How to Add Business Value - When Not Looking to Sell

Implementing a few simple strategies can significantly increase the overall value of your school or business. Even though you may not be looking to sell at this time, it is important to focus on areas that will interest a potential buyer, as they will be the ones ultimately assessing the value your school to determine if the business fits the price tag. Below we will go through operational strategies as well as exit strategy ideas to ensure your business is reaching its full potential.

• Increase Revenues

  • Cash flow is the single most important factor to most buyers when considering an acquisition, therefore, the quickest way to add value to your school. Buyers will typically calculate the businesses value by estimating future cash flow and calculating risk. Businesses with sustainable or growing cash flow are less risky for a buyer, meaning they are likely willing to assign a higher value due to the reduced risk and higher future potential earnings.

  • Adding additional program offerings such as a School-Age After School Program or a Summer Program can often unlock additional revenue streams for childcare owners. These are typically underserved markets in the industry and an easy way to drive additional revenue with minimal expense, that is you have the available space.

• Understand your Target Customer

  • Knowing your parent population expectations is a must when operating a successful business. Knowing their price points and understanding the quality of education that you provide are crucial in maximizing profits. As a business owner, you can be charging top dollar and providing bottom tier service, nor should you not charge a premium for being best in town. Identifying the balance between what your facility offers and how your rates compare to the competition are key when operating a successful business.

• Plan and Execute an Exit Strategy

  • Many owners make the assumption that a buyer will see the business as they do, who as owners often place a high value on the owner’s work and emotional connection to the business. Buyers have a slightly different view to your company. While wanting to maintain the integrity and quality you offer, they view it as an investment, and like all investors, they want a high return with little risk. To decide whether your business is worthwhile investment, most buyers look to a few factors:

    • Strategic planning. Do you have a clear, actionable plan to measure results?

    • Strong Management team. Do you have a reliable, well qualified management team capable of running the business in your absence?

    • Owner dependence. Can the business function without you, or will the company’s value immediately decline upon your departure?

    • Recurring revenue base. A multiple stream, recurring base of revenue protects against market uncertainty, meaning you’re not unnecessarily dependent on a single customer or classroom.

    • High entry barriers. The harder it is to enter your niche, the less likely it is that you will eventually be overtaken by a competitor. Long standing relationships in the community go a long way.

    • Scalability. Investments that serve customers and build better products appeal to buyers. Your company should be ready to grow and scale to a larger geographic reach.