You can do many projects yourself with motivation, hard work, and some instructions. However, selling your childcare business is not one of them. Every month, I receive calls and emails from childcare business owners who either sold their childcare business on their own or are in the middle of trying to sell their childcare business themselves. Unfortunately, they are not contacting me to tell me how well things are going but to seek my assistance with their situation, which is not going as they thought it would.
Many who sold their childcare business by working directly with the buyer are unhappy with how things turned out. They may be having problems with the buyer continuing to need their assistance months after closing. Or the buyer is not making the payment on the owner financing they provided. They and the buyer have a different interpretation of what was agreed upon – and the agreements are unclear. The business is not performing as well as it did under their ownership, and they will not receive the earnout payment that was part of the deal. The list of potential problems – even after the owner has sold their childcare business– can be endless.
Other childcare business owners are trying to sell their businesses, and things are not going well. They are encountering problems with breaches in confidentiality; the buyer cannot obtain financing, things have been dragging on for many months, problems with getting through due diligence, and many other issues they have no idea how to handle.
There are many reasons why trying to sell your childcare business yourself is not a good idea. Let’s cover a few significant ones.
You Don’t Know What You Don’t Know
We have all heard the saying, “You Don’t Know What You Don’t Know.” This saying is so true when it comes to selling your childcare business. Most people will only sell one business in their lifetime. How can you know ahead of time how to do something you have never done before? I think most childcare owners know that they do not have the knowledge and ability to sell their childcare business themselves.
So, why would they try to sell their childcare business themselves? Well, it most often happens because they have been approached directly by an individual buyer or someone who makes acquisitions for a regional or national childcare chain or private equity group. The buyer has told them how interested they are in purchasing their business; they will provide them with a free business valuation, pay more than other buyers, and offer a quick closing. So, the childcare owner thinks I have the buyer; the buyer wants my childcare business; the buyer has done this many times before – I don’t need to hire a childcare business broker; I can do this myself and save money by not paying a commission.
It is often not until they are far along in the process that they realize their limited knowledge of selling a business has resulted in their getting less for their business and real estate than it is worth; they agreed to things that are not in their best interest; things are not going well, and they do not know how to fix things or get themselves out of the deal. Unfortunately, many do not realize all the mistakes they made until after signing the agreements; the sale is complete – and it is too late.
Cannot Protect Your Confidentiality
It is impossible to protect your confidentiality when selling your childcare business yourself. You cannot thoroughly qualify buyers before they learn who you are and, of course, what childcare business you are selling. Making sure no one finds out your childcare business is for sale is very important. Even very small breaches in confidentiality can result in the loss of teachers, staff, and enrollment.
Working with a childcare business broker helps protect your confidentiality and ensures buyers are qualified before they learn what childcare business is for sale. An experienced childcare business broker will know hundreds of small and big things to do and not do to keep the sale of your childcare business confidential.
No Match for the Professional Child Care Buyers
Progressive Insurance has some of the best commercials. Below is one of my favorites from several years ago.
Yes, the man thought that the “Name Your Price Tool” gave him the power to name the price he wanted to pay for insurance, and it also gave him superpowers that would allow him to do anything. I am reminded of this commercial when I hear stories of childcare owners who sold or are trying to sell the business themselves. The man in the commercial cannot juggle the chainsaws like the professional chainsaw juggler.
A childcare owner will also not have the same knowledge and skills as professional childcare buyers. Buyers (frequently called Director of Business Development or Director of Acquisitions) employed by the regional and national childcare chains and private equity groups often have advanced degrees and training in finance, business analysis, business valuation, negotiating, deal structuring, and other merger and acquisition-specific knowledge and experience.
Working with a business broker specializing in analyzing, valuing, and selling childcare businesses is the only way to ensure someone just as knowledgeable and skilled in mergers and acquisitions as the buyer is representing you.
Preparing, Positioning, and Marketing Your Child Care Business
Offering your childcare business for sale before the business has been prepared for a sale can be a big mistake. Depending on the condition and financial performance of the business, it can take weeks, months, or sometimes years to prepare a childcare business to be taken to market. In addition to preparing a childcare business, positioning and marketing can mean the difference between successfully selling or the business being on the market for an extended period.
Successfully Completing Due Diligence
Making it through due diligence requires the childcare business and owner to be adequately prepared to complete the process. Surprises can be fun – but no one likes surprises during due diligence. Many things that can pop up during the due diligence process should have been identified and addressed before taking the childcare business to market. When selling a childcare business, due diligence will include many things in various areas – legal, corporate structure, human resources, operations, program standards, licensing, insurance, technology, etc. Not being prepared for due diligence can result in many long hours (often after the center closes at night and on the weekend) and high-stress levels.
Working with an experienced business broker specializing in childcare will be very familiar with what is included in due diligence: things that are most important to specific buyers, which buyers have a reasonable due diligence—list, and those that have an arduous, unreasonable due diligence process and extensive data requirements. A childcare business broker can help determine what needs to be done before taking the business to market and facilitating the smooth and successful completion of due diligence.
As I often say, “You only get one chance to do it right when selling a childcare business.” Selling a childcare business is a very complex project, not a Do-It-Yourself project. Instead of trying to do it yourself, work with a knowledgeable, experienced broker specializing in selling childcare businesses full-time. I promise you will be glad this is one “Do It Yourself” project you did not attempt alone but completed with the assistance of a professional.