How Much Is My Preschool Worth?

When you’re ready to sell your preschool, you’ll want to determine how much your preschool is worth first.

It’s quite a lengthy process to get your preschool ready to sell, so don’t take it lightly.

To determine your preschool valuation and how much a bank might loan someone to buy it, you need to get together some paperwork.

GATHER YOUR BUSINESS FINANCIALS FOR 3 YEARS

When you’re reviewing your financials (profit and loss statements), you’ll see gross income and net income. Gross income is the amount of revenue your business made before expenses or taxes were taken out. Net income is the amount of profit you actually made after expenses and taxes were taken out.

WRITE DOWN YOUR NET INCOME FOR 3 YEARS

Once you have the 3 numbers written down, add them together. Then divide the total by 3. That number is your average net income. Example:

• 3 Years’ Net Income: $60K, $80K, $100K
• Total: $240K
• Total divided by 3: $80K Average Net Income

WRITE DOWN YOUR AVERAGE NET INCOME

Once you have your average net income, multiply it by 4 (that includes goodwill, furniture/inventory, mentorship, etc.)

• Average Net Income x 4 = $320K Business Valuation

WRITE DOWN YOUR BUSINESS VALUATION

Your business is valued at $320K, and you could sell your preschool for a minimum of $320K. In other words, if you find a buyer that agrees to pay you $320K for your preschool, then it is highly likely that your buyer will be able to get a loan for the full amount (minus a small down payment) as long as these are in play:

• Buyer has good credit and employment history
• Seller has strong financial books and tax returns that prove the average net income
• A business plan (and supporting documents) show a strong, healthy, growing preschool business

If you want to sell it for more than the business valuation, you can increase the sales price. However, remember that a bank will only loan UP TO that amount, so any additional money above the business valuation would need to be brought in cash to closing.

The reality is this: Your business will sell at exactly the moment when you find the buyer willing to pay your asking price, and not a moment sooner. You need to find the right buyer and you need to ask the right price.

Put those 2 variables together and you’ll be able to sell your preschool successfully now that you know how much your preschool is worth!