Selling a Childcare Business
Exiting a small business is a complex venture that needs advance considerion, is crucial to get all in order before you offer your daycare or school for sale.
Most of the businesses listed for sale never sell. Lluna Investments is a company that specializes in the school industry. Our success depends on your successfully closing the deal. Selling childcare centers is what we do best.
First One. Identify
First, all the partners of the business should sign a Partners Resolution to Sell. Second, they need to look at the facility condition and get some essential documents ready. The process for Selling a childcare center is similar to other businesses; however, there are some crucial differences, like notifying DCF before closing.
Successfully selling your preschool requires some preparation, for instance, assembling a team of professionals that you trust ahead of time, considering tax that will trigger after closing before you sell, and review and update all business finances to be ready for due-diligence.
Sellers will need to contact a group of professionals to help to prepare for the sale. Although a real estate broker will be handling most of the initial offer and contract, consultation with a real estate attorney is advisable and sometimes essential. The sales contract of a childcare center or school could involve specific clauses.
A CPA could help before, during, and after the sale. Consider the following with your CPA.
Have an exit strategy prepared before you sell your business is crucial — a clear view of what will be your next step before you close on the sale. Talk to your CPA regarding Capital Gain and Depreciation Recapture taxes. There are ways to deferred for years or indefinitely, some or all of those taxes.
At Lluna Investments, we can work together with your CPA and provide you with a plan for a Structure Sale that could deferred Capital Gain taxes while helping you sell at the best possible price.
Qualified Intermediary for 1031 Exchange
1031 Exchange is another way that you could differ taxes if applicable. It requires planning with your QI and your broker from Lluna Investments to identify and close on another Real Estate property within 180 days of closing. Contact us for more information.
The right Business Broker
Hiring the right broker makes the difference between closing the deal or not closing. Lluna Investments sold childcare centers to buyers in the US, South America, Canada, and Europe. We assist with all aspects of the negotiation, valuation of the business, and real estate, with marketing while keeping full confidentiality, qualification of the potential buyer, and more.
Your sale will be Confidential.
Confidentiality is not an issue when selling a business like a gas station. Advertising the sale of a gas station does not affect gallons of gas pumped every day. Customers will continue to go to the gas station even if they know that the business is for sale.
That is not the case when selling a childcare business or school; Non Disclosure Agreements are an essential part of the deal. When there is general knowledge that the school is for sale ahead of the closing date, teachers and parents start to worry because of the unknown future of the school.
The best way to keep the sale confidential is to hire an experienced broker. At Lluna Investments, we have the experience needed, but most commercial brokers are not familiar with the process and pose a risk.
School Valuation Service.
Pricing the school right is essential for your bottom line, and also crucial to make sure that the offering price your school outside of the real market value. Having a price that is too high will only favor other sellers and hurt your listing.
It is crucial to have all the documents ready beforehand, or the Seller could miss an excellent opportunity with a qualified Buyer. The minimum documentation needed will depend if the Real Estate is part of the sale. To start here is a list:
- Last three years of corporate tax returns
- YTD financial statements.
- Payroll summary
- List of staff, including accreditation information and salary information.
- Information about any leased equipment.
- Governmental program details. (VPK – Food program – School Readiness and other programs in place.)
- Breakdown of current enrollment.
- Accreditation information.
- Other information you think is relevant.
- Copy of the lease agreement (if applicable).
- Landlord or mortgage holder information.
- Floor plan of the facility.
- Provide if possible, the previous title insurance policy (if including the Real Estate).
- Survey (if applicable).