You Can’t Plan Appropriately If You Don’t Know What Your Business Is Worth!
Are you thinking of selling your Childcare Center now? Are you planning your retirement? Do you want to know what your center would likely sell for so that you have a better idea what you will be able to retire on if you sell now? Or, if you are planning to sell in several years; do you want to know how much you will have to increase the value of your center to retire in the style you want?
Request a market value assessment of your childcare center
We will give you an idea of what your business is worth.
Are you thinking of selling your Childcare Center? We provide Calculation of Value Estimates of Childcare Center Businesses for Childcare Centers located in Georgia for free; and for childcare centers elsewhere in the USA, we only charge $499. This Calculation of Value is based on the information you provide to us on the “Confidential Business Value Form” and a scheduled telephone discussion between you (the Owner) and us. Download the form and answer as many questions you can to help us provide you this simple estimation of Market Price and Terms. Determining the value of a Center is not an exact science. The more information we have on your center, the better we are able to provide the market value of your Business. After filling in the form, please e-mail this document to us at Value@ChildCareBrokers.com or fax it to 770-410-9982.
The above Calculation of Value is only to be considered a “value range” and not an exact value. This “ball park” value of your Childcare Center business is far short of the Professional Calculation of Valuation which we prepare for all Childcare Centers which we are Selling. But, it could be a first step in understanding the value of your center.
If your center is located outside of the State of Georgia and if you are going to negotiate with potential buyer(s) about the price or start marketing your center for sale, we recommend the Professional Estimate of the Market Price and Terms because it will give you the confidence that your asking price is a realistic price and you get recommendations to maximize the value of your business. This is a more precise estimate of the market price and terms of your Childcare Center, so that so that you can market your center with confidence that you have not over-priced or under-priced your business. (Please refer to “Childcare Center for Sale by Owner”)
All Information provided by you on your Child Care Center shall be held in strict confidence by us. All financial information and related information shall be used for the sole purpose of valuing your business. If you give us an assignment to sell your business, it will be used in the confidential marketing of your center.
Click to download the Confidential Business Value Form: ChildCareBrokers Business Value Form
Please contact Jay Whitney to set up an appointment to discuss your childcare center’s value.
If you are in Georgia, we want to be your advisor whether you want to sell immediately after our free evaluation or wait several years. We will be prepared to sell your center when you are ready to sell it. If your center is located anywhere else in the USA, we can refer you to a business broker who has a specialty in childcare centers.
How are Childcare Center BusinessesValued? – Rules of Thumb
There are many rules-of-thumb ways to value a childcare center business. But, if your Business is sold at a value estimated by a rule-of-thumb that is too low, you will give up money. If your Business is marketed at a rule-of-thumb that is too high, your Business will NOT sell … unless it sells for just the value of the fixed assets. Childcare centers in financial trouble often sell for just the value of the fixed assets … with no goodwill.
Here are some “Rules of Thumb” valuations we are aware of. Depending on how good or bad the “rule” is, approximately 50% of childcare centers would sell for more than these “rules of thumb” and 50% would sell for below. This is why we do not use them to calculate valuations. We show them below so you can see the variations in them.
- Percentage of Annual Revenue – 30% to 45% of annual revenue for the business value only
- Percentage of Annual Revenue – 140% to 300% of annual revenue for the value of the real estate and business together
- Multiple of Sellers Discretionary Cash Flow (SDCF) for the business value only – For centers licensed for under 100 children: 1 to 2 times annual SDCF; for centers licensed for 100 to 250 children: 2 to 3.5 times annual SDCF; for very profitable centers licensed over 200 children: 3.0 to 4.0 times annual SDCF. SDCF is also referred to as Adjusted Profits. It is calculated as: EBITDA + the Owner’s Compensation.
- Multiple of Earnings before Interest, Taxes, Depreciation, & Amortization (EBITDA) for the business value only – 3 to 4 times annual EBITDA
- Based on licensed capacity – $1,000 to $2,500 per child for the business value only
- Based on licensed capacity – $6,000 to $14,000 per child for the real estate and business together
For a Potential Buyer to buy your Business (as long as it is not in financial trouble), the Adjusted Profits* of your business MUST be high enough to support three things:
1. The annual debt service payment
2. A reasonable salary and benefits for the new owner (For her/his time to replace the previous owner.)
3. An Internal Rate of Return (IRR) on the Equity invested by the Buyer to buy your Business.
If Adjusted Profits of your Business are not high enough to support these three things for the price you want, Buyers are not going to buy your business. Conversely, if the Adjusted Profits of your Business cover all of these three things with additional profits left over, the price can be increased.
* Adjusted Yearly Profits is: Income before taxes + owner’s salary and benefits + interest expense + depreciation – average yearly capital expense required.
Business only vs. including the business & real estate
Acquisitions Must be Bankable
Why Know its Value?(Even if you do not want to sell now)
If the unexpected happens.
Without planning, there is harm if the business owner:
- Accepts an unexpected low-ball offer because he/she did not know the value of the business.
- Doesn’t accept an unexpected lucrative offer because he/she did not know the value of the business.
- Doesn’t increase the value of his/her business before a sale because he/she did not know how buyers value a business.
- Doesn’t know the financial effects of selling/transferring to family vs. selling to outsider buyers.
- Doesn’t have insurance to protect the company’s value against the unexpected, there is harm if the unexpected occurs.
- Doesn’t implement a wealth preservation plan prior to a business sale or the owner’s death or disability, there can be harm.