Is now the right time to sell? Inflationary trends pave the way for high valuations.

The Bureau of Labor Statistics (BLS) recently released its monthly report on inflation, and the numbers show that prices have continued to rise at a steady pace. The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in March on a seasonally adjusted basis, after increasing 0.4 percent in February. Over the last 12 months, all items index increased 5.0 percent before seasonal adjustment, the largest increase since 2018. One area that has seen a significant increase in costs is childcare, daycare, and preschools.

The cost of tuition, other school fees, and childcare (TSFC) has been rising steadily over the past few years, and this trend has continued in 2023. According to the BLS, the TSFC increased by 0.3% in March and 3.7% over the past 12 months. The increase in childcare costs is driven by several factors, including higher wages for workers, increased demand for services, and new health and safety protocols in response to the COVID-19 pandemic. Daycare and preschools have also seen significant cost increases over the past year. The cost of preschool and kindergarten tuition increased by 1.0% in March and 6.8% over the past 12 months. This increase represents one of the largest year-over-year growth in the last decade. These increases are a result of rising labor and operational costs, as well as the increased demand for services as more parents return to work. While the rising cost of childcare is a concern for many families, it presents a significant opportunity for childcare providers to increase their revenues and improve the quality of care they offer to families. With the demand for services increasing, providers can raise prices to reflect the true value of their services. This not only benefits the providers themselves but also helps to support their staff and improves the quality of care they can provide.

With the continual increase in the cost of childcare, daycare, and preschool services, it is expected that the business valuations of childcare providers will also experience a surge. This is primarily due to the fact that higher revenues and profits typically lead to higher valuations. With the growing demand for such services, childcare providers can raise their prices and increase their revenues, consequently resulting in a higher valuation. Additionally, investing in new technology and training programs can enhance the efficiency of their operations and enable them to provide better services to their clients, thereby increasing their profitability and scalability and ultimately resulting in higher valuations. Furthermore, the increasing demand for childcare services can foster a more competitive market with more potential buyers for businesses that are looking to sell, leading to higher valuations as buyers are willing to pay a premium for well-positioned businesses that can meet the growing demand for services.

Given the current market conditions, now may be a particularly advantageous time for childcare providers to consider selling their businesses. With the rising demand for childcare services and the potential for higher valuations, providers may be able to fetch a premium price for their businesses. However, it's important for providers to carefully consider their options and work with experienced professionals to ensure they receive the best possible value for their businesses. A business valuation expert can help providers understand the true value of their business and identify areas for improvement to maximize their potential sale price. An experienced M&A advisor can also help providers navigate the complex process of selling their business and find qualified buyers who are willing to pay a fair price.

In conclusion, the current market conditions offer a unique opportunity for childcare providers to capitalize on the rising demand for services and potentially increase the value of their businesses. Whether providers are looking to sell their businesses or simply improve their operations, working with experienced professionals can help them achieve their goals and position themselves for long-term success.