Adelaide Business Broker Nikki Katz recently had a conversation with our Director Dru about selling a childcare business in Australia. Having transacted a number of businesses in this space, Nikki had some important considerations for prospective sellers. They were:

Important Consideration – Clean Financials

Being a simple to understand business model, the first thing interested parties look at when assessing potential childcare acquisitions is the finances. For this reason it is imperative to go to market with up to date, accurate and transparent numbers. Armed with this, buyers will be able to quickly dig deeper into margins and profitability and assess whether it’s a match for them.

Important Consideration – Premises Security

With childcare businesses being dependent on their premises to operate from, it is critical that premises are secured before going to market. Buyers won’t risk their money on an operation that may have to be moved in 12 months time when a lease ends. Before going to market, secure as long a lease possible then communicate this clearly with potential buyers. Many buyers are also very interested in acquiring the freehold should this be owned by the selling entity. Nikki’s recent three childcare transactions have been a mix of freehold and leasehold.

Sale Price Maximisation – Management Team

While two of Nikki’s past three childcare businesses were run by an owner operator, the one that was run by a management team sold for a much higher price. This was because center’s being run under management are attractive to a much wider pool of people who can purchase it as an investment rather than having to work it themselves. Before going to market, it is recommended to get as much of the business as possible being run without the departing owner’s input. This will make it a more appealing buy and drive up the final sales price.

Important Consideration – Licensing

When a childcare centre sells, it triggers a review from the state’s licensing board which may adversely impact profitability moving forward. As an example, one of Nikki’s recent transactions dropped from 80 approved places to 73 places post transaction as regulations had changed since it had been last assessed 20 years ago. Nikki and the new owner were able to get this back up after making some minor amendments, however it is a great thing to be aware of and a consideration to make before going market. It could be worthwhile to have a third party assess a building to see how it would stack up on review to ease the mind of potential acquirers.

Buyer Profile

As childcare businesses require a licensed director to operate, they are most commonly purchased by an industry buyer. Typically large groups from either the local market or interstate who are looking to increase their market presence.

Would you like to have a confidential conversation about your childcare business? Book a complementary consultation with a market expert today.