Child Care Business Valuation – What you need to know

How to value child care business accurately is essential if you are serious about selling. Naturally, the buyer’s valuation is usually very different from what the seller believes the school is worth. There is not a precise method for Child Care Valuation, but here we will explain how to get a good accurate number.

Owners are usually emotionally attached and they factor their years of hard work into their calculation, but these emotions get in the way of the Child Care Valuation. The first step to successfully to arrive at a price is to make sure that we look at the business objectively.

The “Potential” of the business

There are always experienced buyers might be looking for good opportunities, and it is common for the Seller to promote the “potential” of the business as an asset they expect to have that extra value as part of the valuation.

An school that have room to grow or improve, is more attractive to buyers that could take advantage of that potential; but is also a risk. The Buyer needs to implement changes and often invest money, with the expectation of having a reward after doing so. Expect that an educated Buyer is going to based the offer on the current situation of the business.

Child Care Valuation

 

Child Care Valuation based profits multiplier

There are several methods used to arrive at the best Child Care Valuation possible. To start we use the last three years of taxes and financial statements. These of some “Rule of Thumb” for  how to value child care business. This is why it is important to look at every rule that applies to the center before making a determination.

  • EBITDA multiplier.

    • 2.5 to 4 times for business only.
    • Up to 7 times for business and Real Estate.
  • SDCF multiplier.

    • 1 to 2 times for centers with less that 100 capacity.
    • 2 to 3.5 times for centers licensed between 100 to 250.
    • For larger centers 3 to 4 times the SDCF.
  • Annual revenue multiplier.

    • 30% to 45% for business only.
    • 140% to 300% fo annual revenue for business and Real Estate.

A multiplier of the EBITDA is the most commonly used method for Child Care Business Valuation, but the final price depends on things like condition of the real estate building, (if applicable), number of locations, and years in business, among others.

Based on License Capacity

License capacity is also a good indicator on how to value child care business. For centers without Real Estate the factor is between $1,000 and $2,500 and for Business including Real Estate, $6,000 to $14,000.

This of course, is a guide to set a reasonable on how to value child care business. The Seller must expect a lower offer that the original price and needs to be ready for negotiations. The final price depends on variables like the market, “supply and demand” at the moment, motivation from the Buyer, financing options, etc.

Contact us for a Child Care Business Valuation

We charge nothing, send us an email to info@llunainvestments.com or call 954-691-9394 for a no cost Child Care Valuation.

Related: — Selling a Child Care — Contact us


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