Archive for the ‘Blog’ Category

How Do I Sell My School
Friday, February 21st, 2020

School owners decide to sell their schools for several different reasons. They might have health concerns that no longer allow them to properly run the school. Some might be getting close to the age of retirement or just feel burnt out. Regardless of the reason, you will need an expert that understands how to sell your school. Gateway School Sales’ proven track record of successful transactions will allow you to reap the financial reward and enter into the next phase of your life right.

 

Gateway School Sales will assist you with determining a value for your school, establishing an asking price, developing a marketing package specifically for your school, identifying buyers with an expansive buyers list, facilitating negotiations, and most importantly closing the deal. This allows you to continue to focus on your school and not be distracted trying to sell it.

 

There are 7 steps in selling your school:

1. The first step is to determine a fair market value of the school. The school will need to be sold at a fair price so the next owner will be able to make a living and have a return on their investment.

 

2. We will develop a marketing package called a Confidential Business Review (CBR) that will provide an overview of the school including the school’s historical performance, photos of the school, identify growth opportunities, and equipment list.

 

3. After we have completed the CBR we will start marketing the school to potential buyers in a confidential manner. Our database is filled with potential buyers that have all expressed interest in buying a school. Our buyers have been vetted to make sure transactions go as smoothly as possible. Our buyers are made up of individuals looking to purchase their first school to corporations looking to expand and purchase additional schools. Ideally, we will have several buyers express interest in your school. We will give them a confidentiality/non-disclosure agreement and then present them the full CBR.

 

4. After the interested buyers review the CBR package and still remain interested they will want to see your school and meet you before they maker an offer to purchase. We will normally try and schedule this meeting when the school is closed to uphold the confidentiality of the transaction. This meeting allows both parties to meet each other and get an idea if they would like to continue with the process.

 

5. If all goes well, we will then work with the buyer to make an offer for your school. Offers can differ in structure. Some can be all cash while others may have financing involved. If there are multiple offers you can negotiate the offer and choose the one that is best for you.

 

6. After the negotiation process a verification process known as Due Diligence will begin. The buyer will ask for back up documents like tax returns, supplier invoices, bank statements, and other items. During this period the buyer will also be working to get bank financing, licenses, permits, insurance, and other items that are needed for the purchase and to run the school. At the end of all of this we will then work with the closing company, title company, CPAs and attorneys to draft the closing documents to smoothly transition the school to the new owner.

 

7. After all of the closing documents have been signed the transition to the new owner begins. There usually is a training period where you will show how the new owner how to manage and run your school. This normally lasts a couple of weeks with some phone support if need afterwards.

Why Do Owners Decide To Sell Their School?
Monday, December 23rd, 2019

Fatigue / Stress

Running a school is much more than a full-time job. Over the years the energy required to handle day-to-day challenges can be enormous.  Even when things seem to be well managed, there isn’t an endless supply of energy to deal with daily issues. We have been called many times to sell a school because the owner’s doctor has told them to sell the school in order to reduce the stress in their lives. As owners reach retirement age, it’s normal for them to think about “what’s it all for” and begin to look at other more rewarding activities and where they’ll get the financial resources needed to pursue them.

 

Burnout

They are just tired and are ready for a change. It is common for employees to change jobs; school owners sometimes want to change the direction of their careers and switch industries. Even school owners with very profitable schools want to do something else.

 

Removing Financial Risk

As people age, they take fewer risks. Most financial advisers will diversify retirement accounts into stable stocks in a variety of industries to minimize the risk to retirement income. Most school owners have a major part of their net worth tied up in their school. The value of the school could be destroyed if something happens to their key employees, the economy, government regulations change, new competition emerges or hundreds of other things happen. Savvy school owners will sell the school when the school is performing well.

 

Economic Uncertainty

If a school owner has been in business for more than 5 years, they know the economy runs in cycles. There is typically a recession every 5 years. It stands to reason there will be another economic slowdown in the next few years. Many owners realize the best time to sell is when the school and the economy are trending up. The next recession could be worse than the last one due to mounting government debt and the growing lack of consumer confidence.

 

Physical Health

Schools are not run by machines – they’re run by people. We have seen too many families no longer able to enjoy the lifestyle their loved one provided due to the owner’s untimely exit or major disability. If you are not ready to sell your school now please prepare a contingency plan to protect your family.

 

The biggest mistake school owners make is waiting too long to sell their school. The best time to sell is when the owners and the schools are both doing well.

Do not be an owner that receives nothing for all of their hard work!

If now is the time to sell, give us a call at 972-219-6961.

What do Buyers Look for when Purchasing a School?
Monday, December 9th, 2019

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.

Timing the Sale of Your School
Friday, November 8th, 2019

Company Performance – Sell at Peak Value

Selling at “peak value” is, of course, easier said than done. Most school owners will find it hard to consider selling when things are going well, but that could be precisely the best time to get out. A growing, expanding and smoothly running school will be most likely to attract multiple buyers, creating an auction-like atmosphere that will often lead to a high selling price. Too many owners wait until a major customer or key employee is already lost before trying to get out as well. Buyers will be aware of these types of situations and may use it against you in the negotiation process. The key to getting the most money is selling when the buyer can find few flaws.

 

We have all heard when investing in the stock market to buy low and sell high. Many school owners do the opposite when it is time to sell their schools. They say the school is doing well so they do not want to sell. What you should be saying is the school is doing well; I AM READY TO SELL!

 

Interest Rate

Interest rates are low at the moment. While interest rates have been discussed the last few years as being nearly ready to rise, it appears that 2015 will be the year they do go up. The Federal Reserve has cautiously wound down its bond-buying program, and if school owners wait too long to sell, they could be facing much higher rates.

 

As interest rates rise, so does the price of capital — leading to lower valuations. Many buyers will be using loans to make their acquisitions. Because earnings are used to pay the interest on loans, interest rates greatly impact, the multiple at which someone can afford to buy a school.

 

The more expensive it is for buyers to access capital, the less willing they are to pay a premium valuation. As interest rates begin to rise meaningfully this year, the more likely it is that valuations of schools will go down.

 

Personal

Most school owners sell because of personal reasons. The following questions may provide some guidance for you:

  • Am I still having fun?
  • Am I willing to make changes to grow the company?
  • Am I investing in the latest technology to keep the company strong?
  • Are there personal issues that need more attention?
  • Have I accomplished what I set out to do?
  • Am I getting tired more quickly?

 

We find that critical introspection of personal issues may prompt entrepreneurs to think seriously about selling their businesses.

 

The classic entrepreneurs who are miserable the day after selling is often a myth.  We have found more often than not school owners who have interests outside of their school jump into these pursuits with the same enthusiasm they had when running their school.

 

The biggest mistake school owners make is waiting too long to sell their schools.

 

Do not be one of those school owners that receive nothing for all of their hard work.

 

If now is the time to sell, give us a call!

3 Ways to Facilitate a Successful Sale
Wednesday, October 23rd, 2019

It is important to plan carefully and make the move toward selling at the right time. Doing so, can have a positive impact on your selling price. Observing market conditions, preparing your school for would-be buyers and strategically positioning it as a viable school will all play an important role when you decide to sell.

 

Prepare in advance

It pays to prepare your school for sale well in advance of placing it on the market. Plan to allow at least six months to a year to prepare your school for sale. Diligent preparation will help you to show your school in the best light. You will want time to gather all the necessary documentation that potential buyers will expect to see. Also, keep in mind the time frame it takes to complete a school sale. Most sales take 6-12 months from the time the school placed on the market to closing the transaction. Careful preparation will give you more flexibility to align your sales timing with a favorable market and could help you avoid the pitfall of having to sell quickly at a less-than-ideal price.

 

Research the market

In order to establish a fair asking price, you’ll need to do some research to objectively determine where your school fits into the market. While you certainly don’t want to under price your school, pricing your school too high may drag out the sales process or even prevent your school from selling at all. Fluctuations in the market, and more specifically within your particular industry, will help you determine the best time to put your school on the market. Look for similar schools for sale to get a feel for the current market and then seek the help of a professional by calling Gateway School Sales.

 

Look at your school through a different lens

It is important to look at your school through potential buyer’s eyes in order to determine your school’s strengths and weaknesses. Take the time to promote your school’s high points and work on its low points with an eye towards improving your selling price. Remember that buyers would ideally like to purchase a school when it’s doing well and showing steady growth. If records show you are in decline, then it may not be the best time to sell, since this will negatively impact your selling price. You want your school to stand out in a competitive market as the best investment in its field. Your documentation should include past results and current placement in the market, as well as the potential for future growth. This is where the guidance that Gateway School Sales will provide will prove invaluable.

Putting a Price on Your School
Tuesday, October 8th, 2019

When trying to attract buyers that will make a fair bid for your school, you first need to have a good understanding of its value. M&A advisors and professional appraisers can provide you with information that will help you from setting a reasonable fair market value price to favorably negotiating your deal’s final terms.

 

EXPERT OPINIONS

Many school owners hire a professional appraiser at some point to review their company’s books and operations and provide a ballpark estimate of its value. An appraiser’s services can also be useful when you’re ready to sell your school.

 

One of this professional’s critical tasks is to normalize earnings – that is, to adjust them to better reflect your company’s performance under different ownership. The appraiser might make adjustments to earnings for one-time expenses, such as tax penalties or legal costs. And adjustments generally are made for discretionary expenses such as inflated (or artificially low) salaries and bonuses, and nonessential items such as club dues or company-owned vehicles.

 

An appraiser will also consider your accounting method. Many schools use a cash basis accounting system, which can accelerate expenses such as depreciation, ignore expenses like debt and defer revenues such as completed contracts for more favorable tax treatment.

 

Your company will look more attractive to buyers, however, if income and expenses are converted to an accrual basis, which records these items in the period they’re earned or incurred.

 

In weaker economies, an appraiser might project your company’s future earnings under more favorable economic conditions, based on your historical numbers. These projected earnings can be particularly useful when sale negotiations get sticky and you need evidence for your price position.

 

PRICING FOR THE MARKET

Although a professional appraisal can give you a general idea of your company’s worth and make your financials appear in their best light, you also need M&A advisors to help you set a reasonable market price. Ultimately, your company’s value is the price a buyer is willing to pay – regardless of the number you have on paper.

 

Companies with powerful value drivers such as proprietary technologies, critical patents or market-leading brands may merit a higher price than standard multiples suggest.

 

In setting a price, M&A advisors might consider variables such as the current economic environment, the M&A marketplace, conditions in your industry and recent sales prices of schools comparable in size, history, current cash flows and future earnings projections, among other characteristics.

 

This information might be used to set a price based on your company’s earnings before interest, taxes, depreciation and amortization (EBITDA), with three to six times EBITDA at the low end and seven to 10 times EBITDA in the higher range.

 

Companies with powerful value drivers such as proprietary technologies, critical patents or market-leading brands may merit a higher price than standard multiples suggest. If you or your M&A advisors already have a potential buyer in mind, your initial price will likely reflect what the buyer considers your company to be worth. A competitor, for example, may be willing to pay an above-market price to eliminate you as a threat and gain access to valuable territories, top-performing workers or complementary product lines.

 

Your advisors can also help you take steps to enhance your school’s attractiveness and potentially boost its price. For example, you may need to clean up your workplace, repair or dispose of non functioning equipment and ensure that your employees look and behave professionally.

 

BE REASONABLE

 

However you arrive at a value for your school, keep in mind that you’ll need to remain flexible and open-minded throughout the M&A process. Potential buyers will have their own opinion of your company’s value; and if the parties’ positions are vastly different, price negotiations are likely to go nowhere.

Make your Summer Program Shine!
Wednesday, March 13th, 2019

Summer programs are important for the student and families within your school but also for your school. Summer programs can bring in a large portion of a school’s revenue for the year. The only problem that many schools face is the cost to implement summer programs that will attract both parents and students. However, we are fortunate enough to live in an area that offers many things to do inside and outside for a small price or sometimes even free. Here are some low cost summer activities to make your summer program shine.

 

Cinemark Plano Movies 10
Movie tickets are always $1.25
Klyde Warren Park
Always Free!!
Public Library Programs
Most cities offer free events through the public libraries. A good option is the Dallas Public Library.
Whole Foods Story Time
Whole Foods does a story time every Tuesday at 10am.
This is appropriate for children ages 2-5.
Dallas Museum of Art
Always free!!
US Bureau of Engraving and Printing
Always free!!
Frisco Fire Safety Town
Free tours and fire safety education

 

Don’t Wait!

A successful summer program can mean more revenue, it can attract more students to your school which ultimately results in a higher selling price for you when you go to sell. When the time comes, contact Gateway School Sales.  You will have experts on your side when selling your school.

Investing in Your School’s Financial Longevity
Thursday, February 28th, 2019

Summer programs are an important factor to consider when contemplating how to build enrollment and revenue for your school. It is not possible to operate a successful school without a financially strong and stable backing. While the weather outside is still cold, the competition for summer programs is heating up. Here are some marketing tips to set your school apart so that your summer program can shine.

 

Do you have windows that face a road or sidewalk? Paint your windows! This is such a simple way to attract much wanted attention. Colorful signs and banners that also incorporate a picture or two of your summer program are a great way to get both parents and students attention as they are driving or walking by. Also, sending letters and brochures home with students is a great way to communicate with parents and increase enrollment.

 

Offer an early bird discount to increase summer enrollment and revenue early on. Doing so, will help ensure more students attend summer programs thus increasing cash flow in your school. Furthermore, offering an early bird discount gives you time to plan ahead because you will be able to gauge the amount of children attending. Offer a referral discount. Giving one family 20% discount on a summer program could end up creating $200 extra in tuition when they refer another family to sign up for the summer program. Who knows? Maybe they will continue as a year round student as well!

 

You may be wondering what you will gain by doing these three simple tasks. You will increase enrollment, increase revenue, and increase the value of your school. Which means when you go to sell, your school will sell for a higher price. When that time arises, we will be there to secure the successful sale of your school.

 

Please visit our website at www.GatewaySchoolSales.com for more information.