Having worked as a child care business mergers and acquisitions advisor since 1995, I know that when a child care owner contacts me, they are often interested in selling their child care business. One of the primary things they would like to know is its value. Knowing the value is key when considering the sale of one’s childcare 
business. However, there are other reasons why it is essential for a childcare business owner always to understand the value of their childcare business.
Let’s look at five key reasons.
Benchmarking and Performance Measurement
Valuing your business provides a benchmark against which you can measure its performance over time. It helps identify areas that need improvement and track progress towards achieving your business goals. Regular valuations enable you to gauge whether your strategies are effective and whether you are on the right growth path.
Child care owners often do not understand what factors increase and decrease business value. The common effort is to increase gross revenues. Unfortunately, increasing business value typically requires more than just increasing gross revenues.
Strategic Planning and Decision Making
Understanding your business’s value empowers you to make informed strategic decisions. It helps you identify growth opportunities, assess risks, and allocate resources effectively. When you know your business’s value, you can plan for expansions, mergers, or acquisitions with greater confidence.
I am always pleased to learn that a childcare business owner has engaged in strategic planning. However, I rarely find that business value and plans (action steps) to increase the value of the child care business are part of the strategic plan. Most often, strategic plans are solely focused on program improvement, curriculum development, leadership development, and other important program–related things. Still, every child care business’s strategic plan should include efforts to increase business value over time.
Securing Financing
One of the consulting services I offer is helping child care owners obtain financing for program expansion, acquiring another location, and debt restructuring. A key element in obtaining financing, particularly for expansion, is the current financial operations’ profitability, stability, and business value. If the value of the business is low or below industry standards, the ability to obtain financing for restructuring or expansion will be limited. Lenders will not view the childcare business as creditworthy or capable of repaying the loan. A common saying is, “Lenders only want to loan to businesses that have money.” The best way to qualify for financing is to operate your child care business at a high level, achieving financial performance and profitability that results in a high business value.
Exit Strategy and Succession Planning
Knowing the value of your childcare business is crucial, whether you plan to sell it, retire, or pass it on to the next generation. Unfortunately, it is only when it comes time to sell and exit their childcare business that owners think about what their business is worth. Yes, of course, they have thought about what their business is worth in the back of their minds. However, they have an overly optimistic value in mind. Not having a true understanding of value until they are ready to exit their business often means less money received from the sale, or putting off exiting their business until they can work to improve their business value.
Working with a knowledgeable individual who knows how to value a childcare business is essential. Understanding the value of your childcare business and recognizing what factors increase and decrease its value can help you not only improve its value but also set realistic expectations and make informed decisions about its future.
Whether you started your childcare business last year or many years ago, understanding its value now and in the future is essential. It is why I have offered a free business evaluation to childcare owners for years. I hope you will contact me to discuss your childcare business and get your free business evaluation. No obligation, and all conversations are confidential.
Donna S. Dailey
