Know How To Count Your Money In Early Education

Whenever professionals discuss the financial performance of early education companies, the conversation will always include “cash flow”…and that can be dangerous. The term “cash flow” can mean many different things and it can be the cause of material misunderstandings that can lead to litigation or you losing some of your money…or both.

Instead of using the term cash flow in your discussions, use the term EBITDA. EBITDA means…
Earnings
Before
Interest
Taxes
Depreciation and
Amortization (of non-tangible assets—not loan amortization)

It is commonplace for Earnings to include compensation paid to the company’s owners including salary and benefits like the owner’s health insurance, company car…etc.

EBITDA is a much better indicator of a company’s true cash flow and its ability to meet its obligations as it includes the non-cash tax deductions of Depreciation and Amortization. EBITDA shows you how much money you have not how much you have on paper.

ALWAYS: If you’re in a conversation with someone who uses the term “cash flow”, ask them if they are defining cash flow as EBITDA…or simply ask them how they are defining cash flow. Many sales people like to use the term cash flow. It’s vague. It allows for a lot of latitude. People depend on you. It’s always best to be very clear when you’re talking about your money.

Listen to an enhanced audio version of this article below...

All the best,

Brad Barnett
President, BFS^®
Don’t settle for less than a proven early education company—Talk with BFS^® for the Expertise and Individual Attention you deserve.

"Thank you for your assistance selling our preschool. Your attention to detail, professionalism, and constant support allowed for a potentially difficult and confusing venture to occur without a hitch."

John and cheryl karay

Former Owners of Kinder College, Inc

Hopkinsville, KY

BFS^® is the Largest Non-Governmental Provider of FREE Resources to the U.S. Early Education Industry. If you have questions on a topic, watch a quick video by going to our YouTube Channel or access information by going to our Instant Q & A page.

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(Legal Disclaimer: Always consult the proper professionals before taking action. By and before the use of the information provided herein, reader agrees that BFS^® is not responsible for viewer’s actions related to said information.)

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