I have been selling child care businesses since 1995 and speak with hundreds of child care owners and potential buyers each year. In my discussions with child care owners, I often find that they have been planning for years to sell their child care business to a buyer or “type of buyer” that will most likely have little to no interest in their child care business.
Owners of small and medium-sized child care businesses may be pinning their hopes on selling to a large regional or national child care chain for an anticipated equally large price. Unfortunately, things rarely work out that way. Large regional and national child care chains are only interested in buying large child care centers. Many of these buyers note a minimum licensure of 125 or even higher as their target acquisition. Moreover, in states with increased licensing regulations like North Carolina, some chain buyers will only consider very large child care businesses. They just cannot make the financial numbers work in small or even medium-sized centers.
Small and medium-sized child care businesses are most often purchased by someone already working in child care or early education – maybe as a teacher, director, assistant director, or an elementary school teacher. Alternatively, the owner of another child care business either within the market area or a distance that does not require too long of a commute. Moreover, the ability for us to confidentiality market child care businesses on the internet sometimes allows for the sale of the child care business to someone living hours away or in another state but willing to move for the right opportunity.
Unlike the large regional and national child care chains, these individual buyers often have limited financial resources to purchase a child care business. Ninety-plus percent will need to obtain either a substantial amount of seller financing or a bank loan or both to buy a child care business. Therefore, the child care business must have good financial records showing enough profitability or the buyer will have difficulty convincing a bank to lend the funds for the purchase.
Owners of small and medium-sized child care businesses must:
- operate the business with high enrollments,
- charge market rates,
- keep very tight controls on labor costs,
- eliminate all unnecessary expenses,
- keep accurate; supportable financial records, and
- create enough profit to allow the buyer to obtain financing
In summary, the buyers of small to medium-sized child care businesses are individual buyers not regional or national child care chains. Individual buyers have limited funds and can only obtain a loan to purchase a child care business that is profitable. As the owner of a small to medium-sized child care business, you must understand the most likely buyer or “buyer type” for your child care business and operate your business in a manner that will provide the profitability for a buyer to purchase your business someday.
If you are planning to sell your child care business soon or in the next couple of years, give us a call. We will be happy to analyze your child care business and provide you with a free estimated price range for your business. Moreover, share suggestions for increasing operating profits to assist in planning for the future, successful sale of your child care business. All conversations are completely confidential.
Solutions 4 Child Care helps people start, grow, buy, and sell child care businesses. Always happy to speak with child care owners, if I can help give me a call.