Maintainable profit is the yearly profit a nursery can be expected to keep producing under a new owner. It is what remains after removing items that belong to the current owner, one-off events and accounting choices, and after adding known cost changes.
In a maintainable profit nursery valuation, this is the figure the multiple is applied to. Because of that multiplier effect, a small change in this figure moves the price by several times that amount.
This page explains how maintainable profit is built from your accounts, which adjustments apply, how buyers test your costs and income, and what evidence settles common disputes. For the wider valuation process, see our guide on how to value a nursery business.
What does maintainable profit mean in a nursery valuation?
Maintainable profit, also called fair maintainable profit or normalised profit, is the level of sustainable earnings a nursery can generate year after year under a typical buyer. It separates the underlying trading performance of the setting from the personal way you run costs and draw money through the company.
How it differs from the profit in your accounts
Your accounts are prepared for tax and compliance, not for a sale. They reflect your personal pay structure, the costs you put through the company, and whatever events fell into that financial year.
Three kinds of difference separate reported profit from maintainable profit. Owner-specific items cover personal expenses or a director’s salary above or below the market cost of your operational role. One-off items cover unusual events that will not repeat, while known future changes build in cost rises taking effect after your year end. Depending on those adjustments, maintainable profit can be higher or lower than the accounts profit.
Maintainable profit, EBITDA and EBIT
EBITDA is earnings before interest, tax, depreciation and amortisation, which measures operating cash flow before financing and accounting write-downs, as explained in our guide to EBITDA in nursery valuations. EBIT is earnings before interest and tax, which leaves depreciation and amortisation in to reflect ongoing equipment replacement, as covered in our guide to EBIT in nursery valuations.
In most nursery sales, maintainable profit is expressed as adjusted EBITDA, though some valuers work on an EBIT basis. The multiple must match the basis, because applying an EBITDA multiple to an EBIT figure, or the reverse, gives a wrong value.
Why does maintainable profit carry so much weight?
Maintainable profit carries so much weight because buyers apply their valuation multiple directly to this figure to reach the headline price. Every adjustment agreed in due diligence changes your offer by several times the adjustment itself.
In plain arithmetic, every £1,000 added or removed moves the value by £1,000 times the multiple. Lenders look at the same adjusted figure when testing loan affordability and deciding how much to lend a buyer.
Valuers look at what a competent operator could sustain, not what one owner happens to achieve. Government valuers apply a similar concept in the VOA Rating Manual on the receipts and expenditure method, assessing the fair maintainable trade a reasonably efficient operator could achieve rather than the actual occupier’s results. The Valuation Office Agency uses this approach for business rates, so the idea in sale valuations is similar, not identical.
Which figures do buyers start from?
Buyers start from your latest full year of statutory accounts and current management accounts or a trailing 12 months. They cross-check these against the two or three years before to see whether occupancy, fee income and wage ratios are steady.
Public filings are never enough on their own. Small companies can currently file filleted or abridged accounts at Companies House, which keep the profit and loss account off the public record, so a buyer cannot work out maintainable profit from Companies House alone.
Where profit moves up and down, a weighted average under the nursery profit multiple method is common, as shown in the weighting example on our main valuation guide. Timing also matters in childcare because funding rates change each April, the National Living Wage rises each April, and fee reviews and intake follow the academic year in September. As a result, the latest 12 months often gives the truest picture of the current cost base, and our nursery exit planning guide is the best place to start preparing two to three years of clean figures.
Which adjustments add profit back?
A valid add-back must pass a clear test: the cost will not continue under a new owner, and you can evidence it with invoices or payroll records. Buyers and their accountants will reject any proposed adjustment that fails either part of that test.
You can add back any part of an owner’s pay and pension above the market cost of the role you actually perform. Personal costs run through the business are also added back, such as a family car, private fuel, personal phone bills or wages paid to non-working family members.
Genuine one-off costs can be added back where they will not repeat, such as fees for a settled legal dispute, a one-off major repair or a temporary recruitment spike. Recurring repairs, routine decorating and regular equipment replacements presented as one-offs will be challenged in due diligence.
Interest and, on an EBITDA basis, depreciation and amortisation are also added back to operating profit. Dividends are paid from post-tax reserves rather than charged as a business cost, so there is nothing to add back.
Which adjustments take profit away?
Downward adjustments deduct commercial costs missing from your accounts or remove income that will not continue under a new owner. These deductions explain why a buyer’s maintainable profit is often lower than your accountant’s reported profit.
The largest deduction usually arises when an owner works as manager or counts in ratio without a market salary. Even if you take your income mainly as dividends, the buyer will deduct the full market cost of replacing you, including salary, employer National Insurance and pension.
Buyers also deduct the shortfall where family members work below market pay, or where rent paid to a connected landlord, such as the owner or the owner’s pension, sits below market level. Because a new lease will be needed on sale, the buyer prices in the market rent.
Further deductions apply where there is deferred maintenance, under-investment in resources, or staff paid at or below legal minimums. Buyers also remove income that will not continue, such as one-off grants, insurance receipts or a temporary spike in places.
What cost changes will a buyer build in?
Buyers price the cost base the nursery will have after completion, not the one in the last accounts. When statutory wages, taxes or property bills rise after your year end, a buyer recalculates profit as if those higher rates had applied all year.
- Statutory wage rates: Under the National Minimum Wage and National Living Wage rates, from 1 April 2026 the rate for workers aged 21 and over rose from £12.21 to £12.71 an hour, the rate for 18 to 20-year-olds rose to £10.85, and the rate for under 18s and apprentices rose to £8.00. The age profile of the team matters because staff moving up age bands and keeping pay differentials for room leaders raise total wage costs.
- Employer National Insurance: Under HMRC’s policy paper on the employer National Insurance changes, from 6 April 2025 the rate rose from 13.8% to 15% and the secondary threshold fell from £9,100 to £5,000, while the upper secondary thresholds for employees under 21 and apprentices under 25 were unchanged. Although the Employment Allowance rose to £10,500, the Employment Allowance rules mean connected companies can claim only one allowance across a group, so a group buyer will usually remove that saving.
- Statutory Sick Pay: Under Statutory Sick Pay on GOV.UK and Acas guidance on the 2026 changes, from 6 April 2026 sick pay is payable from the first day of sickness, the lower earnings limit has been removed, and the rate is the lower of £123.25 a week or 80% of average weekly earnings.
- Business rates relief: Under small business rate relief in England, relief applies where the rateable value is under £15,000, and is full at £12,000 or less where this is the only property the business uses. A business taking on a second property keeps relief on its main property for 12 months if taken on before 27 November 2025 or 36 months if taken on from that date, and after that only if each other property is below £2,900 and total rateable value is below £20,000 (£28,000 in London), so a multi-site buyer will budget for the full bill. In Scotland, Day Nursery Relief offers up to 100% relief for eligible nurseries.
- EYFS ratios: Under the EYFS statutory framework effective from 1 September 2025, ratios in England are 1:3 for under twos, 1:5 for two-year-olds (changed from 1:4 in September 2023), and 1:8 for three-year-olds and over, or 1:13 where a suitably qualified Level 6 practitioner works directly with the children. The staffing model must be legal and sustainable without the owner counted in ratio.
- Rent reviews and lease renewals: In nursery sales, buyers usually factor in any rent review or lease renewal due soon after completion.
The figures on this page describe England, and funding and rates work differently in Scotland and Wales. Buyers always model the rules that apply in your nursery’s nation.
How do buyers judge the quality of nursery income?
Buyers examine where your revenue comes from because the same occupancy can produce different profit depending on the age and funding mix. For that reason, buyers look at occupancy and funding by room and age across the year.
According to the DfE’s 2025 providers’ finances report, published in May 2026 from fieldwork in May to July 2025, private group-based providers in England received 59% of their income from entitlement funding, 37% from parent-paid fees and 4% from other sources in 2025, compared with 48% funding and 48% fees in 2024. In that 2025 survey, the median hourly funding rate compared with the median hourly parent-paid fee was £10.49 against £8.00 for under twos, £7.84 against £7.75 for two-year-olds on the working parent entitlement, and £5.52 against £7.50 for three and four-year-olds. Funding sits above fees for under twos, roughly level for two-year-olds, and below fees for three and four-year-olds.
Under the DfE’s early years funding explainer for 2026 to 2027, with local authority rates announced on 15 December 2025, the minimum share of funding passed to providers rises to 97%, and reported national average local authority rates are £12.04 for under twos, £8.90 for two-year-olds and £6.42 for three and four-year-olds. Each local authority sets its own provider rates using a local formula and supplements, so providers receive their own council’s rate rather than the national average, which is why how location affects a nursery’s value matters to buyers.
In the May 2026 DfE report, 89% of private group-based providers made additional charges to parents, worth around 2% of income, with evidence that some fold additional charges into daily fees, which statutory guidance does not allow. Optional additional charges are normal, but income that depends on compulsory charges tied to funded hours is at risk and a buyer will discount it, especially with the CMA’s early years education and childcare market study, launched on 1 July 2026, reviewing funding and provider models. Buyers also use a sustainable level of occupancy across the year, not a peak term.
How do your figures compare with the sector?
Buyers use national survey figures for England as a sense check against your accounts rather than as targets. Because profitability varies widely across settings, valuers always work from each nursery’s own adjusted figures.
Across England, the DfE’s childcare and early years provider survey 2025, published on 11 December 2025, recorded 1,620,800 registered places. In the May 2026 DfE providers’ finances report, private group-based providers had a median income-to-cost ratio of 1.15 (mean 1.25), meaning £1.15 of income for every £1 of cost, with 43% above 1.2 and 9% below 0.8.
In that 2025 survey, private group-based provider costs were 74% staff (including wages, employer National Insurance and pension contributions), 9% rent or mortgage, 4% food, 3% materials, 2% business rates, 2% energy, 1% training, 1% recruitment and 5% other, with a median unit cost of £6.24 per child per hour and median staff hourly pay of £13.00. The report notes that for-profit providers may not have included loan repayments or dividends in reported costs, and the survey pre-dates the September 2025 expansion to 30 funded hours and the April 2026 wage rises. Staff at around three-quarters of costs is typical, so a nursery well outside that range should be able to explain why.
A worked example
The table below shows how adjustments turn reported accounts profit into the figure a buyer prices. This is an illustrative leasehold nursery where the owner works full-time as manager and pays herself £20,000.
| Item | Amount |
| Net profit before tax in the accounts | £62,000 |
| Add depreciation | £9,000 |
| Add loan interest | £4,000 |
| EBITDA | £75,000 |
| Add owner’s car and phone costs run through the business | £6,000 |
| Add one-off legal fee for a settled lease dispute | £5,000 |
| Less market cost of a manager (estimated £44,000 including employer National Insurance and pension) minus the owner’s £20,000 | -£24,000 |
| Less pay rises from April 2026 not yet in the accounts (estimate) | -£7,000 |
| Maintainable profit (adjusted EBITDA) | £55,000 |
Every figure in this example is illustrative. If the owner only applied the add-backs, the figure would be £86,000, whereas the buyer’s figure is £55,000, which is £31,000 lower. At a multiple of 3, used only to keep the arithmetic simple and not a market guide, that gap is worth £93,000 of value, which is why the adjustments matter more than the headline profit.
What evidence will buyers and lenders ask for?
Buyers, their accountants and lenders test every adjustment during due diligence and only accept items backed by primary records. Having your evidence ready early protects your agreed valuation.
- full statutory accounts for three years, not filleted
- current management accounts
- a schedule of every adjustment, with invoices or other evidence
- payroll by role, with hours, pay rates and ages
- occupancy and registers by room and age
- local authority funding statements
- the fee list, with a history of increases
- lease and rent review terms
- the business rates bill and any reliefs
- related-party transactions
Organising these records before launching a sale helps you satisfy due diligence smoothly, as explained in our guides on what buyers look for in a nursery and how to sell a day nursery. Give your broker the full paper trail before marketing begins.
Common mistakes that reduce maintainable profit in negotiation
Most price reductions in negotiation happen when an owner puts forward adjustments that fall apart under scrutiny from the buyer’s accountants. Starting with a realistic, well-documented figure keeps you in control of the sale price.
Sellers often lose value by adding back recurring repairs or regular agency cover as one-offs, or by ignoring the market cost of the owner’s own work in the setting. Others rely on one exceptional year rather than a fair multi-year view, or ignore pay and statutory cost changes that took effect after the year end. Mixing EBITDA and EBIT when applying a multiple, or claiming adjustments with no paper trail of invoices and payroll records, also leads buyers to discount the figure.
What maintainable profit does not tell you
Maintainable profit is the starting point for valuing a nursery, not the final value itself. Once sustainable earnings are agreed, several other factors sit on top of that figure to set the sale price.
The day nursery valuation multiple, the property position, fixed assets, goodwill and deal terms all shape the final offer. You can read how each element works in our guides to the components of a nursery valuation, what affects a nursery’s asking price, factors affecting nursery business value and our full nursery valuation guide.
Next steps
A confidential review of your adjusted figures before going to market shows you how buyers and lenders will read your accounts. You can arrange a confidential nursery valuation with Abacus Day Nursery Sales to test your maintainable profit early. For owners who have time to improve their figures first, see our guide on how to increase your nursery’s value before selling.
Frequently asked questions
What does maintainable profit mean in a nursery valuation?
It is the yearly profit your nursery can be expected to keep making under a new owner. Personal, one-off and accounting items are removed and known cost changes are added in. Buyers apply their multiple to this figure, so it sets the starting point for the price.
Is maintainable profit the same as the net profit in my accounts?
Rarely. Your accounts show profit after your own pay choices, personal costs, interest, depreciation and any unusual items in that year. Maintainable profit adjusts for each of these, so it can end up higher or lower than the figure your accountant reports.
Is maintainable profit the same as EBITDA?
In most nursery sales it is expressed as adjusted EBITDA, which is EBITDA after normalising adjustments. Some valuers use EBIT instead. Either can work, but the multiple must be based on the same measure as the profit figure, otherwise the valuation will be wrong.
Which year’s figures will a buyer use?
Usually the latest full year of accounts, checked against current management accounts and the previous two or three years. Where profit has moved up and down, a weighted average that favours recent years is common. A single exceptional year is rarely accepted on its own.
Can I add back the salary I pay myself?
Only the part a new owner would not need to pay. If you work as the manager or count in ratios, a buyer will deduct the full market cost of replacing you, including employer National Insurance and pension. If you pay yourself little or nothing, maintainable profit usually falls.
Do funded hours affect maintainable profit?
Yes. Funding rates vary by age group and are set by each local authority, so a funded hour can earn more or less than a privately paid hour. Buyers look closely at your age and funding mix to judge whether current profit will hold.
Will a buyer adjust for wage increases after my year end?
Yes. Known changes that take effect after your accounts date, such as a National Living Wage rise, are usually built into maintainable profit because the new owner will pay them. Showing you have already priced them in makes your figure harder to challenge.
Why is a buyer’s figure often lower than my accountant’s?
Accounts are prepared for tax and compliance, not for a sale. A buyer adds costs you may not pay today, such as a manager’s market salary, market rent or lost business rates relief, and removes income that may not continue. Clear evidence for each item narrows the gap.
How can I improve maintainable profit before selling?
Start 12 to 24 months ahead. Keep personal costs out of the business, record genuine one-off costs with evidence, pay a market salary for the manager role, review fees, and track occupancy by room and age. Clean, consistent figures leave a buyer fewer adjustments to argue for.
Author – John P. Gaskell
John is a senior member of the Blacks Brokers team with extensive experience leading successful national sales operations. He plays a central role in developing the team’s approach to client service, drawing on a deep belief that positivity, care and drive are the defining qualities of any great salesperson. John delivers comprehensive training across the organisation that instils a client-first ethos at every level, ensuring consistency of service throughout every transaction. His focus is always on achieving the best possible outcome for each client the business serves.