You have a daycare that you’ve built from the ground up, it has been your baby for the babies since idea conception. You’ve taken the necessary steps to make your daycare run safely, efficiently and superior to all other daycares in the area, by
continuing to hire, train and pay the best caregivers around. And at the end of the day after the last child has been picked up, your mind wanders and asks, What is my daycare worth? Your objective would be to receive the maximum value for it, and to make sure that your daycare and the children are well taken care of after it’s sold. There are many variables to consider when looking at the possibility of selling your daycare and taking it one step at a time puts you on the road to success.
In the last year, there have been 13 daycares sold and purchased in the United States, that met our criteria. Daycares, are essential parts of childcare for the working parent. And while we see some come and go, the good ones tend to stick around. Our team has compiled and broken down the data for you to understand the knowledge needed or you to make a solid decision to sell.
What is your Daycare worth?
The value of your daycare is correlative to your individual business, the market and what potential buyers are willing to pay. Larger daycares that provide a more extensive set of services, such as after-school care for older siblings or extended elementary grades will sell for a higher amount than a daycare that has the basic day care, necessities covered. Both of these daycares are great in their own way, but when trying to figure out what your business is worth, there are some questions to consider, including:
- What are the sales?
- What is the profit?
- What are the growth trends?
- What is driving new sales and is that sustainable?
- What channels do new customers come from and what is the breakdown of each channel?
- What is your market position?
- Is your Location favorable?
- How reliant is the business on the owner?
- What systems and processes are in place to run the business?
What makes a Daycare worth more?
Your daycare has been a top priority since you signed the first child was enrolled in your care and you believe that it is worth top dollar. However, not all buyers will agree unless you are able to show your buyer, that their return on investment (ROI) will be high, their relative risk will be low and have the following characteristics associated with your daycare.
- Predictable key drivers of new sales
- Stable or growing traffic from diversified sources
- Established suppliers of inventory with backup suppliers in place
- Traffic stats
- High percentage of repeat visitors and repeat sales
- Clean legal history
- Brand with trademark, copyright or legal concerns
- Documented systems and processes
- Growth potential
What does the average Daycare sell for?
The graphic above, has broken down the data that we analyzed from the last year, which consisted of businesses that range in the $50 thousand to the $10 million valuation range. And these businesses can sell for as much as billions of dollars or as little as a few thousand. You can clearly see the average of daycares sold in the last year in the United States is around the 2.44 times earnings, with the average sale price coming in at $297,692.31. However, to have a clear understanding you also have to look at the median sale at $200,000. All this information is a bit overwhelming without being broken down, so later in this article, we will break down these numbers and give you the information needed to be able to start the selling process.
What is the most frequent deal size?
The most frequently sized deal, when selling your daycare, is the valuation range of $0-250k This range has dominated the number of sales. For example in 2015 there were 13 sales of daycares, and of those, 9 of the businesses were valued at between $0-250k. While the market for daycares, is that of the smaller valuations there are a few larger valued daycares that are sold as well.
Is the Daycare market getting bigger?
In 2015 the total yearly transaction was well over $3.8 million dollars and while there will always be fluctuations in the markets and trends, being able to keep your salon a float in a time of the market fluctuations will give future buyers the knowledge will give future buyers the knowledge that your business is safe to purchase and is less risky than other daycares for sale.
Are bigger businesses worth more?
As a general rule of thumb, yes, the bigger your business is, the more that is is worth. As you look at the images below, you can see that as your revenue becomes larger, so does your multiple, which in turn helps you as the business owner generate a better return on your investment. To help you understand the graph a little better, look at the multiple from 2015 for the valuation price range of 0-$250k, here the average multiple lands right at 2.56, with a total of 9 daycares sold, however when your business’ valuation is in the $500-1 million range the multiple falls a bit to 2.22, with 3 daycares sold. So in the case of this data, the bigger daycares have a close multiple to the 0-$250 k range, but have less than half of the number of businesses for sale.
What states have the most Daycare business deals?
Are you wondering where the most deals were made throughout the country, or if your state has a hot market to sell fast? Florida and Arizona had the largest amount of daycares sold last year, but still doesn’t mean that someone is not looking to start a business venture in your area. Having a broker to help you find a buyer for your daycare no matter what state you are in, can help you successfully sell your business.
Why would you sell in the first place?
When deciding to sell your business, it can become an overwhelming and difficult decision. Your reasons will always be different from the daycare owner next door. Maybe you need a change, or you are ready to retire. Whatever your reason is, be sure that you have the necessary knowledge and tools to get the value out of your business that you are looking for.
How long will it take to sell your daycare?
There is not one set timeline for the sale of any business. The variables of the individual business and terms of the sale will define how long it will take to sell. Do keep in mind that generally speaking, the larger the deal (over $1 million) take longer to sell, over the smaller deal (under $200k) because of the complexity of the business, in addition to the risk of purchasing a company that large for the buyer. And try to remember, that your individual business will always sell at a different pace than other daycares, and being patient is an essential part in selling.
What is the process of selling your Daycare?
Our step by step process will help you become more confident, when you decide to sell your daycare. Many business owners forget or overlook essential steps in the selling process and sometimes become confused and lost throughout the process. Doing each and everyone one of these steps will help guide you to the maximum profit of the sale of your business. If you have questions or concerns about your daycare’s value or the process in itself please contact us and we will be happy to help.
Who will buy your business?
Buyers are essential for the sale of your business, but have no fear because there are many options and possibilities. These buyers can be first time buyers, experienced entrepreneurs, or private equity companies. No matter what the size or maturity of your business there is a buyer for your business, and we can help you find them.
After reading this article and understanding the necessary steps and processes that come along with the sale of your daycare, and you’ve decided that selling your business is the right decision, we encourage you to have your daycare valuated by a professional broker, this will ensure that you are receiving maximum value for your business. We know that your daycare is unique and special, and we always keep that in mind when valuing your daycare. So when trying to answer that question of what is your business worth, comparing it to the shop in the next town over, will not get you the exact answers you seek. When you are ready to take the first step, we will be more than happy to help you find the true value of your daycare, and can help accelerate the sale, by helping you find the right buyer as well. Feel free to fill out our valuation form and get started right away.