Buying vs. start a new Child Care

So what’s best for you, buying vs. start a new child care. Most buyers also tend to think that buying a business 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 child care center.

Most of the times, buying an existing child care or school is less risky. Here are some of the reasons to consider:

Cash flow

When you buy an existing child care or any school, you take over an operation that has a track record. Usually the last three years of financial statements are provided to the buyer 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 start-up 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 accreditation are not transferable,  the buyer and seller usually get into an agreement so the new owner can operate while the new license is being process.

Permits and licensing during the initiation of a brand new child care could be very challenging. When considering buying vs. start a new child care this is one of the most important aspects.

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

Employees

Good employees are not easy to find.  This is an important 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

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

Not all established schools qualify to be financed. Schools that have been established for less than 2 years is one example.

Conclusion

When considering buying vs. start a new child care, is important to do your homework. One option is more predictable, based on past performance, but the other could offer you great returns in the long run. Make sure you double check all the numbers before making a decision. It is very common when starting a new preschool, to underestimate the time it will actually take to open.

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

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