5 Things to Implement Now for a Smooth Transaction Later

As a business owner, it is important to show profit quarter after quarter and year after year — but this is especially true when you are preparing to sell your company. Buyers want to see that your childcare business is not only running efficiently, but that it is consistently profitable and will continue to be so into the future. To help your school best demonstrate its stable profitability, there are five actions you should implement ahead of your sale.

1. Know What Information to Have Available
   Gathering information in advance will make for a much smoother transaction process and will allow you to focus on making sound decisions when selecting your appropriate successor. Starting with your valuation all the way through to diligence and the quality of earnings process, you should employ systems that enable quick access to accurate information (3 years of bank statements, credit card statements, profit & loss statements, etc.). This will allow the HINGE team to quickly understand your business and pinpoint any potential pitfalls throughout the process. Having HINGE’s sample diligence list will also help you begin producing and gathering information far in advance of your sale.

2. Produce Information Faster with Automation
   To run an efficient business, it’s important to have information readily available for decision-making which is why you should automate as much as possible. HINGE specifically suggests automating your billing system, labor costs, outside vendor payments, and financial statement preparation. Robust systems will make it easier for you to provide current and historical data as well as support in answering necessary questions that could make your business and real estate more valuable.

3. Easily Identify and Document “Add-Backs”
   Whether you’re ready to sell now or you’re several years away, it’s important to begin identifying personal expenses from business expenses in your record keeping. Since personal expenses are removed from your business’ valuation, it can make a significant difference in value. Examples of personal expenses paid by a business could include salaries, payroll taxes, benefits, cell phones, travel expenses, personal vehicles, etc.

4. Employ Strategies for Maximum Value
   With a year’s notice, there are strategies to implement that can make a significant difference in your school’s value. Keeping tuition rates at the cost of care and eliminating discounts, when possible, are great ways to improve revenue. Reviewing your outside services and supply vendors, like food, lawn care and janitorial, to make sure you’re getting the best bang for your buck is also a good idea. Pro tip: Make sure your facility reflects your quality of care by being well-branded and up to date.

5. Grow and Include Your Team
   Your business will gain maximum value when there is little to no risk of parent or staff relationships suffering when you exit. Be sure to work your way out of the job by training your team to run the business in your absence. Also, bring key team members into the selling process to help make them feel a part of your succession plan and get them comfortable with your successor.

Sellers who employ automation and organization are extremely attractive to buyers — especially when the result is a profitable and efficiently run childcare business. If you want to learn more about how best to prepare for the eventual sale of your early education business, don’t hesitate to reach out to our team at info@hingeadvisors.com. We look forward to hearing from you!