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The Importance of Having an Exit Strategy

 

Even if you don’t have an immediate intention to sell your childcare centre, it’s important to consider your exit strategy.Firstly, let’s define the term; in the majority of situations the phrase ‘Exit Strategy’ does mean that you are positioning your business for sale, however, it could also mean that you are taking yourself out of your current role and hiring a centre manager, or retiring and passing your business onto the next generation.

Reasons Why You Need an Exit Strategy

An exit strategy can take many forms, but whatever your situation is, here are some reasons why you should have one:

  1. Someone Makes You an Offer

    If you have an exit strategy, you will be able to have a meaningful conversation, with an understanding of your company’s worth.

  2. Your Health or Family Situation Changes

    Sudden illnesses or family issues take time away from your focus on your business.

  3. Economic Shift

    A recession may negatively impact your business. If you have a well thought out plan, you can move quickly and protect yourself against loss of capital.

  4. You Want Options

    Through the process of planning your exit strategy, you might find that there are other options as well as selling outright that could give you a good return on your investment.

  5. Aging and Retirement Plans

    At some point, you may want to retire and you will want to capture the value of your company.

  6. Demographic Shift

    Society is not static, populations migrate, businesses relocate, schools close or move and retirement villages take their place. This doesn’t happen overnight but shift in age group or wealth may lower your revenues.

  7. Wear and Tear

    Properties require maintenance and only you will know how quickly the day-to-day wear and tear of running a childcare centre is affecting the building and surroundings. If you can foresee major renovations being required in 5 or 10 years, it might be to plan your exit so you still make the most out of your investment.

Where to Start

The Key points for consideration when planning your exit strategy:

  • What is special about your location?
  • Your premises and lease arrangements (if yours is a leasehold business);
  • Your employees, roles jobs and costs;
  • Assess the value of your equipment, furniture, toys, office computers etc…
  • Consider your services and your curriculum;
  • Your relationship with the parents of the children in your care;
  • Your view of your competitors, their size and their locations;
  • Any compliance issues such as licenses;
  • Your management arrangements, role, jobs and costs.
  • Get your centre appraised by an industry expert.

It’s Best to Have Expert Advice

It takes more than placing a listing on Gumtree to sell a Childcare Centre. Think of all the considerations that need to be made before selling your house. The most common advice is to make some repairs, paint the house, spruce up the yard, and get rid of clutter. Likely, you will still want to hire a professional local broker who understands the importance of confidentiality, the specifics of childcare centre valuations, regulations, and contract negotiations.

The most successful exit strategies are the ones that were planned years in advance and with expert advice. Childcare Concepts in collaboration with PwC, Kenneally & Co Lawyers, ACA NSW and it’s partners at Yellow Brick Road and Ezidebit are running a workshop later this year in Sydney for Childcare Centre Owners. These industry experts will be speaking on a range of subjects including; exit strategies, the legal requirements of selling and buying, investing and broaden your portfolio, business development and optimising your investment potential. There will also be a Q& A session where you can get answers for any issues you have about your Childcare Investment.

Register your interest in attending this workshop by clicking here and emailing us with the subject line “expression of interest workshop 2016”

 

If you found this blog useful you might also like:

Why it is important to know the true value of your investment.

Currently Considering Your Options to Sell Your Investment?

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