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Childcare

How to Buy a Nursery School

Find out if you have what it takes to thrive, as well as how to value and conduct due diligence on a nursery school for sale.

Growing by almost 50% between 2006-2016 the childcare industry has much to offer business buyers.

The future is bright for the sector thanks to the free childcare scheme, a growing under-13s population and rising female participation in the workforce.

Nevertheless, you must also assess your own suitability to a demanding role before launching headlong into the process of buying a nursery school.

Do you have what it takes?

It may be a job filled with fun and games but high professional standards must be maintained. You’ll not only be responsible for the physical and emotional welfare of your charges but you will have to set an example to staff too.

Punctuality, enthusiasm, politeness and rigour in adhering to Ofsted directives are a must. You must be discreet and circumspect when dealing with parents and keep meticulous records of the children’s progress.

Most parents are nervous about leaving their children in your care. It is therefore vital that you are approachable and empathic regarding any worries or special requests.

Can you imaginatively incorporate numeracy, literacy and personal development into artistic projects and creative play? The same plastic dinosaurs and stickle-bricks plonked on a table day after day will soon raise eyebrows.

Complicating matters further, physical, cognitive, linguistic, social and emotional development are all given equal footing in the Department for Education’s principles for adhering to the Early Years Foundation Stage.

Childcare franchises

Perhaps these weighty responsibilities overawe you – but you’re nevertheless convinced you can make a positive difference to childhood development. A childcare franchise might, therefore, be worth considering.

A franchisor can provide extensive training and support in complying with regulations plus readymade templates of activities, policies and procedures.

Childcare franchises offer tried-and-tested business models and economies of scale, potentially resulting in a reassuring combination of trusted brand and affordable prices in a sector notorious for high fees.

The trade-off for all this support, however, is payment of franchise fees and constraints on your creative freedom, since the franchise agreement obliges you to adhere rigidly to the (hopefully) winning formula.

Business transfer agents

A solicitor or business transfer agent with experience of managing acquisitions of nurseries or other educational businesses can help you scrutinise childcare nurseries for sale, obtain and scrutinise relevant paperwork, and conduct productive negotiations and detailed due diligence.

While this comes at a cost, if they help you secure a good price on the right business, it could be well worth the outlay.

Valuing a nursery school

It’s worth doing an independent valuation of your target business since nursery operators tend to overvalue their businesses, according to one expert.

A nursery’s asking price derives from its balance sheet, property value (unless leased), goodwill (reputation among customers and prospective customers) and fixtures and fittings. Profit is gauged according to ‘earnings before interest and taxation’ – or EBIT – multiplied by an industry ratio that varies with market conditions.

According to TrueLegal Solicitors, valuations also take account of location, condition, operating capacity, occupancy rates, staff competence, the standard and number of local competitors and the circumstances behind the sale.

Due diligence

These are all areas you should examine during due diligence – and revise your initial offer downwards, or ceiling upwards, according to your findings. You may even abandon negotiations entirely.

Ofsted reports, which assess the calibre of staff, staff/child ratios, resources, health and safety, quality of activities, special needs provision, child protection procedures and record keeping, are publically available. You can also get a feel whether it’s a well-run operation by simply arranging a visit.

More prosaically, on-site or readily available street parking and decent outdoor space for active play are hugely important. Around 80% of clients of any nursery come from within a five-mile radius, so research local demographics – do plenty of young families live nearby?

How many other successful nurseries are in the area? Perhaps some have popped up recently and the intensified competition is a significant reason for the sale.

Be thorough in your due diligence so that you can find the right business to buy!



Matthew Hernon

About the author

Matthew Hernon is an Account Manager at Dynamis looking after Business Transfer Agents and Franchises across BusinessesForSale.com and FranchiseSales.com.

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