Before you buy a nursery, test the business you will actually inherit.

Updated: 12 August 2026

Buying a nursery is not simply a question of checking turnover, profit and the Ofsted history. Those points matter, but the operating detail determines whether the earnings are repeatable and how much work or cash the business may need after completion.

Operational due diligence should sit alongside legal, tax, accounting, property and regulatory advice. It does not replace any of them. Its job is to test how the nursery really works and where the buyer may be relying on assumptions that have not yet been proved.

1. Start with the transaction and registration position

Establish exactly what is being bought: shares in the existing company, the assets and trade of the nursery, or another structure. This affects contracts, liabilities, employees, premises and the Ofsted position, so your solicitor and accountant need to advise on the transaction.

The registered legal entity also matters. Ofsted says that where an organisation changes in a way that creates a new legal entity, including a new company or charity registration number, a new registration is required. Do not assume that the nursery can continue operating under the seller’s registration. Confirm the position with Ofsted early and build any registration timetable into the deal plan.

Read Ofsted’s guidance on legal entities and registration ↗︎

2. Rebuild occupancy, room by room

A single occupancy percentage can hide more than it explains. Ask how the figure has been calculated and rebuild it by room, age group, day and session. Registered capacity, staffed capacity and the places the nursery can actually sell are not always the same.

Look at at least the recent monthly pattern, not one busy week. Test:

• Children on roll against actual attendance.
• Occupancy by room, day and session.
• New enquiries, visits, offers, starts and lost enquiries.
• Known leavers and the forward-booked position.
• Waiting lists, including whether families are still active.
• Discounts, free sessions or unusual attendance arrangements supporting the headline number.

The question is not only whether the nursery is busy. It is whether demand is dependable, correctly priced and matched to the space and staffing model.

3. Test the quality of income

Reconcile the management information to invoices, funded entitlement payments and cash received. Separate private fees, government-funded income and additional charges so you can see what each room and attendance pattern contributes.

Check fee rates, funding rates, discounts, bad debt, arrears and the timing of receipts. A profitable-looking nursery can still need working capital if payroll leaves the bank before funding or parent payments arrive.

Ask what changes after completion. Will the seller’s personal relationships, concessions or pricing decisions continue? Are planned fee increases included in the forecast but not yet communicated or tested?

4. Understand the real staffing model

Do not review payroll as one annual percentage and stop there. Compare the roster, qualifications and paid hours with actual attendance by room and session. Include management time, holidays, sickness, training, pension, employer costs, overtime and agency use.

Look for repeated pressure at opening, closing, lunch cover and quieter days. Check staff turnover, vacancies and the recruitment pipeline. A nursery may meet the immediate staffing requirement but still depend on goodwill, unpaid management time or one person who cannot easily be replaced.

Use the current early years qualification requirements and the applicable EYFS framework. Requirements change, so verify the version in force when you complete the review.

5. Find the owner dependency

Write down everything the current owner still does. That may include managing the nursery manager, handling difficult parent conversations, approving rotas, chasing fees, dealing with the local authority, overseeing safeguarding or making every spending decision.

Then ask who does each task after completion, whether they have the authority and capability to do it, and what it will cost. An owner’s unpaid time can disappear from the accounts while remaining essential to the business.

6. Review quality, safeguarding and compliance as operating risks

Read the full Ofsted history, not only the current outcome. Review actions, complaints, notifications, safeguarding records, safer recruitment files, training, supervision and how leaders monitor practice. Policies are evidence of paperwork, not proof that the system works in the room.

Check whether issues repeat, whether actions were properly closed and whether the management team can explain what it knows. The EYFS is mandatory for registered early years providers in England, and the buyer needs to understand any gap between written procedure and daily practice.

This part of the review may expose safeguarding or regulatory concerns that require specialist advice or immediate action. It should never be reduced to a financial adjustment in the purchase price.

7. Walk the premises with the operating model in mind

Your solicitor and surveyor should deal with title, lease, planning, building condition and other specialist property work. The operational review asks a different question: can the premises support the way the financial model says the nursery will run?

Check usable room capacity, sleep arrangements, toilets and changing, kitchen and food provision, storage, outdoor access, staff space, security, maintenance and any planned changes. Identify equipment or repairs that may need cash soon after completion.

8. Decide what must happen on day one

A useful due diligence review should end with a practical ownership plan, not a longer list of documents. Separate:

• Deal-breaking issues requiring specialist advice or resolution before exchange.
• Assumptions that still need evidence.
• Costs and working capital that should be included in the purchase plan.
• Actions required before or immediately after completion.
• Changes that can wait until the new owner understands the team and families.

Be wary of a plan that relies on an immediate fee rise, rapid staff cuts or instant occupancy growth to make the numbers work. Each of those may be possible, but none should be treated as guaranteed.

Documents worth requesting

• Monthly management accounts and occupancy reports.
• Room-level attendance, future bookings and known leavers.
• Current fee schedules, funding information, debtors and aged debt.
• Payroll reports, rotas, qualifications, vacancies, turnover and agency use.
• Ofsted reports, actions, notifications and relevant compliance records.
• Organisation chart, job descriptions and management responsibilities.
• Maintenance plans, equipment needs and known premises issues.
• Budgets, forecasts and the assumptions behind them.

The exact request should be agreed with your professional advisers and adjusted to the transaction. Data protection, confidentiality and safeguarding must be handled properly throughout the process.

Explore commercial and operational support when buying a nursery ↗︎