Before bringing your most valuable asset, your childcare center, to market, you should be aware of know how to maximize your business’ value. Childcare Brokers can work with childcare center owners to make your center more valuable and better positioned to sell. You can start turning your childcare center into the ideal business to sell by considering some advice from Jay Whitney of Childcare Brokers. Just click on the below videos to watch a 1-2 minute video clip on each of these topics:
WHAT ACTIONS WILL INCREASE THE VALUE OF A CHILDCARE CENTER
As you know, there are two basic ways to increase your center’s profits.
- Increase the revenue by adding children and/or increasing the revenue per child.
- Reducing expenses.
- Labor: Is there proper management to send employees home as soon as the children leaving at the end of the day reduce the child/staff ratio below the licensing requirements? Are specific employees getting too much for their job?
- Overhead expenses: Many Centers have high overhead expenses because the Owner did not take the time to purchase correctly or delegated key purchase decisions to employees. Properly managing expenses like credit card fees, food, insurance, toys, and other overhead expenses can, in total, produce a significant increase in profits.
It will take drive and time to do what may be needed to be done.
The longer that increased profits show on the financial statements and tax returns, the higher the business value will increase to potential buyers, and the larger the amount of loan available from lenders to finance the acquisition… i.e. the more dollars for you.
If you choose to take action to increase the value of your childcare center and sell later, we can provide an annual evaluation of your business’ market value.
WHAT IS THE PROPER SALES PROCESS TO SELL THE BUSINESS?
To get top dollar for a business:
- It should be sold to an outsider – who normally have more cash and have the ability to pay more.
- Document the value drivers of the Center so that potential buyers know of its strengths and future opportunities.
- More than one potential buyer should provide an offer.
We have a 14 step process to market Childcare Centers and private schools for sale.
- Ideal childcare center to sell
- Adjusting the Net Profits to Seller’s Discretionary Cash Flow (SDCF)
- Adjusting Net Profits Multiples
- Obtaining the highest price
- Managing a childcare center while selling it
- Eliminating deal killers
- Confidentiality and not telling employees
- Process and timing to sell a childcare center
- The outlook for childcare center business sales
- Ideal time to sell your childcare center
Value of potential synergy with specific buyers
Strategic value to specific buyers
Prospect of creating a competitive bidding
How well documented is historic performance
What is the level of “Curb appeal”
How much room for improvement and what is the additional
Investment that is needed?
What is expected growth rate driven by external factors?
Be prepared to answer critical questions both verbally and in writing. A Confidential Business Review should answer many questions such as: Are the add-backs justified? Is the business dependent on the owner? Are the majority of the sales with just a few customers? What are the business’s competitive advantages and disadvantages? Why is the seller selling the business?