There are
four ways to get top dollar for your business:
·
Determine
the business value now. Will the sale of your business help you
obtain financial security?
·
Choose
when to sell.
·
Take
action to increase the value of the business.
·
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.
To find
the value of your Business, refer to "Find Biz
Value".
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.
·
Increase the revenue by
adding children and/or increasing the revenue per child.
·
Reducing expenses.
o
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?
o
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.
