How To Sell A Daycare Business For A High Price
It may be difficult to conceive about selling the childcare center you have worked so hard to establish, but if you are reading this, chances are you have considered the idea.
You may be asking how to successfully sell a daycare. Perhaps you’ve asked yourself, “How do I prepare my company for sale?” How can I determine the value of my daycare facility? How can I maximize the profitability of my daycare center by maximizing its value?
Depending on a variety of factors, the size of a daycare facility can range from small to medium to huge. Fees, government support, and expenses all impact the revenue of your center. Following the impact of COVID-19, it is difficult to estimate the average revenue of a daycare center. However, the daycare industry is expected to return to high demand by 2025, as the number of children aged nine and younger is expected to increase at an accelerated rate and unemployment is expected to recover substantially.
Each year, dozens of daycare centers are sold in the United States. Reviewing the multiples below can give you a clearer picture of where you stand, as business experts utilize several formulae to establish the appropriate price for daycare centers. (These figures are provided as a guide. After evaluating your company’s financials, only a specialist can determine your company’s enterprise value.
Prices range between 1.5 and 4 times EBITDA.
For larger facilities (licensed for 100 children or more), multiply the cash flow by four.
For smaller facilities, multiply the cash flow by two.
4-7x SDC (Seller’s Discretionary Cash Flow), real estate included.
You can optimize the worth of your daycare center in a number of ways, using the knowledge you’ve gained about estimating the sales price. Whether you plan to sell a childcare business this year or in five years, you should begin taking these actions now to raise the center’s worth and guarantee you receive the income you deserve when the time comes.
You hold a license from the state that qualifies you to operate your business as an owner. This license is non-transferable; therefore, the new owner must apply for the same license in their name prior to the closing date. Working with a professional to navigate and assist the new owner in obtaining this license, or to locate a buyer who already possesses this license, can be extremely advantageous.
Before advertising your center, ensure that you are in compliance with local building, fire, sanitation, and zoning regulations; and if repairs are required by these agencies, keep documents. By demonstrating compliance with these requirements, your business becomes instantly more appealing to potential buyers due to a reduction in up-front expenditures and an increase in the simplicity of acquiring the required license.
Having a team of highly qualified professionals in your organization helps boost the value and overall appeal of your property. State-specific criteria for employees differ, but it never hurts to exceed them for a variety of reasons.
First, the highly trained personnel will attract more parents to your center, which will enhance revenue. When it comes time to sell, a skilled workforce will be considered as an asset by prospective purchasers, thereby increasing your sales price.
Child Care Aware recommends that all basic employees receive CPR and Health and Safety training, as well as 40 hours of initial training and 24 hours of annual review training. Consider educating your personnel for the Child Development Associate Credential in order to enhance their skill set.
A CDA candidate must:
Must be at least 18 years old.
Obtain a high school certificate or General Equivalency Diploma
Have 480 hours of child care experience during the preceding five years.
Have completed 120 clock hours of official daycare training within the previous five years. The 120 clock hours must include a minimum of 10 hours in each of the eight content categories listed below:
Planning a safe and healthy learning environment to promote the physical and mental development of children
Positive approaches to promote the social and emotional development of children
Strategies for establishing productive family connections
Management techniques for an efficient program execution.
Maintaining a professional commitment
Observing and documenting children’s behavior Child development principles
By employing people with CDA credentials, your company’s reputation and capacity will rise, demonstrating stability and profitability.
In order to optimize the value of your daycare business, you can also begin raising enrollment a few months before listing. Depending on the maximum number of children permitted by your center’s license, start expanding your enrollment and get as close to capacity as possible.
If you have not previously done so, it may be prudent to develop a marketing plan to help bring in new clients and enhance your reputation. By increasing the number of students enrolled, you will raise revenues and demonstrate financial stability. This demonstrates to potential investors that your company is prospering, steady, and a safe and lucrative investment.
If you are not currently taking advantage of the federal programs available to daycare centers, you should investigate this immediately. State and federal governments provide a variety of daycare assistance programs that might help you generate additional revenue and improve your bottom line. The websites listed below contain information on how to apply and qualifying conditions.
USDA Child and Adult Care Food Program
USDA Child and Adult Care Food Program
By utilizing government programs, you may increase your profits by thousands of dollars. Food programs such as the USDA Child & Adult Care Program reimburse centers for food costs, so assisting with the cost of food. State and federal human services departments assist low-income families with the expense of daycare, thereby increasing your enrollment and revenue.
In the same boat as compliance licenses, government perks cannot be transferred. Once the buyer takes over, they will need to apply for these perks, but you have paved the road for them. You’ve already completed the necessary steps to qualify for these perks; the new buyer will only need to apply. The years in which your center accrued these perks will also reflect favorably on your center’s finances in the eyes of potential buyers.
Even if you are not yet ready to sell, it is crucial to understand how your daycare center compares up against competition. By analyzing the value and financial breakdown of your firm, you can determine where you are succeeding and where you could do better.
This knowledge will ultimately make it easier to operate your business, position you for growth and success, and enable you to sell your daycare business for top price.
Sunbelt Business Brokers of South Florida will assist you if you do not know the value of your daycare establishment and want to begin planning for your future. Even if you decide to sell in a few years, valuations can be useful in a variety of financial situations, including determining your net worth and estate planning. Give yourself an advantage: increase the value of your business and safeguard your future by following these measures. We are here to aid you. Contact us immediately.