We provide expert consulting services to help childcare center owner through the process of “Childcare Center For Sale By Owner” (FSBO). Topics:
- How much can you, as a childcare owner, save?
- Childcare Center For Sale By A Broker Local To You, With Consulting Services Provided By Childcare Brokers
- Childcare Center For Sale By the Franchisor, With Consulting Services Provided By Childcare Brokers
- What If The Buyer is Recommended By Your CPA?
- Selling To Your Childcare Center Director?
- Selling/Transferring Your Childcare Center To Your Family/Daughter/Son?
Do you want to save money on broker fees by selling your childcare center by yourself?
If so, we can help you save money because our fee can be a hourly consulting fee, instead of a typical business broker commission (usually 10% of the sales price).
Using a “Childcare Center For-Sale-by-Owner” (FSBO) approach, you can save plenty of money in business broker fees. Using this approach, you sell your own center, and use our professional assistance only when you want it.
How much can you, as a childcare owner, save?
- Typically, a business broker fee is 10% of the sales price.
- For a center that sells for $1 million, the broker fee could be $100,000. The seller will net $900,000 after broker fees.
- Our hourly consulting fee is $250.
- It is up to the client as to how much of the work to market her center the owner wants to do, and how much consulting work she wants Childcare Brokers to do. How much you will save is based on how much you use our professional assistance.
- Some center owners may only need our assistance to value their childcare center for a cost of $1,499. We will also prequalify the center for a loan. (The loan prequalification is free to seller because we are compensated by SBA lenders with a referral fee.)
- For clients who is wanting to do much of the work themselves, that client may only need 25 hours of consulting.
- For clients wanting a medium amount of consulting, that client may only need 50 to 60 hours of consulting.
- For clients wanting lots of help, the typical hours of consulting work is 120 to 150 hours.
- Therefore, our fees would be between $1,499 and $37,500 ($250 x 150 hours). In the example of a center selling for $1 million, the seller will save $98,501 to $62,500.
Selling a Childcare Center (as any business) can be a long and involved process. Selling your own childcare center is not for every center owner. We can provide expert consulting services to address all of your concerns about the following:
- Do you really know how childcare centers are valued? (i.e. Could you reject a great offer, or accept a poor offer?)
- Do you know if you really should not sell your center now? Before you sell, should you take steps that will either reduce taxes when you sell, or will increase the valuation?
- Difficulty in contacting potential buyers and maintaining confidentiality, and would you know if the buyer is financially qualified to buy your center?
- You may not know what the normal process is to sell a childcare center. If the process drags out, it increases the likelihood that a deal will not close.
- You may not know what information to provide to the buyers and when to provide it. If you provide too little information (or not the right information), it will increase the buyer’s perceived risks and reduce their offer price.
- Whatever price the buyer and seller agree to, has to be able to be financed by a lender. Not all lenders are equal, and some lenders will not finance an acquisition that other lenders will finance. You don’t want to be in position that after many months of work to sell your center that the buyer’s lender says that they can’t finance it (or can’t finance it at the agreed to price).
- Therefore, it is very important to get your childcare center pre-qualified for a loan before negotiations with a buyer start. Do you know which lenders have given many loans to childcare centers in the past few years, and therefore are more likely finance an acquisition by a buyer?
- You may not have the time to sell your childcare center in addition to successfully managing your business. If the business suffers, the price that buyers will offer will drop.
We can we provide consulting services to address all of these concerns! We have helped over 100 clients in the process of selling or buying childcare centers.
Most childcare center owners will do a “For Sale By Owner” when either 1) A buyer has directly approached the childcare center owner, about buying the center, 2) The Owner is thinking of selling her center, and she (or the center’s CPA) knows of one or several potential buyers, or 3) the center is a franchised childcare center, and the franchisor introduces a buyer to the owner.
We can help you using a “Childcare Center For-Sale-by-Owner” approach. Why do we help owners this way? Because we know that when the seller knows the buyer, it does not make sense for a seller to pay a broker a huge commission. We also know that childcare owners need expert advice and help to prevent them from making a mistake on, most likely, one of the largest financial transaction of their life.
Childcare Center For Sale By A Broker Local To You, With Consulting Services Provided By Childcare Brokers:
Most Childcare Center Buyers are Local. As such, a local broker is best to find local buyers.
Childcare center owners can use a broker local to the center to maintain confidentiality while finding local buyers, while also using Childcare Brokers to prepare the valuation, and you can receive our professional consulting assistance only when you and your local broker want it. For example, we could provide valuable consulting services as follows:
- Determine the Valuation. We can determine the valuation and recommend the initial asking price. A buyer’s offer will include the offering price and many deal terms. Those deal terms can affect the value of the offer to the seller. We can evaluate the offers. Our goal can be to prevent mistakes such as: Setting the asking price to low or high, rejecting a great offer, or accepting a poor offer.
- Should you really sell your center now? If before you sell, there are steps that you can take that will either reduce taxes when you sell, or will increase the valuation, we can recommend those steps. Our goal is to prevent the mistake of selling the center when instead 1) the value of the center should be increased first, or 2) the seller can take a step prior to the sale to reduce the taxes. We just recommend tax planning steps to reduce taxes, and do not implement those steps. If needed, we will discuss potential tax planning options with the seller’s CPA. The seller, and her CPA, can choose which tax planning options are best for the seller.
- Increase the valuation. You and the broker may not know what information to provide to the buyers, and when to provide it. If you provide too little information (or not the right information), it will increase the buyer’s perceived risks and reduce their offer price. Potential buyers need detailed information as to why the center is valued as such. We can prepare a detailed Advisory Valuation that provides the information on all the risk factors that determine the value.
- Maintain confidentiality. Sometimes real estate brokers don’t maintain confidentiality by putting in the marketing material identifying information, or putting the address into the Multiple Listing Service (MLS). We can review all marketing material so that no identifying information is released before a potential buyer both signs a non-disclosure agreement, and provides information that indicates that the buyer has the financial ability to buy the center.
- We can put the broker’s for-sale ad on the www.ChildcareBrokers.com website and provide all leads to the broker. This advertising will enhance the broker’s advertising efforts. We can provide recommendations to the broker as to how and where to advertise.
- The longer the process of selling drags out, the greater the likelihood that a deal will not close. Therefore, early in the selling process, we can conduct a “pre-due-diligence” process to identify issues that could come up in the buyers due diligence so that any issues discovered can be corrected early. Without a “pre-due-diligence” any issues that come up during the buyer’s due diligence may delay the deal from closing. We can also coordinate the due-diligence process to provide the information during the buyer’s due diligence process.
- Whatever the valuation, it has to be able to financed by a lender. We can get the childcare center pre-qualified for a loan. Buyers, in their initial review of the center should know that a lender has pre-qualified the center for a loan that will cover the asking price, and that the loan will also supply sufficient working capital to the buyer post-closing. Not having financing prequalified can delay the sale transaction from closing, because the buyer will need to take the time to find a lender who provides a loan at a low interest rate. If the buyer doesn’t have contacts with SBA lenders who like to lend to childcare centers, this process can drag out as the buyer contacts many lenders before finding a right one. (Depending on the buyer’s financial acumen & knowledge of SBA lenders, the buyer may never find a right one).
- Real estate brokers may be experts in the terms of the agreement when selling real estate, but, the broker may not know what are the normal and customary deal terms when selling a childcare center business. If the broker can’t tell the difference between a buyer friendly, seller friendly, or fair & neutral agreement, we can help review the Letter Of Intent (LOI) and Asset Purchase Agreement and make our recommendations. (We can also provide a well-tested sample non-binding LOI for the parties to use.)
- During the middle of the negotiations you and your broker may want advice on if you should accept an offer, or what you should counter-offer with.
- During the sometimes long process of selling your childcare center, you, as the owner, will have to successfully managing your business. Since we have worked with over 100 childcare center owners and seen what other childcare center owners do right, and wrong, we can make recommendations to improve profits (and value) of your center.
We can help you using a “Childcare Center For Sale By A Local Broker, With Consulting Services Provided By Childcare Brokers” approach. Why do we help owners this way? Because we know that in every state of the country there are business brokers and real estate brokers who know very little about the business aspects of childcare centers, yet will still “list” childcare center businesses for sale. These brokers may be very good at selling businesses in general, or in selling commercial real estate, but, they know little about the key parts of selling a childcare center (valuation, exactly what factors increase/decrease value (what information should be provided to the buyers), and which lenders have given many loans to childcare centers in the past few years).
Franchised Centers: Childcare Center For Sale By the Franchisor, With Consulting Services Provided By Childcare Brokers
When a franchisor knows that a franchised center owner is interested in selling, franchisors can refer potential buyers to the franchisee owner. Other franchisees may also hear that a particular franchisee owner wants to sell.
Because franchise disclosure laws prohibit the franchisor from making earnings claims to new franchisees, it is unlikely that the franchisors will likely provide much help throughout the sale process in any area that could get the franchisor in trouble. We can help the childcare center franchisee owner using a “Childcare Center For-Sale-by-Owner” approach to provide impartial advice and consulting.
Why do we help owners this way? Because we know that when a franchisor is going to be receiving franchise royalty fees from new buyer for many years, the franchisor may be on the buyer’s side instead of the seller’s side. When the franchisor provides the buyer, it does not make sense for a seller to pay a broker a big commission. We also know that franchised childcare owners need expert advice to help to prevent them from making a mistake on, most likely, one of the largest financial transaction of their life.
Buyer is Recommended By Your CPA?
If a buyer is recommended by the seller’s CPA, the CPA will likely be receiving, from the buyer, many years of fees for monthly accounting and year-end tax preparation. If the CPA will be collecting fee revenue for many years from the buyer, will the CPA be on the buyer’s side, or the seller’s side?
We can provide the impartial consulting advice that you will need is this situation. … So you make the right decisions throughout the process.
(Note: If you, as a childcare center owner, are considering selling and your CPA is not likely to get the buyer as a client, then you need to ask yourself if your CPA will be providing impartial advice because your CPA will be losing your center as a long-term client.)
By using a “Childcare Center For-Sale-by-Owner” (FSBO) approach, you can save plenty of money in business broker fees, you get to use our professional assistance to make sure your center is sold for a fair price and if it is in your best interest to sell your center than the transaction actually closes.
Selling To Your Childcare Center Director?
Many childcare center owners keep their profit data confidential and don’t let their director to know how much money the owner is making from the center. However, if the director is going to buy the center, sooner-or-later during the acquisition process, the director will have access to ALL financial information on the center. Therefore, sellers don’t want to release all their confidential information to the director unless the seller is fairly confident that a deal will happen. If a deal doesn’t happen after the release of all the financial records to the director, the working relationship between the owner and director will forever be changed.
If you are considering selling to your director, we can help you using the “Childcare Center For-Sale-by-Owner” process to increase your confidence level that an acquisition will happen. Your director will not want to overpay for your center, so we can provide a third party valuation to address her concerns. We can get your center director prequalified for a loan to buy your school if the director has at least 5% of the total acquisition cost as an equity down payment.
Only after we have prequalified your director with a loan, should detailed financial records on your center be released. Why do we help owners this way? Because we know that when the seller is selling to the director, the acquisition process can be fairly fast because the director already knows just about everything about the business (except financial information), so it does not make sense for a seller to pay a broker a big commission. We also know that childcare owners need expert advice to help to prevent them from making a mistake like releasing income tax returns and detailed profit reports to the director, if it is not likely that the director is going to buy the center.
Selling/Transferring Your Childcare Center To Your Family/Daughter/Son?
If you are thinking of selling/transferring your childcare center to a family member, there are many issues involved, such as:
- Is the the family member going to pay for the center? If so, how much, and over what time period will the payment(s) be made?
- Is the family member able to get a loan?
- If payments are being made over time, and the center’s business suffers and is not able to pay you, how will that affect your retirement years? If for example, you have two children, and one child buys the center, and later on the business suffers, how will that affect the other child and any inheritance.
If you are considering selling your school to a family member, we can help you using the “Childcare Center For-Sale-by-Owner” process to make the sale/transfer fair to you and all of your family. If financing is required, but the family member buying the school does not have much money for a down payment, we can help structure the transaction to minimize down payment requirements. We know that childcare owners need expert advice to help to prevent them from making a mistake when selling/transferring their centers to family members.
Our consulting service fee can pay for itself! For example, if in preparing the detailed Advisory Valuation, we identify profit improvements of $30,000 per year. If the sale of your center takes six months, in those six months, you could save $15,000. At the time of the business sale, those $30k of profit improvements could increase the value of your childcare center by $75k to $90k.
Even if we don’t find any potential profit improvements, by preparing a valuation that shows the details of why the valuation is a reasonable price based on all the center’s value drivers, and providing a loan pre-qualification, we will reduce the likelihood that the buyer will provide a low offer.
- If you considering selling your childcare center, are you ready to get started with using our consulting expertise? Click the “Add to Cart” button and then go to the Checkout at the bottom of this page to enter the number of hours before submitting your payment. Before submitting your payment, you can also go to the Request a Childcare Valuation page to select the type of valuation you would like.
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Contact us if you have any questions on selling your center or getting started with using our consulting services to help you.