Gateway School Sales

1000 E. Beltline Road

Suite 204

Carrollton, TX 75006

Phone:  (972) 267-9003

Developing an Exit Plan

There are four ways to get top dollar for your business:

  1. Determine the business value now.
  2. Choose when to sell.
  3. Take action to increase the value of the business.
  4. Use the proper sales process to sell your business.

WHAT IS THE VALUE OF YOUR BUSINESS NOW?

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.

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 debt service
  2. A reasonable salary and benefits for the new owner
  3. An Internal Rate of Return 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.

 

 

CHOOSE WHEN TO SELL

Is the amount of money you will receive from a sale enough to accomplish personal, financial, and estate planning goals?

If not, for the next one to three years, do you have the drive to manage the day-to-day details of the business to increase its profits? Are you willing to continue with the intrinsic risks of business ownership that can reduce its value?

Do you believe that your Childcare Center will be worth more in two to three years then it is now?

 

WHAT ACTIONS WILL INCREASE THE VALUE OF A CHILDCARE CENTER

As you know, there are two basic ways to increase your center's profits.

  1. Increase the revenue by adding children and/or increasing the revenue per child.
  2. 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:

  1. It should be sold to an outsider – who normally have more cash and have the ability to pay more.
  2. Document the value drivers of the Center so that potential buyers know of its strengths and future opportunities.
  3. More than one potential buyer should provide an offer.

We have a 10 step process to market Childcare Centers and private schools for sale.

 

Call Gateway School Sales (972)267-9003 today