Selling a preschool - much like your purchase of or starting the business - is an undertaking that requires substantial preparation. The planning of the sale of your business is equally as important as starting and growing your business. Substantial preparation is not only necessary, but is essential if you want to maximize value and obtain the highest dollar.
Mere contemplation of what steps you need to take to prepare your
preschool for sale can be exhausting in itself, perhaps leading to unnecessary procrastination. Like any other project in operating your business, however, planning and execution plan are the key elements. It is important to remember that developing a business-exit strategy is no more difficult or evasive than any other activity connected with a business, such as increasing enrollment or recruiting employees. The most difficult element — as with most things — is actually taking the first step.
This article will provide you with some helpful hints in planning and executing the sale of your preschool.
GET YOUR SCHOOLHOUSE IN ORDER
Selling a business is much like selling a vehicle or a house. That is, you want the business to shine (similar to waxing that sports car or painting the house), as well as communicating the message to the buyer that your business has value (similar to demonstrating to the vehicle performs well and that the house has consistently risen in value). Getting your preschool in order entails the following.
Get Your Financial Books In Order
Once a prospective buyer finishes touring your school and develops interesting in purchasing the business, the first request will be to review your financial statements. A savvy business buyer will want to see your tax returns (federal and state) from the last three tax years to show continuity of income. Therefore, if you do not have custody of the records, you should obtain the information from your tax accountant.
In addition to tax returns, a savvy business buyer will want to see, at minimum, a profit-and-loss (P&L) statement covering the past 24 months - especially the last three months - so the buyer can see the current business income and cash flow. (Some buyers may want P&L statements covering the last 36 months.) The importance of the most recent quarterly P&L statement is that a business is only worth today’s value. In other words, a preschool with a current enrollment of 100 is worth less if the enrollment was 125 six months ago.
The importance of available tax information and up-to-date financial statements in selling a business cannot be overstated.
Keep An Updated Enrollment Chart
A savvy business buyer want to visualize short - and long-term trends of enrollment in your preschool. A chart or graph is the best manner in which to communicate this information to the prospect.
An updated enrollment chart can also benefit you to the extent that you will develop a better understanding of your business, perhaps by displaying patterns at various times of the year, and motivate you to take the necessary steps increase your enrollment if it is down. Remember, the value of your business increases with higher enrollment, just as the value decreases with lower enrollment.
Curb Appeal
Like a car or a house, a business is going to be perceived as more valuable if it looks clean and classy. A paint job (inside and out) and a carpet shampoo will work wonders.
EMPATHIZE WITH THE PROSPECTIVE BUYER
Many sellers approach selling a preschool from their own subjective perspective. This is a mistake, particularly because it frequently results in the seller developing an unrealistically inflated value of the business.
On the contrary, a seller is well-served to put himself or herself in the shoes of a prospective buyer, and make a list of documents and other information you would want if you were the buyer. The buyer prospective buyer is more likely to be concerned about cash flow and growth potential, rather than a creative curriculum or the seller’s relationship with the enrollees’ parents.
More importantly, the business may be more difficult to sell if the prospective buyer perceives the owner as a critical element in the success of the business. Therefore, the day-to-day operations should be principally managed and operated by the staff.
STAY FOCUSED ON THE BUSINESS AND PERFORMANCE
The sales process is fraught with ups and downs, and prospective buyers coming and going. Moreover, the sales process can become an emotional roller coaster if the process is not kept in perspective. As such, the seller should stay focused on the performance of the preschool, and should be prepared to reject a frivolous offer. A competent real estate/business broker will keep a steady flow of prospects until there is a meeting of the minds between seller and buyer.
Posted on March 3, 2011 | 
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