Buying a Day Nursery or Childcare Business in the UK

Every day nursery for sale in the UK comes with the same opening question: is the childcare market growing or shrinking? The published headline says shrinking. The detail says otherwise, and the detail is what you're buying.

England had 59,700 Ofsted-registered childcare providers at 31 March 2026, down 720 on the year before. That headline decline hides the number that actually matters to a buyer.

Break it apart and the picture inverts. Childminders fell by 630, or 2%, to 24,700. Childcare on non-domestic premises, which is where day nurseries and pre-schools sit, rose by 410, or 1%, to 27,900 settings. Places offered by Early Years Register providers rose by 26,500 to 1.31 million, and the non-domestic share of those places grew faster still, up 30,500 to 1.16 million.

So the sector is consolidating from home-based provision into larger settings, while total capacity grows. If you're buying a day nursery, you're buying into the part of the market that's expanding, funded by a state entitlement that got substantially bigger in September 2025 when the 30-hour offer extended to children from nine months old in working families.

That's an unusual combination: government-underwritten demand, shrinking competitor numbers in the home-based segment, and a service parents genuinely cannot do without if they want to work.

It's also a sector with an unusually hard cost problem, which is why plenty of nurseries come to market. Staffing is around 60% to 65% of income, statutory ratios cap how efficient you can be, and a large slice of revenue arrives at a rate the government sets rather than one you choose. This guide covers what nurseries actually earn, what buyers pay, how Ofsted registration transfers, and where the value hides.

A nursery sells hours of care, and how many hours it can sell is set by law rather than by ambition.

The statutory staff-to-child ratios in England under the EYFS framework are the binding constraint:

Age group	Minimum ratio	What it means
Under 2	1 adult : 3 children	Most expensive room to staff
Age 2	1 adult : 4 children
Age 3 to 4	1 adult : 8 children	Cheapest room, best margin

That table explains nursery economics almost entirely. A baby room is staff-intensive and rarely profitable on its own. The pre-school room subsidises it. A setting with a good age mix and full pre-school rooms makes money. One that's heavy on under-2s and light on three-year-olds struggles regardless of how well it's run.

Revenue comes from two very different places. Private fees, which you set, and funded hours, which the government sets via your local authority's early years funding formula. The balance between them just moved sharply, and any buyer working from pre-2025 numbers will get this badly wrong.

The Coram Childcare Survey 2026 puts the average full-time (50 hour) nursery place in England at £148.82 a week for an under-two, down 38.9% from £238.95 the year before. Two-year-olds fell 38.6% to £140.72. Three- and four-year-olds went the other way, up 5.9% to £132.72.

Read that carefully, because it's the parent's bill rather than your revenue. What changed is who pays. From September 2025 working parents of children from nine months to school age became eligible for up to 30 funded hours a week for 38 weeks, doubling the previous 15. The money didn't disappear, it moved from the parent's bank account to the local authority's funding formula.

For families outside the entitlement the picture is the opposite: Coram puts a part-time 25-hour place for an under-two at £188.75 a week in 2026, up from £176.00, and that line has risen every year.

So the sector didn't get cheaper to run. Your income mix changed, and a much larger share of it now arrives at a rate you don't set. Providers have consistently argued that funding rates sit below delivery cost, particularly for under-2s where the 1:3 ratio makes staffing expensive.

Staff costs at 60% to 65% of income, with everything else leaving an EBITDA margin around 10% to 15% in a well-occupied setting. That margin is thin enough that occupancy does all the work.

Why occupancy decides everything

Occupancy is the number to obsess over. Most nurseries run 70% to 80% across the week. Profitable ones target 80% to 85% in core rooms. Because the cost base is largely fixed by ratios and premises, the last 10 points of occupancy are almost pure margin, and the first 60 points barely cover costs. A nursery at 68% occupancy and one at 84% can have identical turnover profiles and completely different profits.

Nurseries trade at higher multiples than most small businesses covered in this series, because buyers include corporate groups and private equity as well as individuals.

EBITDA multiples for good-quality standalone settings typically run 7x to 9x. Larger, high-occupancy settings with strong Ofsted grades and freehold premises reach into double digits when groups are bidding. Settings graded Requires Improvement or Inadequate trade far lower, sometimes on asset value alone, because a poor grade suppresses occupancy and carries regulatory risk.

Price per registered place is the shorthand the sector actually uses. Broadly £7,000 to £15,000 a place across England outside London, with London and the South East above that band. A 60-place nursery at £11,000 a place is a £660,000 business.

That metric is useful precisely because it normalises for current trading. A nursery running at 60% occupancy has depressed earnings, so an EBITDA multiple undervalues the asset. Price per place captures what the setting could earn if it were full, which is why buyers of underperforming nurseries use it.

Freehold versus leasehold changes everything. A freehold nursery is a property investment with a childcare business attached, and the purpose-built or converted premises have real alternative-use value. Leasehold settings depend entirely on lease length, and anything under ten years unexpired materially reduces both value and financeability. Our guide to freehold businesses for sale covers why that matters for financing.

A few pricing realities:

• Ofsted grade moves price more than any other single factor. Good or Outstanding attracts competitive bidding; Requires Improvement halves your buyer pool.
• Settings near a school gate or a large employer command premiums because occupancy is easier.
• A nursery with a waiting list is worth substantially more than one with the same turnover and empty rooms, because the earnings are proven to be sustainable.
• Staff stability matters. Nurseries with high turnover of qualified staff struggle to maintain ratios and grades.

Our business valuation guide covers how to normalise earnings before applying any of these multiples.

A note on these numbers. The UK has no published dataset of small business asking prices or transaction multiples: neither ONS nor any regulator collects them. The ranges above are drawn from current listings on the main UK marketplaces and from how brokers price this sector, so treat them as a sense-check on whether an asking price is sane, not as a valuation. The only numbers that matter for your deal are the ones in the seller's accounts.

This is the single most important structural point in a nursery purchase, and it decides how the deal should be built.

Ofsted registration is not transferable between legal entities. It attaches to the registered person and the premises, not to the business as a saleable asset.

Share purchase. If you buy the shares of the company that holds the registration, the registration continues because the legal entity hasn't changed. You must notify Ofsted about changes to directors and anyone connected with the registration, and they'll assess suitability. The setting keeps trading, keeps its grade, and keeps its inspection history.

Asset purchase. If you buy the assets and trade through a new company, you need a brand-new Ofsted registration. That takes months, not weeks. First-time registration can run to around six months. You also lose the existing inspection grade, which means the setting starts as unrated and faces an early inspection under new ownership.

The practical consequence: almost all nursery deals are share purchases, and buyers pay a premium for the ability to preserve a Good or Outstanding grade. If a seller insists on an asset sale, understand exactly why, and price in both the registration gap and the loss of the grade.

Other regulatory checks:

1. Read the last full inspection report, not just the grade. The narrative tells you where the weaknesses are.
2. Check the date of the last inspection. A setting inspected four years ago is due one, and it'll probably land on your watch.
3. Confirm the Designated Safeguarding Lead arrangements and that safeguarding training is current across the team.
4. Verify staff qualifications against the ratio requirements. A setting meeting ratios only because of an unqualified member of staff has a compliance problem waiting.
5. Check DBS records are current for every member of staff.
6. Ask about any complaints to Ofsted, which are recorded separately from inspections.

Wales and Scotland have different regulators, Care Inspectorate Wales and the Care Inspectorate respectively, with their own registration rules. The transferability principle is broadly similar, but check locally.

Because a nursery purchase is normally a share purchase, you inherit the company's full history including any historic liabilities. Our guide on buying a business with debt and liabilities covers what that means and how warranties and indemnities should be structured.

Every nursery buyer needs to understand this trade-off properly, because it's the defining economic feature of the sector.

Funded hours give you demand certainty. Parents who qualify get their entitlement, the local authority pays, and the money arrives reliably. In a small business, that kind of counterparty is valuable.

The cost is control. You don't set the rate. Local authorities pass through a base rate from a national funding formula, and providers across the sector have consistently argued that the rate falls short of delivery cost, especially for under-2s where the 1:3 ratio makes staffing expensive.

So the mix question becomes central. Ask for the split between funded and privately-paid hours, and model what happens if the funded share rises. A setting where 75% of income is funded has a very different risk profile from one at 40%, even at the same turnover.

How good operators manage it:

• Charge properly for what isn't funded. Meals, nappies, consumables and extended hours beyond the entitlement can be charged separately, within the rules. Settings that absorb these costs are handing away margin.
• Sell the wraparound. The funded entitlement covers a set number of hours over set weeks. Parents who work full time need more. Wraparound hours, early drop-off, late pick-up and holiday cover are privately paid and price at market rates.
• Get the age mix right. Pre-school rooms at 1:8 subsidise baby rooms at 1:3. A setting that's baby-heavy needs higher private fees to work.
• Fill the shoulder days. Monday and Friday are usually the quietest. Pricing incentives that move a Tuesday-Wednesday-Thursday child to a four-day pattern lift occupancy without adding staff.

The DfE's funded early education and childcare statistics show 55,300 providers delivering the entitlements, up 0.6% on the year and the second consecutive annual increase. Providers are adapting rather than exiting, which is a reasonable signal that the economics work for competent operators.

Honestly, this is the part of nursery ownership I'd think hardest about. The demand certainty is genuinely attractive. But you're running a business where a large share of your price is set by someone else, and the direction of travel is toward more funded hours, not fewer. Buy on the assumption that funded share rises, and check the numbers still work.

This worked example is an illustrative composite built from typical market figures, not a record of a specific transaction. Use it as a method for taking a deal apart, and run your own numbers on any business you actually look at.

Here's a deal taken apart properly. A leasehold day nursery in a commuter town, registered for 52 places, Ofsted Good, asking £520,000 for the shares. Twelve years unexpired at £48,000 a year.

The seller's version. "Turnover £742,000, EBITDA about £86,000, always full."

What the occupancy report showed: average 74% across the year, not "always full". Pre-school room at 88%, toddler room at 79%, baby room at 58%.

The rebuild:

Line	Annual	Notes
Fee income, private	£389,000	52% of total
Funded hours income	£353,000	48% and rising
Turnover	£742,000
Staff costs including NI and pension	£474,000	63.9% of income
Rent	£48,000	12 years unexpired
Rates, energy, food, resources	£68,000
Insurance, training, software, admin	£41,000
Manager salary	£38,000	Already employed, stays
EBITDA	£73,000	Below the seller's £86,000

The gap came from two adjustments: the seller had added back a family member's salary who genuinely did work in the setting, and had understated agency cover used during a period of staff sickness.

At £520,000 against £73,000 EBITDA that's 7.1x. Reasonable for a Good-rated setting on a long lease. Two things made it more interesting.

The baby room at 58%. Fourteen places sitting empty. Filling eight of them adds roughly £114,000 of income at a blended £280 a week per place over 51 weeks. That £280 is the nursery's total income per place, parent contribution plus funded-hours payment from the local authority, so don't confuse it with Coram's £148.82, which is only the parent's share. Staffing the eight at 1:3 adds about £78,000. Net contribution around £36,000, which would take EBITDA to £109,000. On the same 7.1x multiple the business would be worth £774,000.

Price per place as a sanity check. £520,000 across 52 places is £10,000 a place, right in the middle of the normal band. That confirms the price is fair rather than cheap, and it confirms the upside is operational rather than a pricing error by the seller.

The risk to weigh against it. Funded income was 48% and heading up as the September 2025 expansion works through. If funding rates lag wage growth, that margin compresses. I'd want the private-fee wraparound offer strengthened before relying on the improved number.

So: fair at £520,000, genuinely good if you can fill the baby room, and the whole thesis rests on an occupancy report the seller almost didn't provide. Always ask for it, room by room, month by month.

Nursery upside is mostly operational, and it's unusually measurable.

Fill the rooms. Obvious and still the biggest lever, because the cost base is largely fixed. Waiting lists, local employer partnerships, school-gate visibility and a decent website with online enquiry handling all move occupancy. Many independent nurseries have no functioning enquiry process at all: a parent emails, nobody replies for three days, they book elsewhere.

Protect the Ofsted grade. Everything depends on it. Grade drives occupancy, occupancy drives profit, profit drives value, and a drop from Good to Requires Improvement can knock a third off the business. Invest in the leadership team and the safeguarding culture before anything else.

Extend the day and the year. Early drop-off from 7.30am, later pick-up, and holiday club provision are privately paid hours on premises and staff you already have.

Fix the age mix over time. You can influence it through pricing and marketing. Recruiting more three and four-year-olds into a 1:8 room improves the blended margin.

Charge for consumables and meals properly, within the funding rules.

Reduce agency spend. Agency cover is expensive and it destabilises the setting. Better rotas, a small bank of trusted casual staff, and lower turnover all help. Staff retention in early years is a genuine competitive advantage, and it's mostly about leadership rather than pay.

Consider a second site. Nurseries scale reasonably well because the management overhead spreads. Groups also attract higher multiples than standalone settings at exit, so building from one to three sites creates value twice: through earnings and through the multiple.

If you're funding an acquisition plus working capital, our guide to financing a business purchase in the UK is worth reading. Nurseries are relatively well regarded by lenders because the income is predictable and part-guaranteed, particularly where the premises are freehold.

This is a serious business rather than a lifestyle purchase, and it should be approached that way.

The strengths are real and unusual. Demand is underwritten by government entitlement and demographic necessity: parents who work need childcare, and that isn't discretionary. Provider numbers are falling while places grow, which favours established settings. Multiples are high, so value created through occupancy improvement is amplified at exit. And there's a genuine institutional buyer market, meaning your exit options include groups and private equity, not just another individual.

The weaknesses are equally serious. Staffing is 60%-plus of income and rising with the National Living Wage. Statutory ratios cap efficiency by law. A meaningful share of your revenue is priced by government rather than by you. And the whole thing rests on an Ofsted grade that a single bad inspection can move.

My view: nurseries are the best business in this series for a buyer with capital and management capability, and the worst for someone wanting a simple owner-operated job. You need a strong manager, and if the setting doesn't have one, buying it is a gamble.

Where the value sits: Good-rated settings with under-filled baby or toddler rooms, a long lease or freehold, and a manager who wants to stay. Those get priced on current EBITDA when the real value is in the empty places.

Where to be careful: anything graded Requires Improvement unless you genuinely know how to fix it, settings where the owner is also the manager and is leaving, leases under ten years, and any deal structured as an asset purchase.

Before you offer:

1. Get month-by-month occupancy by room for two years.
2. Read the last two full Ofsted reports in full, not the grades.
3. Establish share purchase, and confirm the registration will continue.
4. Split income between funded and private, and model a higher funded share.
5. Meet the manager and the room leaders, and find out who's staying.

When you're ready, browse businesses for sale on NewOwner to compare every day nursery for sale listed directly by its owner, alongside other childcare businesses. The business buyer starter kit walks through comparing deals consistently, and if you want to talk through a specific setting, get in touch.