I have heard off-the-cuff opinions such as:
- Only when you get the highest Price.
- I will not sell unless I get all cash.
- Do not sell unless you know what you want to do next.
- Everything is for sale… for the right price.
- If it is a good business that makes money, then don’t sell.
The above answers just address the price and terms…but there is much more in a childcare business owner’s decision to sell.
What is the Opportunity Cost of Not Selling?
We exist in a world of limited resources such as time, energy, talented people, and capital. Consequently, the true cost of not selling a childcare center is the outcome one could have achieved from committing those same limited resources to a different course of action. Said in a different way, there is only so much time, energy, and capital available to a business owner at any particular point of time, and those resources invested in a childcare business are not available for him/her to use, enjoy, or invest in other ways.
The opportunity cost of being involved in your current childcare center business might include giving up:
- Another business venture or opportunity
- Time for rejuvenation and reflection
- Friends, family, and grandchildren
- Diversification of investments or reduced risk
- New challenges, intellectual stimulation, or education
- Health, travel, community involvement, spiritual service
- Or, any other opportunity that cannot be pursued because of the demands of your current childcare business.
The opportunity cost is relevant only in terms of the life goals of the business owner. When a business owner decides that the opportunity cost of owning his/her Company is greater than the overall value (not just money) received from owning the Company, it is time to seriously consider selling. Conversely, a business owner should not sell if he/she finds the business provides the most satisfying, enjoyable, and profitable way he/she can invest his/her time, energy, and capital at the moment.
Many childcare business owners have been involved in their companies for so many years that they have a difficult time envisioning what their life will be like after they sell. Once they sell they are free to discover other opportunities. Not having the freedom to discover alternatives is one of the opportunity costs of business ownership.
Following are three examples of what “Opportunity Cost” sounds like when spoken by a business owner who should consider selling:
- Burn Out – “My childcare business has been good to me. I am proud of it. I poured my life into it and for many years it was very fulfilling and financially rewarding. For a while though, I have not been having much fun and it has been boring. I know I could do more with the Company, and it has lots of potential. However, I just do not want to put any more energy into it. It is time to do something else with my life. I am not sure what that should be, but I am sure I can figure it out, once I am not preoccupied with this Company.”
- Another Business Opportunity – “My childcare business is going well and I could keep running it forever. But, it takes lots of attention and distracts me from a different business venture, with which I believe I can have even a greater success. It may seem foolish to sell a good business, but I need to let go of this one in order to take hold of the next one.”
- Owner Skills – “My childcare business has been successful, but based on my talents and experience; I have taken it as far as I can. The business is well positioned, but it needs a person in charge with different skills and ambitions. Both the Company and I would be better off if I sold it to a buyer that could take the Company to the next level. Then I could focus on what I do best, either working with the buyer, or moving on to a new opportunity.”
Opportunity costs can be applied by Buyers also. Business buyers acquire childcare businesses because the company presents a more attractive opportunity than the alternative uses of their resources.
How Much is Enough?
We live in the wealthiest country in all of history, but no matter how much you make, there is always someone with more. We see business owners who persist in owning their business just because they want more money. Meanwhile, 95% of the people make and have less money than they. We see their “nose-to-the-grindstone” in their particular Company because:
- They are in business
- They want more money
- A few years ago the Company was worth more
- The market may be better in a few years.
When a business owner is passionate about his/her childcare business, working for increased profits is an energizing goal. However, sometimes business owners lose the focus, intensity, and passion that they had when growing it. They then push ahead day after day just because they believe they should use the business to make money. They own great childcare center businesses, but as individuals they feel discouraged and trapped.
Important issues for childcare business owners to address:
- Why are we making money? And why in this business?
- Are we making money in a way that is (still) personally and professional rewarding?
- Is making money with this childcare Company the highest and best use of our resources and abilities?
Regardless of whether you decide to sell your childcare center(s) now, answering these questions is key to tactical and strategic planning, and developing an exit plan.
When is the Best Time to Sell?
The best time to sell your childcare center(s) is when you come to a decision that it is more compelling to invest your time and capital into something other than your current Company. To make that decision, understand that childcare businesses sell for more when the business is doing well, the economy is doing well, and financing is easy to obtain by buyers. As a business broker specializing with childcare centers, my role is not to convince business owners to sell their childcare center businesses. It is to ask owners the insight-producing questions, such as these, to help entrepreneurs clarify their thinking.
If the result of your reflections is a decision not to sell, you can focus on building your childcare business with renewed commitment. If you decide it is time to sell, my role as a childcare business broker/advisor is to help you through the process so that you can move on to the next phase of your life.
If you are interested in finding out more on Exit Planning, or discussing your business objectives in confidence, we welcome the chance to talk with you.