If you’re thinking about selling your preschool, one of the first questions you’ll ask is: what is it worth?

The answer isn’t simple — but it is knowable. Preschool valuation follows a consistent framework, and once you understand it, you can start making decisions that actually move the number.

Here’s how it works.

## Start With Revenue — but Don’t Stop There

Buyers don’t pay for gross revenue. They pay for what’s left after the bills are paid.

The number that matters is **Seller’s Discretionary Earnings (SDE)** — sometimes called owner’s cash flow. SDE starts with your net income and adds back:

– Your salary and benefits as the owner
– Depreciation and amortization
– One-time or non-recurring expenses
– Any personal expenses run through the business

If your school brings in $800,000 in revenue and your SDE is $180,000, that $180,000 is the foundation of your valuation — not the $800,000.

## The Multiple

Once SDE is established, buyers apply a multiple. For preschools and childcare centers, that multiple typically falls between **2.5x and 4x SDE**, depending on a range of factors.

A school with $180,000 SDE might sell for anywhere from $450,000 to $720,000 — or higher if the business is exceptionally clean and positioned well.

## What Moves the Multiple Up

Not all schools are valued the same way. These are the factors that push your multiple toward the top of the range:

**Enrollment and capacity utilization.** A school at 90% capacity has a more predictable revenue stream than one at 60%. Buyers pay for stability.

**Staff retention and independence.** If the school runs without you in the building every day, it’s worth more. If you’re the linchpin — the one who handles everything — buyers see risk.

**Lease terms.** A long-term lease with reasonable rent is an asset. A lease expiring in 18 months creates uncertainty that buyers will price in.

**Clean books.** Three years of organized financials — P&Ls, tax returns, payroll records — signal a professionally run operation. Schools that can’t produce clean documentation take longer to sell and often sell for less.

**Licensing and compliance.** A school with no recent citations, no open complaints, and a current license in good standing is far easier to close. Buyers doing due diligence look at your licensing history.

**Real estate.** If you own the building, it may be valued separately and can significantly increase the total transaction value.

## What Pulls It Down

Valuation adjustments work in both directions. Factors that reduce what a buyer will pay:

– Owner-dependent operations (you do everything)
– High staff turnover
– Enrollment below 70% of licensed capacity
– Deferred maintenance on the facility
– Licensing violations or complaints on record
– Lease terms that favor the landlord

None of these are permanent. Most can be addressed before you list — which is exactly why sellers who start planning 12 to 24 months out consistently get better outcomes.

## Real Estate and Asset Value

In some transactions, value comes not just from SDE but from:

– **Real property** — if you own the building, it’s typically sold or leased back separately
– **Equipment and furnishings** — usually included in the business sale but sometimes broken out
– **Goodwill** — reputation, brand, parent relationships, enrollment waitlist

For smaller home-based or family childcare operations, asset-based valuation may apply instead of an earnings multiple.

## Get a Real Number

If you’re early in the process and want a rough estimate, start with your SDE and apply a 2.5x–3.5x multiple. That range gives you a working number.

For an accurate valuation, you’ll need a licensed business broker who specializes in childcare. The difference between a rough estimate and a formal valuation can be significant — and so can the difference between selling at 2.5x and selling at 3.8x.

If you want to talk through where your school might fall, [reach out here](https://chelseareue.com/contact). I work with preschool owners every day on exactly this question.

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*Chelsea Reue is a licensed real estate agent and childcare business broker specializing in the sale of preschools and childcare centers. Learn more at [chelseareue.com](https://chelseareue.com).*