Selling your nursery business is a big decision, so it’s important that you ensure that you and your business are prepared. We have put together the top 10 questions that sellers ask about the process to help make your business sale go smoothly:
1. What will I need to provide to ensure my business is ready for sale?
You will need to provide…
• The last 2 years of financial statements (annual accounts)
• Management accounts for the period since the end of the financial year (if it’s more than 6 months since the financial year end)
• Evidence of the quality of the business e.g. Ofsted reports, parent surveys, staff surveys and training records
2. Should I sell the shares of the company or the assets?
It’s usually better to sell the shares of the company rather than the assets, as this means there is no need to change staff contracts. There are also significant personal tax benefits, including being eligible for Entrepreneur’s Relief meaning that you will pay only 10% on all gains on qualifying assets.
3. How much is my nursery business worth?
The value of the business is normally calculated on a multiple of adjusted profits, and thismultiple can vary dependent on various factors, including geography and the size of the business (based on the number of placements & number on roll)
There may also be a further payment in lieu of the net current assets.
4. What information will the buyer want?
The buyer will be interested in…
▪ The financial performance (profitability) of the business
▪ Details of charge and pay rates, number on role, capacity, existing contracts
▪ Whether any specialist childcare is provided e.g. SEN, ASD
5. How long does the sale process take?
In our experience, the sales process is normally 10 – 12 weeks, if most of the above information is readily available. We would advise that you don’t underestimate how long the sales process will take, and make sure you factor in any delays into your future plans.
6. How do I keep the sale process confidential?
Potential buyers should sign a non-disclosure or confidentiality agreement before any information about your business is shared with them. We also recommend that you hold meetings with professionals involved in the sale (e.g. advisors, lawyers & accountants) away from the nursery and outside opening hours if possible. Finally, try to ensure that any contact regarding the sale is made via sensitive and secure means, either by personal mobile phone or private email address
7. What costs will I incur?
▪ A corporate finance advisor will generally charge an agreed percentage on the total sale price, to be paid on completion of the sale
▪ Depending on the complexity of the business (e.g. number of staff, property leases) a corporate solicitor will provide you with a fee quote in advance of starting the sale process. This will typically be +/- 1% of the value of the sale
▪ Again, depending on how up to date the financial information of the business is you may also need additional support from your accountant
8. Can I use my own solicitor and accountant?
Yes, although you should check whether they have experience of commercial transactions as this will make the sale process run more smoothly.
9. How much tax will I have to pay on the monies I receive?
Normally the sale of shares in a small / medium sized business will qualify for Entrepreneur’s Relief, which means you’d have to pay a one-off tax charge of 10% of the net proceeds you receive from the sale
10. Will the buyer want to purchase or rent the property from which the nursery is operating?
This will depend on the individual buyer’s requirements, but they’re often keen for the business to continue trading from the existing premises post sale. The buyer will either agree to take on responsibility for the existing lease / management agreement or will enter into a new lease / management agreement for the premises or purchase the property
Diane Elliott worked in the Health & Social Care sector for over 13 years, in a variety of management roles before joining Phoenix in 2010. Phoenix BSC have over 60 years combined Health, Social Care & Education Sector experience and offer expert advice, guidance and support throughout the process of selling your business.