If you’re reading this, you could fall into a few groups of people.
- You are just starting to think about selling off your business one day
- You are already in the midst of selling off your childcare business
- You are just curious to know how to sell your childcare business at the best possible price
And the reasons for selling may vary – from wanting to retire, to feeling tired of being in the industry for many years, or not being able to keep up with the constant changes and competitive landscape.
Regardless of the reason, you definitely need to plan ahead IF you wish to sell off your business at the best possible price.
The most important thing you need to know is this – buyers are more likely to pay a premium for a well-run centre with strong enrolments and profit numbers.
So the BEST time to sell, is when you are at full capacity with strong enrolment numbers.
Do not wait until your enrolment numbers start falling before you put your childcare business up for sale, because it will fetch a far lower price then.
In the last 10 years in the Singapore childcare M&A space, we have witnessed many operators ‘holding on’ to their centres with the hopes that they can enrol more students or increase profitability, before selling their centre for a record price.
And when they contact us a few years later, their numbers have dropped drastically and they can only fetch a fraction of the price they once could, as buyers viewed their centre as less attractive.
So if you wish to maximize your exit value upon a sale, here are some steps you can take right now:
#1: Boost enrolment numbers
This is the surest way to ensure you fetch top dollars once you put your childcare business up for sale. Buyers often pay a multiple of your profits as a takeover fee, so when you focus on marketing to increase your enrolment, you get to enjoy an asymmetric return on your time and money spent.
You could entice parents to sign-up using time-sensitive discounts, bonuses, free uniforms, or waiver of registration fees. Once they sign up, most kids will stay on for a good few years as long as you do a good job as a childcare operator.
#2: Prepare your financials
Before considering a sale, you want to make sure that all your books are in order. Having clear and precise financials will give the buyer a peace of mind that what they are buying is actually what they are getting.
Also, it will be a good idea to showcase historical data. If you can showcase a growing enrolment trend, it will further boost buyer confidence and fetch a far higher offer, versus if you simply showed them enrolment numbers from a select period of time.
Again, remember that buyers are now more savvy and need to know that they are not buying a ‘sinking ship’, but an asset that they can get a good return on investment from.
#3: Streamline your operations
Your goal here is to make sure that your business can run independently without you. You should have a principle/manager in place, that is able to manage your staff, parents, as well as do enrolment for you.
Have clear SOPs and processes in place so that buyer can takeover a well oiled machine, instead of a business that can only function with you in the picture.
Every single role in the centre should be clearly defined and each person should take full ownership of their role, so that the day to day operations in the childcare is seamless.
#4: Engage a dedicated broker
Once you have decided to sell, it would be a ideal to engage just ONE broker who specializes in the childcare industry. Having multiple people market for you will only send a message across the entire market that you are desperate for a sale, and often leads to brokers trying to ‘arm-twist’ you into accepting a lower price simply because they wish to seal the deal.
By engaging just one broker, they can control the pricing and negotiate on your behalf for the best possible price.
Of course, you could try to go the DIY route and sell it yourself. But you may not be familiar with the current market trends and buyer sentiment on the ground, and may not be able to expose your centre to the ideal buyer who could pay you the best possible price.
Once you have done the above 4 steps, you increase the chances that you fetch the best possible price for selling your childcare business.
If you are thinking about selling your childcare centre, speak to us to see how Edugrow can help you. With over a decade of experience in the Singapore childcare space, we are confident that we can value add to you and give you a good exit price.