Do you have a “dream” of buying a Child Care Centre business?
Buying a Child Care Centre as a business enterprise is a major decision. It will not only affect you financially, but it may also be a lifestyle decision, often facilitating in a change of career, or even potential driven.
When looking for a suitable Child Care Centre to buy, you should consider looking for a Centre that will give you the opportunity to make the business more productive and more profitable, rather than purely purchasing the Centre to buy yourself a job. You will also find that by working hard in the business to make the Child Care Centre more productive and more profitable, will help you in the long term particularly if you decide to sell the Child Care Centre again.
Things to Consider When Buying a Child Care Centre as a Business
Here is a list of things you need to consider when buying a Child Care Centre:
- How much available cash do you have?
- Do you need finance to buy your business and how much do you need to borrow?
- Do you want to run the business yourself or have the business managed?
- Do you need to prepare a due diligence report and where can you get help in preparing your due diligence?
- Do you need to prepare a Business Plan?
- What is the difference between a “freehold going concern” business, a leasehold business, and an investment?
- How is the sale price of a Child Care Centre business calculated?
- What Rate of Return (ROI) should you expect from your Child Care Centre business?
- What is the average length of settlement time for the purchase transaction to be completed? and
- Do you have to sign a confidentiality agreement as a prospective buyer?
What documents and information do you need to prepare?
To ensure the purchase of your Child Care Centre business goes ahead both smoothly and successfully our expert consultant will work closely with you and he will also guide you through a number of processes, these processes will include:
Preparing a Due Diligence
Preparing a due diligence report is extremely important. Being an expert business and management consultant as well as being a public accountant will enable our “principal” to provide you with the assistance and guidance that you may need in preparing your due diligence report. The due diligence relates to the process whereby you (the buyer) will be required to obtain detailed information (e.g. finance and legal documentation and a hard copy of the lease) to enable you to evaluate the suitability of buying the Child Care Centre. In assisting you in the due diligence process our “principal” will also provide instructions on your behalf to your solicitor (legal representative).
The due diligence report, will help you to:
- Determine the profitability of the Child Care Centre business you are looking to buy;
- Determine your suitability for acquiring the business;
- Determine whether you can buy the business with the cash you have available;
- Determine if you need to borrow the funds to buy the business;
- Determine if your local bank branch is willing to lend to you, or if you need the assistance of a licensed and experienced finance broker; and
- Determine if in fact you still want to buy the Child Care Centre business.
Preparing a Business Plan
Having a strong, well-thought out and in depth business plan is crucial. It doesn’t have to be complicated, but it should at least include a number of key factors such as:
- Your business’s objectives and mission statement;
- A list via a SWOT analysis of the strengths, weaknesses, opportunities, and threats your Child Care Centre business will face;
- The ongoing accreditation, licensing and experience of your management team and other team members;
- A list of your business’s competitive advantage; and
- Your financial projections (i.e. a summary of your income projections for the next 3 years).
Frequently Asked Questions (FAQs)
To help in your decision-making process and while you are researching information. Here is a list of some of the most FAQs that many prospective clients ask themselves:
#1 – What is the difference between a “freehold going concern” business, a leasehold business, and an investment?
- A “freehold going concern business, is where you purchase the property and the business.
- A leasehold business is where you just purchase the business and sign a lease to pay rent to the landlord.
- With an investment, you are only purchasing the freehold property as an investment.
#2 – How is the sale price of a Child Care Centre business calculated?
The location and condition of the Child Care Centre business will determine the sale price of the business. The sale price is generally calculated as follows:
- Freehold going concern Child Care Centre’s should offer a yield between 13 per cent -17 per cent.
- Leasehold Child Care Centre’s should offer a yield between 25 per cent – 30 per cent.
- Investment Child Care Centre’s should offer a yield between 5 per cent – 8 per cent.
#3 – What Rate of Return (ROI) should you expect from your Child Care Centre business?
You should realistically expect the ROI to be anywhere between:
- 12 per cent – 18 per cent for a Freehold going concern Child Care Centre.
- 20 per cent – 25 per cent for a Leasehold Child Care Centre.
- 5 per cent – 10 per cent if you are purchasing the freehold property as a passive investment.
#4 – What is the average length of settlement time for the purchase transaction?
Before settlement can be achieved you will find that the Contract of Sale generally allows:
- 30 days for the due diligence and finance approval (where required); and
- A further 30-60 days for the transfer of the Child Care Centre license.
Reminder: To ensure a seamless and efficient settlement process to occur. It is wise that you contact your local bank or a licensed finance broker as early as possible as this can be advantageous to you in speeding up the settlement process.
#5 – Do you have to sign a confidentiality agreement as a prospective buyer?
You will find there is a simple and straightforward agreement called a Disclaimer, Acknowledgement and Confidentiality (DAC) Agreement that you must complete and sign. This agreement provides you with details and also gives you access to any information of a confidential nature for the Child Care Centre you are interested in acquiring.
Seek Expert and Professional Advice
If you want your “dream” to be realised you will need to get the right professional advice and assistance. Well, you can relax and be comfortable in the knowledge that the expert consultants can guide you through this major decision.
You will also need additional expert and professional advice, from the following experts:
- An accountant, who understands the Child Care Centre business, or at least understands small businesses;
- A professionally qualified finance broker, who has the required expertise to help you obtain the required finance for the purchase of your Child Care Centre.
- A solicitor, who understands what the legal requirements are for buying your Child Care Centre business; and
- A tax accountant, who can explain the taxation requirements for your Child Care Centre business;
Contact Us Today
Why not arrange a consultation, by calling us today on 1300 4 SINGH today or simply click here to ask us a question.
DISCLAIMER: This blog post is of a general nature only and does not constitute professional advice. I strongly recommend that you seek your own professional legal and accounting advice in relation to your particular circumstances.