Common Child Care Seller Questions


Child Care Business For SaleHow long will it take to sell my childcare business?   

It generally takes, about a year and sometimes longer to sell most childcare businesses. Some childcare businesses will take longer to sell, while others will sell in a shorter period of time. The sooner you have all the information needed to begin the marketing process, the shorter the time period should be. It is also important that the business be priced properly right from the start. Some sellers overprice their business thinking they can always decrease the price later. This theory often “backfires,” because buyers often refuse to look at an overpriced business. Also, it has been shown that the amount of the down payment may be the key ingredient to a quick sale. The lower the down payment the buyer has to put down, the better.  A down payment of more than 30 percent of the asking price will increase the time necessary to achieve a successful sale. A reasonable down payment also tells a potential buyer that the seller has confidence in the business’s ability to make the payments and its continued success.  

Why Is Seller Financing So Important To The Sale Of My Child Care Business?   

Surveys have shown that a seller, demanding all cash, receives on average only about 70 percent of their asking price, while sellers who accept terms receive on average 80 percent or more of their asking price. In most cases, childcare businesses that are listed for all cash do not sell. With reasonable terms, however, the chances of selling increase dramatically, and the time period from listing to sale greatly decreases. Most sellers are unaware of how much interest they can receive by financing the sale of their business. In some cases, it can greatly increase the amount received. And, again, it tells the buyer that the seller has enough confidence that the business can, indeed, pay for itself.   

What Happens When There is a Buyer for My Child Care Business?   

When a buyer is sufficiently interested in your business, he or she should submit a written offer. An offer will usually have one or more contingencies i.e., review of your financial records, ability to obtain a new lease for the building, documentation of current and historical enrollments and or other pertinent details of the business.   

At first review, you may not be pleased with a particular offer; however, it is important to look at it carefully. It may be lacking in some areas, but it might also have some pluses to seriously consider. There is an old adage that says, “The first offer is generally the best one the seller will receive.” This does not mean that you should accept the first, or any offer — just that all offers should be looked at carefully.  There is no guarantee that the second, third, or fourth offer will be better than the first.  If a buyer puts forth the effort to submit a written, you should take the time to read all the pages, note points of agreement and disagreement, and make a counter-offer.   

When you and the buyer are in agreement, both of you should work diligently to provide the lender and all advisors the information necessary to expedite the due diligence process and preparation for closing.  After the completion of due diligence and removal of all contingencies, the attorneys will draft the necessary documents for closing. The closing is merely a meeting where you and the buyer sign all the documents necessary to legally transfer the business.  The buyer is given the keys to the business and you receive the funds for the sale of your childcare business.

What Can I Do To Help Sell My Child Care Business?   

A buyer will want up-to-date financial information. If you use accountants, you can work with them on making current information available. Always keeping accurate in-house enrollment data and financial information is of the utmost importance. If you are using an attorney, make sure he or she is familiar with the business closing process, and the childcare license laws of your particular state and has the time to prepare the documents for the closing. Time is of the essence – every day that passes from the time of agreement to the closing the less likely the transaction will close. As things drag on and closing is pushed and rescheduled, buyers get nervous and have “cold feet”.  Do your part, be organized, provide requested information in a timely manner, and be in contact with your accountant and attorney at least every couple of days until the transaction is closed.

What Can Business Brokers Do – And, What Can’t They Do?   

Business brokers are the professionals who facilitate the successful sale of businesses. It is important that you understand just what a professional business broker can do — as well as what they can’t. They can help you decide how to price your business and how to structure the sale so it makes sense for everyone — you and the buyer. They can find the right buyer for your business, work with you and the buyer in negotiating, and every step of the way until the transaction is successfully closed. They can also help the buyer with all the details of the child care business buying and the new licensure process.

However, the business broker is not a magician who can sell an overpriced business or unprofitable child care business. Most businesses are saleable if priced and structured properly. The amount of the down payment you are willing to accept, along with the terms of the seller financing, can greatly influence not only the ultimate selling price but also the success of the sale itself.

Retaining a business broker to assist you with the marketing and sale of your childcare business may require some time and research.  Most business brokers do not specialize in the childcare industry.  In fact, most business brokers list and sell all kinds of businesses and thus often have little detailed knowledge of any particular type of business.  Child Care businesses are certainly unique in many ways one being state regulation and licensure.  Therefore, for best results, you should retain a business broker that has experience selling childcare businesses in your state.  Finding such a business broker may not be easy depending on the state you operate in and the number of business brokers practicing in your area.  However, an experienced childcare business broker can make the difference between selling your business for a fair price – giving it away – and not selling it at all.  Should you not be able to locate a business broker that specializes in child care, at least make sure that the broker you choose has extensive experience in selling businesses and is willing to put forth the time and effort to understand your state child care laws, regulations, and transfer licensing steps.

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