What do Buyers Look for when Purchasing a School?

Profitability – Buyers purchase businesses because of profitability. Many business owners try to hide profits from the IRS to minimize taxes. The issue arises when you are ready to sell, these additional monies are hidden profits that the buyers and their bankers don’t see. This makes it harder to sell the school and to finance the business transaction. What should you do? At least three years prior to selling, stop running personal expenses through the business. Pull profits out through your salary, management fees, or paying increased rent to yourself. A well run school will have a payroll cost of 35% to 40% of revenues.  The overall profit will be 35% of the top-line revenues if the building is owned and 25% if the building is rented. The more profit documented on your tax return, the higher the selling price of your school.


Curriculum – The childcare industry has moved away from a daycare model to a pre-school or education based model. Buyers like to purchase schools that have a strong curriculum that teaches the children in their care. Your preschool will have more value than your daycare will.


Documented Systems – If you are running your school from the knowledge in your head and you do not have documented procedures your team can follow, it will make it harder for a buyer to purchase the school and continue the success you have enjoyed. If they have concerns about your business operating systems, buyers will not pay as much for it.


Organization – A childcare center that is organized and everything in a clearly labeled place shows a buyer your school is run efficiently. There is attention to detail in the daily classroom schedules, managing the welfare of the children and the finances of the school. It also makes it easier for the buyer to learn your system of operating your childcare business. This creates a higher perceived value of the business.


Cleanliness – It is critically important for your school to be clean. The moment a parent, a licensing representative, the health department representative or a buyer walks in the door they should be greeted with a fresh smelling, and clean school. One of the most common issues we see is clutter in the Owner’s or Director’s office. Make sure your entire school is clean and neat. You are trying to present a good image. You would clean your house before a dinner party, so clean your school before trying to selling it.


Well Maintained Facility – If you tried to sell your house the real estate agent will tell you to paint and do necessary maintenance to make your house more attractive. Inexpensive things like painting, cleaning carpet and waxing the floors will give you a great return on your investment when your school is sold.


Limited Owner Dependence – Are you at the school from open to close every day? If you are, it makes it very hard to sell your school! Train your employees to take some of these responsibilities. Buyers want a well-trained team to help continue the successful operation of the school. Many buyers like to have the ability to not have to stay from open to close each day.


Every childcare center is sellable. The question is what can your school be sold for?
Give Gateway School Sales a call and we can provide you with a free valuation.