Linda Harley Will you Receive value for what you create.
The importance of planning for the future of your childcare business can not be underestimated. A business plan provides you with a clear road map and strategy to grow and achieve your business goals and financial objectives but of equal importance is the Exit plan. How are you going to optimise the value for the business you have created?
Business Advisors usually recommend the exit plan be established as the start of a business, however most owners are too busy trying to get their business up and running to worry about selling so this step is often overlooked!
With any business there will come a time when you will want to sell. Your childcare centre is no exception. It may be time for new challenges for you personally or perhaps retirement is approaching. Alternatively, your centre may not be performing to expectations and you feel it is time to move to new challenges. What ever the reason it is important to have an exit strategy in order to maximise the return on investment
You are probably familiar with the saying “you get what you pay for” – in selling a child care business it is “you receive the value for what you create”.
To plan for your exit continue to run the business as you normally would, but always ask yourself how a new owner might view the business you have built, and respond to the decisions you make.
As part of your business plan, and well before the decision is made to sell your centre, it is important to ask yourself some tough questions such as:
Does my childcare centre;
Provide a satisfying environment for my staff?
Meet the needs of the community and parents?
Retain high occupancy through retaining parents support?
Optimise financial profits and targets for the size and location?
Operate without me being there every day?
Have opportunities that could be implemented before selling?
Presentation of the business.
First impressions count for your clients and also buyers of the business. Going to your centre regularly creates complacency. You may go there in a rush with a million and one things to do .Before you know it the Centre is looking tired and very different from the first day of ownership.
Stand back and consider things such as: excess resources in the storage room (commonly called “Junk”), staff members not wearing full uniforms, worn paint work, out of date paper work and discretionary cost increases.
Of equal importance are the staff facilities. Do they have a pleasant work environment, dedicated space for non contact time and challenge for professional development?
Consider what your clients and potential buyers will see when they walk into the business for the first time, how can you improve the presentation?
Profitability
Buyers are looking for a business that has historical and future maintainable cash-flow. You will need to demonstrate the historical cash flows and forecasts to give the buyer confidence that the business can be transitioned and continue to produce the returns.
In childcare this future maintainable cashflow is dictated by a number of variables, the most important being occupancy and teacher ratios. These can usually be demonstrated by the implementation of your business plan discussed above. What is not so easy to demonstrate is the key question all buyers have, “will this business continue to perform without the current owner involved?”
The majority of buyers for childcare centres are not trained teachers, but investors wanting to own a centre that is “managed “. They want a business that allows them to work part time in the business attending to the licensee responsibilities and administration, not necessarily the day to day operation and staff management requirements.
Make yourself redundant
Make it easy for a buyer to step into your role by planning your exit strategy well in advance. If you have all the knowledge and skills to run the business, the buyer’s greatest fear is that the business will walk out the door when you do. Ask yourself “Can I go on holiday for three weeks and the business run itself without me?” If your answer is No, keep working on the business plan until you can say yes!
Team up
The sale of your business is likely to be the biggest sale of your life. To optimise the value of your childcare business team-up with your advisors. Your team should include your Accountant to focus on financials, Solicitor to attend to leases and employment contracts and your Specialist Childcare Business Broker to prepare the business for sale. The earlier you do this, the more successful your exit will be and you will receive the value for what you create.
Author Linda Harley.
