Follow the Leaders

For any career business owner, that fateful moment will eventually come, when they look to the horizon and envision new endeavors for themselves. They look toward a future for which their life’s work has been placed, solemnly, in the hands of another; a future where they are free to pursue some better purpose, that next great thing, whatever that may be. And the owners of daycare school businesses are surely no exception.

However, such men and women as these look also to a period fraught with misgiving and angst, as they have many important decisions looming ahead. Between those initial ponderings and that very last handshake to seal the deal, there hangs those not-so-small matters, questions such as,

What is my daycare actually worth? How much should I be getting?
What can I do to add as much value as possible? Which efforts should I prioritize?

It is for this strain of inquiry that this article has been purposed. And while the scope of this matter greatly exceeds what can be covered here, we may still offer something valuable, by shedding light on the ideas of those most qualified, the leaders of our industry. And so, having taken a look at what they’ve said, we will highlight those ideas that we found the greatest consensus and confidence for.

For those of you still early to this process, the suggestions outlined here should help shape the right perspective and set you on a solid course as you close this illustrious chapter of your life. Let’s begin.

Give Buyers a Daycare That Runs Itself

You won’t find many buyers in the market for a “fixer-upper”, and those that are looking will be driven to find the lowest cost possible. These are not the people you want to be dealing with.

In an article by Bob House, General Manager of BizBuySell™, he articulates this idea nicely,

Prospective buyers don’t want to spend a lot of time worrying about day-to-day operations. They want a well-oiled machine. The more seamless your business runs, the more comfortable they will be with the purchase — and the more they may pay.Bob House for INC.COM

So in order to sell your business for what it’s really worth—certainly, to sell for more—it is essential that you convince your prospective buyers that they’ll be able to take the reigns and keep operations running smoothly. While this is far easier said than done, here are some suggestions to set you on the right path,

  • Develop—and document—foolproof processes and routines for ALL OPERATIONS. Enable them to essentially run themselves.
  • If necessary, retrain your staff to ensure they are up to date on all tasks and policies.
  • Maintain your school’s compliance with applicable government agencies. Keep clear and thorough records for the replacement owner.
  • Prepare all your documentation, including tax returns and employee files.

Offer Buyers a Staffing DREAM TEAM

Your employees represent an enormous portion of your daycare’s value. As we touched on in the previous point, while you may know how to drive your business effectively, that ability must be transferable. And such a thing is only possible if the quality of staff you currently have supporting you remains there for your predecessor.

Having a team of highly-trained professionals, backed by a solid foundation of long-term managers, will help build substantial value and appeal for your business. As for the aspect of training for school employees, it’s worth noting that, per Child Care Aware, it is recommended that all basic employees have CPR & Health and Safety training, along with 40 hours of initial training, and 24 hours of review training once per year. To advance your employees skill set, you may want to consider training them for a Child Development Associate Credential.

Lastly, you must also ensure that you foster an employee culture that keeps them loyal and enthusiastic about their roles with you. The last thing any new owner wants to see is high employee turnover. Regarding the ways to increase a business’ value before the sale, MassMutual Financial Group™ weighs in to say,

But building a strong and experienced management team is just the start. A buyer needs to know that the accumulated knowledge of its most important team members (itself a valuable commodity) won’t walk out the door after purchase. Many factors contribute to a company’s ability to retain key employees, among them culture, opportunity and compensation.MassMutual Financial Group
Having employees that are skilled and satisfied are instrumental for keeping any business stable. And so, to increase the worth of your childcare center or preschool, be sure you are cultivating a dream team workforce. Give them reasons to stay loyal, using long-term incentives such as equity ownership or bonuses to reward profits.

Showcase INDICATORS of Stability, Growth, & Prosperity

Leading up to the official listing of your business for sale—and in relatively close proximity to then—there are numerous methods you should consider for giving your facility an extra boost towards attracting buyers.

As a business owner, you naturally understand the function of your daycare as an investment. And the prospective buyers who come to evaluate you most certainly do as well. That being the case, there are several related factors that weigh on their minds most of all. These considerations include:

  • The stability of your revenue flow—can they depend on your current rate to continue while they get settled?
  • The profitability of your school right now—but also into the future

But, of course, making improvements for matters as terribly broad as profits and revenue is extremely tough. And you are likely already doing everything you can toward these goals. Nevertheless, there is value in fully realizing the priorities of your prospective buyers. Furthermore, there may be some ideas you haven’t considered, because they are only intended for those final months of your ownership.

So then, let’s take a look at what the authorities and leaders for schools and real estate have to suggest for changes leading up to a sale:

  • Explore new ways to cut costs and increase efficiencies.
  • Looking back at your business, consider which methods have consistently increased revenue, especially for recurring revenue.
  • Expand your school’s market and the programs it offers;
    along those same lines, look to increase enrollment and reach maximum capacity.

Phil Hagey of Viking Mergers & Acquisitions speaks directly to childcare owners, saying,

By increasing your enrollment size, you will also be increasing revenues and demonstrating cash flow stability. This demonstrates to buyers that your business is thriving, stable and is a safe and prosperous investment for them.Phil Hagey for Viking Mergers.com

Finishing Strong

For many, the journey of owning a business ends with just as much turmoil as it began. The sheer number of decisions to make and considerations to weigh are truly nothing short of overwhelming. But just like everything else in life, information and preparation are your strongest allies.

Stay diligent and continue your pursuit of sound advisement and knowledge. You are on the last leg of your journey; set your course for a strong finish!

The BRCA System is UNMATCHED for Helping School Owners Achieve Maximum Profit From Their Sale

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