An overview of a child-care center offered for sale. Includes the price, how the business was valued, the outlook of future sales, and the pros and cons of the purchase.
The Business: Popular lore may say it takes a village to raise a child, but conversely, it could be that all one needs is a group of kids to raise a profitable business venture. Consider this nine-year-old child-care center, located close to Charlotte's booming business district. With its state license for 116 students; lucrative tuition subsidies for single parents, available from North Carolina's Child Care Resources program; and expertise with children, from infants to after-schoolers (up to age 12), this business could advance as quickly as a 2-year-old--if placed in the care of a growth-minded new owner. The current owner is ready for recess, but her staff of 10 will probably stay around for next period.
Price: $270,000 (With $130,000 down, the seller will provide 10-year financing at 8% interest)
Outlook: With Bill and Hillary focused on early-childhood education, the kidbiz hasn't looked this strong since the Muppets hit Sesame Street. But in an industry in which many child-care facilities struggle to survive, this center deserves an A+ for the strength of its cash flow, its high profit margins, and that most important factor: location, location, location. Although the licensed-student capacity of the center's leased 4,016-square-foot facility (complete with two playgrounds, seven classrooms, and a kitchen) is maxed out, a new owner could relocate to bigger digs or reproduce the center's proven business concept elsewhere, either in or out of town. The only issue worth debating: might there be a payoff to upgrading from North Carolina's "A" to "AA" status? That would require the center to increase the number of staff per student but also would permit charging higher fees than the current weekly rate of $115 per full-day child and $78 for after-schoolers.
Price Rationale: In industries like this one, in which nonprofits and mom-and-pops compete with national chains, there's only one rule of thumb: buy a business that has already proved its ability to earn money. This one looks ideal during show-and-tell, despite the costs of a hefty liability-insurance blanket of $500,000 per child. Since day-care centers generally get valued at around 50% of gross revenues, a fair price for this Southern belle might be about $217,000. Of course, a bidding war could push the price higher, but the center's lack of real estate holdings would make that tough to justify.
Pros: If you like kids (and love all those government subsidies), you can quickly advance to the head of the class.
Cons: Unless you want to wind up a small-fry, you'll have to figure out how to build growth in a business that's already operating at full capacity. That's a heck of a lot tougher than learning your ABCs. -- Jill Andresky Fraser
*Before interest, taxes, depreciation, and owner's compensation.
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 to Brian Keys Hands, VR Business Brokers, at 704-676-0940.