How to sell a daycare business in Canada under the $10 a day system
Daycares sell for 3.0 to 5.0 times adjusted earnings, and in a funded centre a government formula now sets much of the profit. How Ontario’s formula works, and how the licence passes in a sale.
Daycares in Canada typically sell for 3.0 to 5.0 times adjusted earnings. In a centre enrolled in a provincial program, a formula sets much of the profit: Ontario adds an allocation in lieu of profit to funded costs and caps parent fees at $22 a day. A share sale keeps the licence, and an asset buyer applies for its own.
What a daycare business sells for
Owners who set out to sell a daycare business in Canada start from a range of 3.0 to 5.0 times adjusted earnings, the education and childcare row of the table of multiples by industry. Our own valuation runs on that row. Adjusted earnings are profit with the owner’s salary and personal costs added back, the figure explained in SDE or EBITDA.
For a licensed centre the multiple is the second question. The first is how much of the profit a government formula now sets, since most centres take part in a provincial program funded under the Canada-wide agreements. This article uses Ontario as its example, because the province publishes its funding formula in detail.
The $10 a day agreements
Under the Canada-wide early learning and child care agreements, Ottawa funds the provinces and territories to bring the average fee for regulated child care down to $10 a day. In a December 2025 release, the federal government said eight provinces and territories had reached an average of $10 a day or less. Every jurisdiction had cut fees by at least half.
Ontario sits above the target. Fees for eligible children are capped at $22 a day, which brings the provincial average to $19, and the same release says Ottawa will provide $695 million in 2026 to hold that average through December 31, 2026. The province’s agreement page reports that 93 percent of licensed spaces for children aged 0 to 5 were in enrolled programs as of June 2026.
For a seller, the program changes two numbers: the fees you may charge and the profit you may keep.
What an Ontario centre receives
Since January 1, 2025, Ontario has funded enrolled centres on their costs. The Ministry of Education’s cost based funding guideline sets how service system managers pay each centre: a program cost allocation, built from benchmark costs adjusted for its region, plus an allocation in lieu of profit. The parent fees the centre expects to collect are then subtracted from the total.
The profit part is a formula with three pieces. Take, as an illustration, a centre with a benchmark allocation of $2,000,000 and a further $400,000 of top up funding, enrolled for the whole year.
| Piece of the allocation in lieu of profit | Rate in the guideline | Amount |
|---|---|---|
| Base rate, on the program cost allocation of $2,400,000 | 4.25 percent | $102,000 |
| Premium rate, on the benchmark allocation of $2,000,000 | 3.5 percent | $70,000 |
| Flat amount for a centre enrolled all year | $6,000 a year | $6,000 |
| Allocation in lieu of profit | About 7.4 percent of program costs | $178,000 |
The guideline treats wages paid to owners for their labour as an eligible cost, the same as any employee’s pay and uncapped. Perks for a controlling owner, such as a year end bonus, are excluded from eligible costs. At year end the profit allocation is recalculated on actual costs, so spending below the allocation lowers it as well.
What the formula does to the price
Continue the illustration. Suppose the owner runs the centre as its supervisor and draws $110,000, an eligible cost. To a buyer who will do that job, adjusted earnings are $288,000, the profit allocation plus the owner’s wage. Our engine applies 3.0 to 5.0 less 0.5 for earnings below $500,000, which gives about $720,000 to $1.3 million.
A buyer who hires a supervisor can claim that wage as an eligible cost too, so their earnings stay close to the $178,000 allocation. On that figure the same range gives about $450,000 to $800,000. Below $500,000 of earnings our engine expects the buyers to be mostly individuals, one of the groups in who buys Canadian businesses.
Two effects follow for value. Earnings in an enrolled centre are steadier, because the formula covers eligible costs and the fee cap sets parent revenue. Growth comes mostly from added spaces, and those depend on the service system manager, the municipal or district body that runs the program locally.
Funded spaces therefore carry value of their own. Ontario’s licensing manual lets a service system manager refuse enrolment to a program outside its targeted growth plan, so an enrolled centre holds a place a new one may have to wait for. A centre that leaves the program gives parents and employees at least 30 days’ notice.
How a child care licence passes in a sale
In Ontario the licence stays with the legal entity that holds it. Appendix C of the province’s licensing manual says a buyer of assets applies for a licence of its own, while a sale of the shares of a licensed corporation keeps the same licensee and its licence.
In both cases the current licensee writes to its program advisor at least 30 days before the tentative closing date, naming the buyer and setting out how families and staff will hear about the sale. The manual also warns that the buyer’s own licence remains subject to the ministry’s review.
A new entity also has to apply to the service system manager to enrol in the funding program. That makes a share sale the simpler route for a funded centre, although the tax result differs, as share sale or asset sale explains. Qualifying shares can use the lifetime capital gains exemption, $1,275,000 in 2026.
Educators stay with the centre in a share sale because their employer is the same company, and what happens to employees covers the asset sale case. Other provinces license centres under their own laws, so check yours, and the guide to selling a business in Ontario covers the rest of that province’s process.
What to prepare before you sell
- 01Keep your service agreement and each year’s funding reconciliation in one file, since a buyer reads them first.
- 02Separate owner wages for real work from perks, which the guideline already excludes from funded costs.
- 03Confirm that your lease runs long enough for a buyer and whether the landlord has to consent to a transfer.
- 04Decide early whether you will sell shares or assets, because the answer sets the licence and enrolment steps.
- 05Train the person who will replace you as supervisor if you plan to leave at closing.
A funded centre reports to its service system manager on a set structure, which lets a buyer check the numbers quickly. Preparing a business for sale covers the year before a sale in general. The Quick AI valuation gives a first range for your own centre in a few minutes, before you give anyone your name.
The buyers, due diligence priorities and sector requirements are set out on InvestDeal’s childcare and education M&A advisory page.
Questions owners ask
- What is a daycare business worth in Canada?
- Typically 3.0 to 5.0 times adjusted earnings, before adjustments for size and the owner’s role. In a funded Ontario centre the profit largely follows the province’s formula, so the price follows the funding allocation and the wage of any owner who works in the centre.
- How do the $10 a day child care agreements affect selling a daycare?
- Enrolled centres receive funding that covers eligible costs and adds an allocation in place of profit, while parent fees are capped. Earnings become steadier and growth narrower. Enrolled spaces gain value of their own, because new enrolment depends on the local service system manager’s growth plan.
- Can a child care licence be transferred to a buyer in Ontario?
- The licence stays with the entity that holds it. A buyer of the shares of a licensed corporation keeps that licence, and a buyer of the assets applies for its own licence and its own enrolment in the funding program. Either way the licensee writes to its program advisor at least 30 days before closing.