You may be wondering how much can your childcare business sell for?
In this article, I am going to use data from transactions we have done over the last 10 years to give you an idea of how much your centre potentially might fetch.
These should just be a gauge for you, and you may or may not fetch the same price as market sentiments change all the time, and every buyer assesses each centre based on different factors.
So without further ado, here we go…
We are going to take the transaction data of 24 profitable childcare centres we have personally transacted over a 3 year period.
There are many other centres we have transacted that are breakeven or losing money, which we will discuss further below.
Of the 24 profitable centres, the total transaction value amounted to S$24,893,000.
The total capacity of these centres were 1,577.
Enrolment was 1,450, which represents an average enrolment of 92%.
The total profit before tax was S$5,405,000.
They were operating with a 25.8% margin on average.
The average sale multiple was at 3.86 EBIDTA.
This analysis tells us that in order to fetch the best possible price, a childcare centre needs to be near full capacity (80-90%+ is ideal), with strong margins (20%+).
If you operate a childcare centre that falls in this category, perhaps it is time to consider selling before your enrolment or margins fall.
As for breakeven or unprofitable centres, buyers typically consider how much it would cost them to setup a brand new centre and add in their expected burn rate.
For breakeven centres, they might even add on a small premium on the expected setup cost of a similar centre, as they no longer need to spend the time and energy to do one up from scratch, and can takeover a fully operational centre with staffing in place.
Again, it all boils down to finding the right buyer for your centre.
Remember – the best time to sell is from a position of strength, and not when you are facing declining enrolment numbers and stiff competition.