Buying vs. start a new Childcare

So what’s best for you, buying vs. starting-up a new childcare business. Most buyers also tend to think that purchasing a daycare would cost more than starting a brand new facility from scratch. That may be true for some other types of businesses, but it’s usually not the case when starting a brand new school or a childcare center.

Most of the time, buying an existing childcare business or school is less risky. Here are some of the reasons to consider when buying vs. starting-up a new childcare:

cash flow in a childcare business

Cash flow

When you buy a childcare business or any school, you take over an operation that has a track record. Usually, the Seller provides the Buyer with the last three years of financial statements and taxes for analysis. The Buyer will also analyze the needs of the school if any, short term and intermediate goals and based on that; the Buyer could make an informed decision and make predictions. A startup business, on the other hand, must rely on spreadsheets with projections that cannot be supported.

 

Permits and licensing

Licensing requirements and permits could create unexpected delays before opening the doors of a new facility. Although the license and most of types of accreditations are not transferable,  the Buyer and Seller usually get into an agreement so the new owner can operate while he or she receives the new licenses.

Permits and licensing during the initiation of brand new childcare could be very challenging. When contemplating buying vs. starting a new childcare business, this is one of the most essential aspects to consider.

Consider a one-year time frame (yes, one year) for opening a new childcare center, starting the day you sign the lease agreement.

Employees

Good employees are not easy to find; this is a significant advantage when buying an existing facility; the employees are already there. The new owner will have the opportunity to keep some or all of those employees and make any other necessary changes.

Another important consideration when opening a brand new facility is that there is no other choice but to hire teachers and other personnel before even opening the doors, without having kids enrolled.

Financing your childcare businessFinancing

SBA loans are available for startups as well as business acquisitions; however, it’s easier to get funding when buying an existing business. Bankers and investors generally feel more comfortable dealing with a company that already has a proven track record.

Not all established schools qualify for financing. Schools that have been established for less than two years is one example.

Conclusion

When considering buying vs. starting a new childcare business, it is vital to do your homework. One option is more predictable, based on past performance, but the other could offer you high returns in the long run. Make sure you double-check all the numbers before making a decision. Frequently people underestimate the time that takes to open a new childcare center.

Contact us with any questions at 954-691-9394 or email info@llunainvestments.com

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