Exit Strategy Planning For Child Care Business Owners
Did you know surveys indicate that three out of four (75%) business owners regretted the decision to sell their business? Unfortunately, the statistic is true. Business owners often note three primary reasons for regret:
- One, lack of preparation. They realize they should have started planning their exit much earlier and done more to prepare their business.
- Two, they left money on the table. By not maximizing the value of their business, their business did not sell for as much as it could.
- And, no personal plan. Their post-transition satisfaction is low because they did not prepare a personal plan for what they would do after their exit.
Having worked with child care business owners since 1995 as a business consultant and mergers and acquisition advisor, I know firsthand that only a very small percentage of child care business owners have an Exit Plan. Although most owners think about the day they will exit their child care business—very little is done—other than thinking and dreaming about exiting.
This lack of formal exit planning not only can delay a child care owner’s exit timeline but often results in child care business owners making bad decisions should an unexpected situation arise that has the owner wanting to exit their business sooner than anticipated.
During the Great Recession and COVID, many child care owners decided to sell their child care businesses. Some sold due to financial problems, and others sold because they did not want to continue with the day-to-day challenges and stress of owning a child care business. Having done little or no exit planning, many owners made decisions that were not in their long-term best interest, including:
- Selling their child care business for less than its true value.
- Agreeing to earnouts or seller financing (with “strings attached”), some never receive full payment.
- Leasing their building and land with low rents and terms highly favorable to the buyer.
- Agreeing (often as a buyer’s requirement) to continue to operate the child care business for the buyer after closing for several months—losing all control of operations and decision making—while still having the stress and headaches of being responsible for running the business.
As the saying goes, “Desperate People Do Desperate Things.” In good times, a lack of exit planning leads to poor decision-making. Challenging, stressful times make it even harder to make good exit decisions.
I want to make sure that you have an Exit Plan that will allow you to receive the maximum value for your child care business, understand what exit options are available—and which ones would be best for you, your family, your employees, and your child care business, and help you prepare your business and yourself personally for the day you will exit your child care business.