Are you currently the owner of a daycare center in the beginning stages of preparing your beloved daycare for sale? Here at NJ Broker Plus, we want to ensure your selling process is seamless and when you put up your daycare for sale, you receive the price you deserve. Every business is different, which makes no two buying and selling processes alike. So if you’re ready for some useful tips in selling your daycare center, keep reading!
Do Your Research!
After making the initial decision to put up your daycare for sale, your next step is to do your seller due diligence. This begins with research; if you’re reading this blog you must have already started! Doing a bit of market research is a great way to start understanding the industry in which you’re selling. Getting an idea of average sale prices and what buyers are looking for in the daycare business will help you evaluate your own current daycare center and target the right buyers for your business. Keep in mind the different types of buyers when selling. These buyers include those who self-pay and have cash available to spend, versus those who finance through a bank or require seller financing. You also want to perform a business valuation on your daycare to receive an accurate value for your business that can be used to create a fair asking price. You can always count on the experts at NJ Broker Plus to assist you in the valuation and researching process, to ensure you have all the resources you need for your sale.
Gather Your Most Important Documents
At this point, all of your important business documents should be gathered and organized for the beginning of your sale. Such as: copies of business tax returns, recent P&L statements and lease (if you’re renting space). Having those documents on hand is essential for any questions that may come about from potential buyers. At this time you should ensure that all of the correct licenses and permits for your daycare center are up to date and your finances are in order. This will help your transaction go smoothly. Once all of your documentation has been gathered and organized, you are one step closer to your sale.
Prepare Your Daycare Center
As a business owner, you understand how important it is to keep the operation of your daycare running efficiently. A successful transition of ownership relies greatly upon having accurate records and providing proof of sales and expenses during due diligence (post offer time period when buyer takes a deep dive in your financials to become comfortable with the business finances). You should make sure all financials are well documented in preparation for the sale of your daycare center. Not only do you want your daycare center to appeal to many buyer candidates, but you want to make sure your records will support buyer due diligence. Finding a financially qualified entrepreneur to purchase your business is often not as easy as it may sound. Before your sale, be mindful of your current profits and make sure you have documentation to support that profit during due diligence.
Last but not least, prepare your site and employees for the sale. Whether you want to inform them of your decisions or not, make sure your daycare center can run efficiently without you. Make sure your center is clean and in tip-top shape for potential buyers to view.
Let The Experts Help You Along The Way!
When you’re ready, hire our team of experts to confidentially market your daycare center business! Now that you have done your daycare selling research, you are ready to contact the experts at NJ Broker Plus to set up a no-obligation meeting.
Selling a Daycare FAQs
There are multiple factors that are considered to determine a value of a daycare center. As with most business valuations it is based on a multiple of cash flow or SDE (seller discretionary earnings). Ranging from 1x’s SDE to 4x’s.
These factors play a significant role:
- owner dependency– is it run absentee, semi-absentee or operated by owner? The less owner dependent, the higher the multiple.
- center size (licensed capacity)- larger centers usually sell for a higher multiple.
- location and facility layout is important. Room size dictates staff:child ratio efficiency.
- rent including CAM cost ideally would be less than 20% of sales.
- staff costs / payroll should be under 50%, preferably under 40%.
- Increasing revenues
There are several things you can do before selling to maximize the selling price of your daycare. First, be sure that you are in compliance with all regulations and standards. Additionally, having a highly trained staff and new programs in your daycare center can also increase your business’ value. An increase in enrollments will likely increase the price of your daycare. Lastly, capitalize on government program offers to child care centers.
- When is the best time of year to sell my daycare?
- Who can help me sell my daycare?
- Is it worth it to sell my daycare business?
- Who needs to be involved when selling my daycare business?
- How do I sell my daycare business?
Since consistent or revenue growth will play a role in the valuation of your business, you should remain focused on that. It’s likely in your best interest to hire a business broker. It is their job to help you find the best buyer that will offer the highest price. Make sure the business broker you select will market the sale of your business anonymously. Rumors that your business is for sale could adversely affect revenue.
Key documents when selling your daycare business will include: 3 recent years of P&L’s, tax returns, a nondisclosure agreement, a letter of intent, a purchase agreement, and closing documents. Typically the seller’s attorney will draft the purchase agreement and both buyer / seller attorney’s prepare closing documents.
In preparation for selling your daycare business it is important that you consult with a business broker that can assist you in the sales and marketing process and to obtain a business appraisal for the current value of your daycare. It is vital that you organize the right documentation and financial records, such as historical and YTD P&L’s and business tax returns.