Two kids playing at a daycare center in Perth

Have you considered buying a childcare business in Perth?

The childcare business in Australia is booming.

With more and more families functioning on dual incomes, the rise of single motherhood, and rising costs for in-home care, childcare centers have become highly profitable businesses.

This article here provides all the staggering numbers, with almost one million children currently enrolled in certified childcare centers throughout Australia.

The stats are based on an official survey conducted by the federal government that found there are around 15,000 childcare centers operating in the country and over 700,000 families utilize some form of childcare or daycare services every month.

The snapshot shows substantial growth in the sector. In 2013, an additional 22,400 children were enrolled in daycare versus the previous year. The trend continues to strengthen.

The government survey showed that a whopping one quarter of all kids in Australia ages 12 and younger are enrolled regularly in childcare. This is a new record for childcare in Australia.

A Growing Trend

Early Childhood and Childcare Minister Kate Ellis had this to say on the popular trend:

“What we’re seeing is more children accessing childcare in more services than ever before in our nation’s history. We’re creating a more flexible, affordable, accessible childcare system with higher quality standards, and families around Australia are rightly taking advantage.”

In fact, Australia is one of the world’s leaders in federal financial support for childcare. Unlike many other nations, we can receive assistance for childcare expenses, which can add up to tens of thousands of dollars per year.

The Australian government just issued a record-breaking $20.6 billion for direct childcare assistance. They upped a 30 percent rebate to 50 percent for families’ out-of-pocket expenses, according to Ellis.

It’s important to note that although the numbers are up, Ellis claimed there are still a lot of obstacles with childcare availability. Although the government incentive is attractive, many have trouble finding a center near their home or office. Or oftentimes, enrollment has already been filled and parents are stuck with more challenging options.

 

Why you should buy a childcare business

  • Individual childcare businesses are currently selling for 3.0 – 5 x net profit – one of the highest returns for any business.
  • Childcare centre groups are selling for 5 to 6 x net profit which is getting close to Public Company sale  multiple levels.
  • Employee wages are relatively low compared to some other industries and usually the industry does not experience problems obtaining staff from Managers to Certificate III workers. Several HR agencies specialise in Childcare.
  • In Australia over 50% of first time mothers re-enter the work force by the time their child reaches 1 year old, making childcare a necessity for the majority of parents with children under the age of 5 years.
  • Government subsides – Centre’s can receive up to 80% of their fees direct from the Government.  This can depend on location, size of the centre and income of parents.
  • A 30 year old client, who built up a group of 19 centres (in Perth) over a period of 10 years, sold them in 2014 for $64 million.
  • There are savings in numbers – once you reach around 5 centres+ – central administration can represent considerable savings in insurance, payroll, staff management, centre management (leases, marketing, advertising, cleaning, repairs & maintenance etc.).
  • Administration work can also be handled from anywhere and by a team of people not necessarily associated with childcare.
  • Opportunity to buy nationally outside of Perth and possibly manage from established administration base in Perth or elsewhere.
  • Freehold centres are also available sometimes.   Freehold can represent a saving both from a tax perspective and commercial rent.    With interest rates at current record low levels the interest on a commercial loan usually works out cheaper than the equivalent in commercial rent costs. It also means any improvements to the Centre are adding to the commercial value of “your” property and not someone else’s.  Opportunity for commercial gain on the property.
  • Freehold ownership also means that when you want to sell your business you have far more control.  You are not in the hands of a Managing Agent or landlord as to whether they will approve your buyer.
  • Childcare centres are one of the few non-franchise businesses that Banks will lend on.  The usual lend is 50% for a leasehold business and up to 70% of the overall cost for a Freehold centre.  Links to recommended finance brokers and Bank Childcare specialists are available on my website.
  • Currently many leasehold centres sell within weeks of coming on the market.
  • Many other businesses can be linked, associated with Childcare.Sound secure investments.
  • Finally they are sound secure investments.

 

Want to find out more about selling or buying a childcare business in Perth?

Contact Angela today at Advance Business Brokers for more information.