.svg)
.jpg)
The decision to expand a nursery business is rarely made in a boardroom. It is made at a kitchen table, or in the car on the way home from a long day, or in the middle of the night when you are thinking about what the business could become. It starts with a feeling long before it becomes a plan.
That feeling is important. It is what drives good operators to build great businesses. But feeling ready and being ready are two different things, and the gap between them is where most expansion mistakes happen.
Why now
The market conditions for expansion are genuinely compelling right now. 75% of early years sector professionals surveyed by Christie & Co plan to buy and/or sell in 2026. The average sale price of a day nursery rose 3.8% in 2025, a second consecutive annual rise, and valuations typically range from 3 to 7 times EBITDA depending on occupancy, Ofsted rating and scale. The market has grown more than 50% in value since 2017, from around £7 billion to £10.5 billion.
For the right operator, the opportunity to acquire or to be acquired, is real. Large groups with 21 or more settings took 62% of completed deals in the market last year. Whether you are looking to grow through acquisition, open a new setting organically, or position your business to be an attractive target yourself, the direction of the market rewards operators who are prepared.
These three questions are not designed to put you off. They are designed to make sure that when you do expand, you do it from a position of strength.
Question 1: Do I know what my current business is really worth?
Before you expand, you need to understand the financial health of what you already have. Not the headline numbers, the real picture.
What is your weekly FTE occupancy, not just in your best weeks? Healthy occupancy in the sector is considered 80% or above. If you are below that, expansion will make an existing problem harder to see and harder to solve, because you will be carrying the same structural issue across two sites instead of one.
What is your cost per funded hour and does it cover what the funding actually pays? The national average funded rate for three to four-year-olds is £6.12 an hour, and it has fallen 3% in real terms since 2017. If your cost per funded hour already exceeds this, every funded place you offer is being subsidised by something else in the business, and that subsidy will only get harder to sustain as you grow.
What is your operating margin after paying yourself a market-rate salary, not after taking whatever is left over?
The first step in any growth plan is a clear, honest picture of the base you are building from. If your staff costs are above 70% of revenue, that is a structural issue to address before you take on more. Expansion does not fix a cost base problem. It usually amplifies it.
Question 2: Can my business operate well without me being in it every day?
This is the question that catches most owner-operators out. When you have one setting, you can be hands-on with everything. You know every child, every member of staff and every parent. You catch problems early because you are there.
When you have two settings, you cannot be in both places at once. If the business is built entirely around you, your relationships, your knowledge, your daily presence, then a second setting will stretch you in ways that affect both sites. The first setting will start to slip in the areas where your presence was quietly holding things together, while the new setting demands attention it is not yet generating the income to justify.
Before you expand, the first setting needs to be able to run well without you for extended periods. That means the right management structure, a manager or deputy who can make decisions in your absence. The right processes, documented ways of doing things that do not rely on your memory or your judgement in the moment. And the right financial reporting, management information that tells you what is happening when you are not there, so problems surface in the numbers before they surface in a parent complaint or a staffing crisis.
This is also exactly what buyers look for. What makes a nursery attractive to an acquirer is, among other things, reduced owner-dependency. If you are thinking about selling in the next three to five years, building a business that runs well without you is not just an operational priority, it directly affects your valuation. A buyer paying for a business that cannot function without its current owner is really only paying for one thing: you. And that is not a sustainable asset to acquire.
Question 3: Do I understand what expansion will cost before it starts paying?
Expansion costs money before it makes money. A new setting needs a deposit, a fit-out, working capital and time to reach a sustainable occupancy level. In the early years sector, that journey can take six to twelve months, sometimes longer if you are building from scratch rather than acquiring an existing setting with an established parent base.
During that period, the new setting is a drain on the cashflow of the existing one. And the existing one is already under more pressure than it was two years ago. The average nursery is already facing a £45,000 to £47,000 increase in employer National Insurance costs from April 2025. Add the April 2026 National Living Wage rise to £12.71 an hour, and the cost base many operators are managing is significantly higher than it was two years ago, before you have even factored in the cost of expansion itself.
If the existing business does not have the reserves or the borrowing capacity to absorb a period of reduced cash flow, the expansion that felt like the right move can quickly become a source of serious financial pressure, not because the decision was wrong, but because the timing and the funding structure were not right for the business as it stood.
The question is not whether you can afford the expansion at the point you sign the lease or complete the acquisition. It is whether you can afford the period between signing and the new setting reaching the occupancy level that makes it self-sustaining. That gap, often six to twelve months of negative contribution from the new site, is where well-intentioned expansions run into trouble.
If you can answer all three with confidence
You are probably in a strong position to expand. The next step is finding the right opportunity, whether that is an organic opening, an acquisition or something in between and making sure the financial structure of the deal works for your business at every stage of the journey, not just on day one.
If any of the three gave you pause, that is not a reason to abandon the idea. It is a reason to have the conversation now, while you still have time to prepare, rather than after you have committed and the pressure is already on.
Capital and demand are there in this market. Value is maximised by nursery operators who can demonstrate sustainable earnings, lower owner-reliance, and a clear path to cash flow through the expansion phase.
(Robert Burns, Transaction Advisory Services Director, Ballards)
Sources: NDNA Sustainability Survey 2025; Christieand Co Business Outlook 2026; Nursery World Groups Report 2026; House ofCommons Library CBP-8052.
Disclaimer. This article has been prepared forinformation purposes only. Formal professional advice is strongly recommendedbefore making decisions on the topics discussed in this release. Noresponsibility for any loss to any person acting, or not acting, as a result ofthis release can be accepted by us, or any person affiliated with us.
.jpg)
.jpg)
.svg)
%201.svg)
