In a significant regulatory shift, the government has announced the removal of the controversial Early Childhood Education (ECE) network management rules, a move that has been hailed as a victory for commonsense by many in the sector. These rules, which governed the establishment and operation of new early childhood centres, were seen by many as bureaucratic and unnecessarily restrictive.
Associate Minister of Education, Hon David Seymour has confirmed that implementation of proposed changes to applications to change the identity of the service provider were on hold, and that applications would continue to be managed under current processes.
With the implementation of Pay Parity and increased wages, there has been a discernible enhancement in staff retention within the majority of businesses I have had the privilege to represent. While competitive remuneration undoubtedly plays a pivotal role in retaining talent, it's important to acknowledge other noteworthy factors contributing to this positive trend.
Happy New Year, after a great summer we are looking forward to what the 2024 year delivers for the ECE sector.
In some recent appraisals and sales, we have noted a range of challenges around leases, in particular, shorter durations being available for a new owner so I felt it valuable to provide some insight on this.
During recent Childcare business and freehold negotiations, some purchasers have not been able to secure finance via the traditional bank lending process which has changed significantly after introduction of the new lending regulations in 2022.
Another limiting factor is the high interest rates which have increased the cost of borrowing and mortgage payments.
To overcome this issue, negotiations have been facilitated with Vendor finance, also known as seller financing, to achieve a successful sale.
To achieve fair market value for the sale of a Childcare business, there are a number of factors to consider.
1. Knowledgeable and Willing Parties: Fair market value is determined when both the buyer and seller are acting in their best interests and possess reasonable knowledge about the value of the childcare business and associated real estate. This ensures that neither party takes advantage of the other.
With the receipt of the July 2023 funding payment, we are now receiving clients’ full year financials to 31 March 2023. Reviewing these there are some trends of increasing expenses coming through which warrant mention.
With the rising cost of living front of minds for all of us, there are potential opportunities for all owners to take a closer look at their expenses and see if any of these can be reduced to improve financial performance :
The team have continued to be busy over the last month or so with enquiry on childcare business and freehold sales.
There have been some delays in getting the 2022 financials through from Accountants as they continue to be challenged with staff being away due to Covid.
The first quarter of the year has certainly been interesting with the continued disruption of Omicron working its way throughout NZ.
This has impacted the centre operations with occupancy, meeting staff ratios while many have been isolating and rising costs.
Our advice to all business owners continues to be that they keep a close eye on their financial management to ensure costs are keep in balance with revenue and help navigate through increasing rents, wages and general expenses that is impacting all business owners in current economic times.
Linda Harley 
