- We’re in a time when our industry is being described as “broken” or “in crisis”. It’s not the first time we’ve been broken or in crisis. We will solve the shortage of teachers issue and we will bounce out of it. The only real questions are will you catch the bounce and how high will your bounce be.
- In every part of life, there are a very few who are truly exceptional in their field. These are the entities (people or companies) that provide you with the best service, the most confidentially and the absolute best results, and they do it consistently. Most people and companies are trying or simply pretending to be exceptional. Unfortunately, when brokers make mistakes in the childcare industry, it can be the difference between a secured retirement for the client or a loss that never gets repaid. For many people, selling their early education company is a once in a lifetime event…an event where you do not want any mistakes.
- Recently, I received an email at work in which the brokerage company (a fairly well known company that presents itself as a childcare broker specialist) sent an advertisement to me for a single childcare center that they represent in a small town in the Southeast US. This advertising information included the name of the small town, the exact licensed capacity of the center and negotiable deal points that the seller was apparently willing to concede to any buyer. All of this information was provided without an NDA (Non-Disclosure Agreement) being signed. I don’t think for a second that this company, broker or agent means to purposely do harm to their client. Generally speaking, I think the people in this industry mean to do good. However, with the information provided by this brokerage, a curious but unprofessional or inexperienced buyer could…a. Identify the center.b. Walk into the center, show the advertising piece and ask the seller’s staff about buying the center.c. If it was a competitor, the competitor could send copies of the advertisement to the center to scare the teachers and then swoop in and hire the teachers for their own childcare company.d. If the buyer was legitimately interested in buying the center, then this information almost guarantees lower offers and more difficult financing for buyer.
- These types of mistakes happen often in our industry. There are lots of brokerages claiming to understand childcare because they have sold a hand full of centers. Trust me. At five or ten centers, you haven’t even scratched the surface of professional mergers and acquisitions in the early education industry. I’ve taken many calls from people whose companies were put at risk because a salesman type didn’t understand the meticulous requirements for managing an early education company divestiture. Being a good salesperson does not mean that you can manage an M&A transaction. You must know how to both promote and protect your client. Protecting your selling client by operating under proven Standard Operating Procedures (SOPs) can also make the transaction less stressful, faster and easier for the staff, the parents and the buyers of the centers or schools…not to mention more profitable for the selling client.
- We have talked with the owners of many early education companies, some with one or two centers or schools and some with 15 or more. Many became our clients after suffering some of the following industry mistakes:
a. Brokerage underpriced their company.
b. Brokerage didn’t understand the need for exceptional discretion.
c. Brokerage gave buyer’s business information to buyers who weren’t financially or educationally pre-qualified to buy their company.
d. Brokerage didn’t redact the private information (think Social Security Numbers) in their tax returns and other private documents.
e. Brokerage didn’t have a strong enough NDA…or didn’t have the buyer sign an NDA before exposing the identity of their selling client.
f. Brokerages that didn’t know or understand the specific state regulations. Each state has its own set of regulations and while they can be very similar, they’re not all the same. Nobody wants a deal that starts with a contentious relationship with state licensing.
This list is not exhaustive. These are just some of the more common mistakes we see in the business. - Fortunately, the cure to these and other issues is simple. Ask the hard questions of any brokerage or consulting firm you’re considering. We have closed our clients’ transactions ranging from one or two million to $30 or $40 million and the thing that has remained constant is nearly everyone we have worked with is genuinely nice. However, sometimes this trait stops people from asking the more direct questions that we need to ask. ASK all of the hard questions. No matter how big or how small the issue, ask the question. A solid, high-quality brokerage firm will have no fear of giving you direct and honest answers to your questions. Some basic questions that you should ask of any brokerage firm are as follows:
a. Confirm that the brokerage firm specializes in the early education industry. Selling convenience stores, motels and restaurants is great, but it does not qualify a brokerage to sell childcare centers, preschools, Montessori schools or private elementary schools.
b. Confirm years of experience in the early education industry. Nobody starts out selling $50,000,000 worth of centers a year. It takes time to build up to this level.
c. Always ask for references and don’t settle for a name and an email address or a phone number. People get busy with their life after they sell their company. They get into travel, their next company, charitable pursuits…etc. Make sure you can get verifiable comments from the former clients of the brokerage.
d. Check their Better Business Bureau rating. The BBB rates businesses on a scale from A+ to F. It’s easy to check the report card. If they say they don’t have a BBB rating, ask them why?
As always, we’re here to answer your questions.
Brad R. Barnett, President / Principal Broker
BFS®
Barnett Real Estate Services, Inc.
As Referenced Above:
BFS Home Page: https://bfsinc.net/
BFS References: https://bfsinc.net/references/
BFS Selling Page: https://bfsinc.net/selling/
Childcare Millions Book & Profits for Children’s Charities: https://childcaremillions.com/