detail.
Module 5 : After you’re approved
If your application for approval is successful you will have a range of obligations and administrative responsibilities. The final module in this course will unpack what you need to do after you are approved.
To be approved for Provider, applicants will need to complete 4 out of 5 modules in the National Law & Child Care Subsidy Approval Course on the ACECQA LMS to receive a completion certificate. ACECQA Learning Management System (LMS).
You will need to complete 80% of the course to download a completion certificate. This certificate can be submitted with your application/is requested to be attached to your application as evidence of completing the course.
Step Three – Apply for Provider number
- You must be approved to operate a service (Provider Number) and administer the Childcare Subsidy (CCS). You must be approved by the Australian Government in your state or territory government.
To be able to own and operate a childcare business your entity purchasing the business must hold a Provider number. The people associated with that entity e.g. Director/s must be ECRU approved.
This Provider number is applied for via the Department of Communities – Childcare section in the State you live in or the State you are buying the Childcare business in.
Once approved/received, the Provider number is valid for all of Australia. You can own multiple businesses around Australia under the one provider number.
The Provider number is attached to the entity e.g. Company – Company/Trust you have set up that will ultimately own the Childcare business or businesses.
The price is $241 for 2022 -2023.
The Provider number once obtained does not last forever. If you have not purchased a center within a period of approximately one year from time of issuance the Department may cancel the number.
The application will require credit checks into the Company history and of ALL the Directors of the Company.
Sellers will rarely accept offers from Buyers that do not hold a Provider number due to the time involved to obtain and risk of the Buyer not being approved. The process (exam) is much harder since 01 May 2022. Resulting in a higher fail rate. Time is of the essence when doing the exam. Most applicants fail due to not completing the exam in the required time frame.
The time quoted by the Department of Communities for Childcare Provider Number is currently 120 days, however, the Provider approval process has been known to take up to 180 days or longer. Refer section 15 of the Act for more information.
Provider Application Assessment/Examination
Effective 1 May 2022, ECRU (Education and Care Regulatory Unit) is now conducting on-line assessments for Provider Approval suitability in an exam format and subsequent interview.
Several applicants have advised they did not finish in time.
You can flag and skip a question, going back to an answer later.
Exam
- 75 mins
- 46 multiple choice questions (no short answers)
- No outside material/ resources can be used.
You are provided with online access to the required documents for the assessment. Two screens are set up, which are easy to use and navigate.
Most of the questions were scenarios wanting the law and regulation reference.
You need to be very confident in navigating your way around these documents. If you are unsure of an answer, you can flag it and return later.
Below is an overview of the documents and information that should be studied.
A very thorough knowledge of the Regulations and the ACT is required to be able to identify and know Regulation numbers and information quickly. Some of the questions relate to multiple regulation numbers e.g. is it 76/22/14 or 42/1/23 etc
What needs to be displayed for rating assessment:
- SQM inside – outside
- Fencing
- Ratio
- Healthy eating
- Forms documents how long to keep – what needs to be in the centre – how it’s maintained.
- Child protection
- Who responsible what
- Notification of incidents
Applicants sit the exam in the ECRU offices in Perth. Usually offer only one date per month. It is very important participants answer the questions as quickly as possible.
ECRU provides some reference materials, a pen and some paper.
A buyer may have their wife/sister/friend/Centre Manager of an existing business as Company Director to obtain Provider number and have them as the Company sole Director.
If you receive a pass mark which is above 80% then you may be called in for an interview.
The interview takes place around 4 weeks after the exam. The interview for around an hour will again be on your knowledge of childcare.
Below is an overview of the documents and information that should be studied.
A thorough understanding of the Regulations and the Act is essential, as some questions may reference multiple regulations (e.g., 76/22/14 or 42/1/23).
Key Areas to Know for the Rating Assessment:
- Space requirements (SQM inside and outside)
- Fencing requirements
- Child-to-staff ratios
- Healthy eating policies
- Document retention and maintenance requirements
- Child protection responsibilities
- Notification of incidents
Resources are available in the ACECQA website
To prepare for the assessment, PMCs are encouraged to read the information provided in the links below:
- Australian Children’s Education & Care Quality Authority (ACECQA) (website)
- Education and Care Services National Law (WA) Act 2012 (the National Law)
- Education and Care Services National Regulations 2012 (WA) (the National Regulations)
- Guide to the NationalQuality Framework
- My Time, Our Place: Framework for School-Aged Care inAustralia
- Belonging, Being and Becoming: Early Years Learning Framework for Australia
Business Plan
A business plan may be required from buyers for ECRU prior to sitting the exam. Where an applicant does not currently own a business or started to build a centre, then they will need to base their plan on what would be their ideal centre that they are hoping/planning to operate.
The business plan needs to incorporate:
- Costings
- Financial expectations
- Budget
- KPI’s
There is a business plan template available via the ABB website under resources. There are also advisors on the ABB website that specialize in creating business plans for a fee. I would therefore recommend that all provider applicants commence their business plan as soon as they have lodged their Provider application, to ensure that it is ready to be submitted as soon as requested.
A Business plan will also be required by PRODA when a centre has been purchased or is about to open. The PRODA business plan should be an extension of the Provider business plan.
“Study study and study” in the words of a successful applicant. Make sure you are very familiar with the Regulations and the Act.
The Provider certificate will arrive in the post.
See resources below:
- Applications and notifications forms
https://www.acecqa.gov.au/resources/applications
- Business Plan Template
Step Four – Business Selection
Once you have received your Provider number, you can then proceed with your purchase or look for a childcare business and advise the broker/owner you are already in possession of your Provider number.
If entering into a contract to purchase the entity on the Contract must match your Provider Number Certificate.
Advance Business Brokers specialise in the Sale of Childcare below is a link to our current listings:
https://advancebusinessbrokers.com/businesses-for-sale/?category=child-care
Step Five – Conditions of Business Contract / Service Approval / CCS/ Finance
Finance
Finance if applicable can be applied for concurrently with Service Approval application.
Service approval
Early childhood education and care providers must be approved to operate a service and administer the Childcare Subsidy (CCS) in Australia.
All applications are submitted via the National Quality Agenda IT System (NQAITS).
Once you hold a Provider number and secure a Centre (Under contract) the next step is the transfer of the existing Service Approval of the Centre being sold.
The transfer of Service is legislated to be 42 days from receipt of correct application with the Department of Communities. Interventions are common practice and can extend the process out to 100 days. Advance Business Brokers will oversee and manage during the Sale process of contract.
If the buyer is wanting to purchase the Centre in a New entity (different Directors) , they will need to apply for a NEW provider number for that Company and may be required to complete the whole Provider process mentioned above, including sitting the exam.
Transfer of Service can only be lodged with a Provider number.
The price for 2023 was $130.
CCS
Existing providers or new providers for CCS funding must use the National Quality Agenda IT System to add a new service or add to existing account.
The following information is for:
- Providers who intend to apply for new CCS account
- existing providers who intend to add or remove a service from their account
- existing providers who have undergone a restructuring of their legal entity.
You should read the following information carefully before applying. You can also complete an e-learning course about the approval process on ACECQA’s website. Refer to Step Two above.
If you need help during the application process, contact: CCSassessments@education.gov.au
If you experience technical issues while using the National Quality Agenda IT System, please email nqaits@acecqa.gov.au.
CCS – Funding for parents with children in Childcare – PRODA
If the buyer has a contract in place to purchase a business, and has applied for and received their Provider number, then once Transfer of Service for the Centre being purchased has been lodged, the Buyer should lodge their application for CCS funding. This application can take 60 days or longer depending on whether it is a new application or addition to an existing account.
If you are an existing Childcare operator already with a PRODA account and receiving CCS funding, then your new service/business must be added to your existing PRODA account.
For an existing Childcare operator or new applicant, ensure as the Buyer of a Childcare Service you have this completed in advance of settlement so there is no disruption in CCS payments to parents.
Any questions need to be directed to the relevant Government department.
Families who want to apply for CCS should visit the Services Australia website.
CCS Application summary process are as follow:
- Check your eligibility
- You must meet eligibility criteria to administer Childcare Subsidy (CCS) at your service. This page outlines who the Australian Government will approve to administer CCS.
- Get ready to apply
- When you apply for Childcare Subsidy (CCS) approval, you’ll need to provide a range of information and evidence. Having this information ready will reduce the time it takes to complete the application. This page outlines what you need to do before you apply.
- Submit your application
- Once you’ve gathered all the required information and evidence, you’re ready to submit your Childcare Subsidy (CCS) approval application. This page outlines how to complete and submit your application.
- After you apply
- After you submit your Childcare Subsidy (CCS) approval application, it will undergo a rigorous assessment process. This page outlines what you need to know while you wait for an assessment decision and what to do when you receive a decision.
- Add, remove or relocate a service
- Once approved, providers must let us know about any changes to their services. This includes if you intend to open, close or relocate a service or if your provider changes legal entity. This page outlines what you need to do in these scenarios.
- Suspension of approvals
- Your National Law or Childcare Subsidy (CCS) approvals can be suspended. Approval may be suspended if you don’t comply with your obligations or following a voluntary request.
PRODA – Child Care Subsidy ( CCS) Funding
- Create a PRODA account and obtain an individual Registration Authority number
PRODA (Provider of Digital Access) is an online identity verification system that strengthens the security of personal information for new Persons with Management or Control (PMC).
New PMCs will need to create a PRODA account and obtain an individual Registration Authority (RA) number if they are submitting a National Law provider approval application or an application to administer the Child Care Subsidy under the Family Assistance Law. The RA number is unique to your PRODA account.
- Identifying Persons with Management or Control (PMC)
From July 2023, the National Law definition of a PMC will be similar to the definition used by the Australian Government for a PMC of a provider entity for administering the Child Care Subsidy under the Family Assistance Law.
In some cases, a provider’s PMC will be the same individual for the National Law and for Child Care Subsidy purposes. However, in some circumstances, a person may be a PMC in relation to the Child Care Subsidy, but not a PMC under the National Law.
A PMC has legal responsibilities under the National Law and Regulations, and the Family Assistance Law for Child Care Subsidy purposes.
When completing your application in the NQA ITS you will be asked to verify your identity by entering your RA number.
- Submit your application in the NQA IT System
By accessing this link https://public.nqaits.acecqa.gov.au/Pages/Landing.aspx you can log in to the NQA IT System or register for an account.
If you experience technical issues, email nqaits@acecqa.gov.au.
- Child Care Subsidy application assessment time-frames
Approval for the Child Care Subsidy can only be determined after approval under the National Law and after the Australian Government has assessed your application.
An estimated assessment time-frame cannot be given, however ensuring all mandatory information documentation is submitted with your application will assist in this process.
Watch this 2-minute video for information about the National Law and Family Assistance Law (to administer the Child Care Subsidy) application process.
NQA ITS – Full User Guide : https://www.acecqa.gov.au/sites/default/files/2023-06/NQA%20IT%20System%20-%20Full%20User%20Guide_0.pdf
Step Six – Settlement
Settlement on a childcare business typically takes place on a Friday, as government funding is allocated from Monday to Friday. This usually occurs two weeks after the Transfer of Service becomes unconditional, as stated in the letter received from ECRU.
Please note that childcare centers are in high demand and difficult to acquire. Entering the industry may require flexibility from the buyer regarding both location and price.
If a center has been operational and profitable for more than two years, a buyer may be able to secure financing for 50% of the business price, or 60% to 70% of the combined business and property price if purchasing both simultaneously. Finance brokers who specialize in child care center financing can be found under the “Resources” section of the ABB website
The price of childcare centers varies widely, ranging from $100,000 to over $4,000,000 for an individual center (excluding property), depending on factors such as net profit, location, size, and age.
Currently, individual child care businesses in the Perth metro area are selling for a multiple of 3 to 4.5 times net profit, including add-backs. Group sales can achieve multiples of 6 to 7 times net profit.
Regional locations, typically more than two hours from Perth CBD, generally sell for multiples of 2 to 3 times net profit.
We hope you have found the above useful.
Click HERE to access the PDF version of the Childcare Process!
