WHAT IS GOING ON?
We at Bailey Routzong have for 28 years provided the straight scoop regarding conditions in the early education marketplace. In fact we try diligently to report the typical positive news about our industry and its financial marketplace. However, since early in the year, the general financial markets have gone through some major volatility that is beyond the control of any of us. Just a short list…
• Extremely tight (and expensive!) labor markets shutting down many classrooms
• 40-year high rate of consumer inflation – average family cost nearing $600/month
• Our Federal Reserve forcing up interest rates substantially, increasing businesses’ cost
of capital to slow the economy
• Stock market slide into “bull market” territory
• Supply chain still backed up and worsening product shortages
• War involvement in eastern Europe posing national security uncertainty
• Majority of economists predicting a RECESSION within 12 months
WHAT DOES THIS MEAN TO SCHOOL BUSINESS OWNERS?
Of course, our specialty for 28 years has been representing family-owned early education school operators when they are preparing to exit their business and we must say, many operators have seen the warning signs and are now preparing to exit.
As we discuss with owners around the country and those who are already our clients, we tell it straight where we see the market making a significant move that will likely tell what the results will be from the business marketplace changes.
Unfortunately, we have to say that we see material changes in our industry marketplace that do not favor school operator-owners. Even though a significant turndown in our economy could loosen the labor market, increasing unemployment caused by a RECESSION would likely remove an operator’s need for additional staff.
At the same time, rising interest rates increase businesses’ cost of capital, which limits many businesses from expanding their operations and boosting their employee count. We’ve all been through these RECESSIONS…let’s simply hope that this one would not be as severe as the last RECESSION.