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.

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.

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!

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.

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.