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Family-Run Child-Care Center

Financial summary and brief description of a child-care center.
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The Business Literally, a "mom-and-pop" operation, ideal for the entrepreneur with young children: the company consists of three sites offering child care (for kids through age six, accounting for 73% of revenues), a private preschool and kindergarten, a Montessori school (for ages two and a half through six), and a summer day camp -- all in the sylvan suburbs of a major Pennsylvania city.

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Financial Summary 1989 1990 1991*
Revenues $338,000 $395,000 $414,000

Net profit before taxes $46,000 $67,000 $68,000

and owner compensation *projected

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Price $940,000

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Outlook Thanks to career-conscious but still family-minded baby boomers, who produced a record 4.2 million children last year, child care is a burgeoning business -- worth nearly $20 billion and projected to be the eighth-fastest-growing U.S. industry through the turn of the century. Does that spell opportunity? Maybe. There are more than 1 million established day-care setups of all sorts, and some analysts already see a competitive pinch. Whether because of price competition among operators or the pressure brought by customers whose own budgets are tight, cost is a big issue in day care, and that keeps profits for most care givers tot-sized -- just 8% to 10%.

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Price Rationale The asking price includes $470,000 worth of assets (land, buildings, fixtures, supplies), and $470,000 toward 20 years of goodwill and a consulting fee for the owners, who will stay on to ensure a smooth transition. Experts say an optimally run center should operate at no less than 75% of licensed capacity; this one is running below 60%. Experts also say the price may be high. Formulas aren't gospel in child care, but one industry-experienced broker says 10 times expected earnings (or $680,000) would be more typical.

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Pros The market is predictable and growing. There's potential for new income sources (summer camps for older children). And you get to bring your kids to work.

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Cons You'll never create customers for life (children grow up). Margins are kept low by price-aggressive competitors. And you get to bring your kids to work.

-- Alessandra Bianchi

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Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed by mail only to P.O. Box 272, Brookfield, OH, 44403-0272. n

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Last updated: Sep 1, 1991




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