Open Discussion Forum

  • 1.  Business Aspect of Private Preschools

    Posted 09-29-2022 12:21 AM


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    Carina Carpio
    Lead Teacher
    Hillside Montessori School
    San Juan Capo CA
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  • 2.  RE: Business Aspect of Private Preschools

    Posted 09-30-2022 03:18 PM
    Carina Carpio,
    I owned my own Montessori School/Childcare for 14 years, and then sold the business to an employee two years ago.  Currently I am the Director of a school district's after school childcare program.
    I think it is wonderful that you are being given an opportunity to have a mentor before taking over the reigns solo!  I am curious if you had, prior to bring offered this proposal, expressed interest in a director role and/or buying the business?  Regardless, I'll continue to share. 
    I ran my center for 10 years by myself- teaching full time and running the business- I do not know how I managed to do so for so long!  It was very stressful on me, and my family.  I eventually hired someone to help run the licensing and enrollment side of things- she took that over and worked part time in the office and I worked part time in the office and part time in the classroom.  I enjoyed teaching the morning half of the day, and having the second half of the day to address administrative duties and collaborate with the other office employee.  Eventually her title became "administrative assistant", and then as I was preparing to sell the business, she took over more responsibilities, and I bowed out.  She was not the employee that ended up buying the business though- she had intended to but changed her mind, and we have been able to remain great friends fortunately.  The employee that bought the business moved into the Owner role and the administrative assistant continued in her role. 
    To sum up, it was very hard to balance my personal standards of teacher role with the responsibilities of a great director, and be a mother and wife....and don't forget your personal hobbies because your health and happiness should come first.  It is important that YOU feel like this is a balance you want to achieve, and feel realistic about being able to do so and stay healthy yourself.  There is so much support out there for Directors and Teachers, I think it is possible to do both for sure!  
    My next question is, will you have a contract in advance?  5 years is a long time and many things can change.  It is important that you want to do this, each step of it, and if you really want to take over the business, it's important that you both have things agreed upon before entering this new work-relationship.  All the while, it is important that the Program and the children involved are well taken care of.  
    It is not easy to buy a childcare business, and in order to do so, one must be creative, resourceful and think outside the box (most banks will not lend to a "childcare" as a business as there is no "collateral" in other people's children, so saving or finding a private lender was the only way I have heard of others buying an already existing childcare business).  The proposal you have been given sounds like a good path towards taking over the director responsibilities, and buying an already established childcare business.  
    I hope sharing my opinion based off my experiences can be of some help to you.
    Good luck! 
    Sincerely,
    Annette Evans

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    Annette Crosiar
    Director
    Ventures Program Sitka
    Sitka AK
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    Original Message


  • 3.  RE: Business Aspect of Private Preschools

    Posted 10-03-2022 09:37 AM
    Hi,

    The first question is what is your personal goal and where would you like to be professionally in 5, 10, 15 years? If you see yourself as a business owner of a school or need to have a better understanding of what that means, then educating yourself is important. Owning a business goes beyond understanding the finances. I would enroll in a start your business course or webinar through your local Small Business Development Center. They are government funded and all their resources are free. When purchasing a business, always ask how the value of that business is determined and research to see if the price is fair. Know your demographics and see if there will be enough children to sustain your business long-term. I would review the school's business plan and understand each area. If they do not have one, develop one. Lastly, how will the purchase be funded? Do you have enough personal finances or will you need to borrow? If you need to borrow how good is your credit and do you have a trusted contact at a bank or financial institution? Remember when you go into business you want the business to financially sustain you not you sustaining your business.

    From experience, teaching and directing at the same time is doable but hard work. The time you have to just focus on teaching is split because now you have to make sure that all the administrative tasks are completed. I don't want this to be discouraging, but personally neither was part-time. I was the director not the assistant so this may be different for your situation. 

    Hopefully this is helpful.

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    Cynthia Largent
    Midlothian TX
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    Original Message


  • 4.  RE: Business Aspect of Private Preschools

    Posted 10-04-2022 05:03 PM
    Hello Carina,

    Our family has owned a private childcare center in Texas for the past 40 years.  8 years ago, ago we built a brand new, second center, from the ground up, which was a daunting task.  In order to give you a better perspective on what you might be facing, could you provide a little more information about the center you would be purchasing five years from now.  For example, how long has the center been in business, what is the actual enrollment versus the licensed capacity, what is the mix of private pay versus subsidized pay students, have ya'll had any staffing issues in the last 12 months and is there any large outstanding debt on the businesses?

    Everyone always thinks it would be great to own their own business and that business owners make all of the money.  On the front end it may look like we make a lot of money and in some cases we do, however, we don't get to keep it.  Most of it goes out the back end.  If you don't have a source of secondary income, you can get into financial trouble very quickly if you don't understand that a private school/daycare has to be a business first that is able to pay its bills, pay its employees and have enough money left over to pay you as the business owner.

    I look forward to hearing more about your potential future venture.

    Sincerely,

    Tim Kaminski, Director/Owner
    Gingerbread Kids Academy
    Richmond, TX

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    Tim Kaminski
    Director/Owner
    Gingerbread Kids Academy
    Richmond TX
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    Original Message


  • 5.  RE: Business Aspect of Private Preschools

    Posted 10-06-2022 12:33 AM


    Hello Carina,

    Our family has owned a private childcare center in Texas for the past 40 years.  8 years ago, ago we built a brand new, second center, from the ground up, which was a daunting task.  In order to give you a better perspective on what you might be facing, could you provide a little more information about the center you would be purchasing five years from now.  For example, how long has the center been in business, what is the actual enrollment versus the licensed capacity, what is the mix of private pay versus subsidized pay students, have ya'll had any staffing issues in the last 12 months and is there any large outstanding debt on the businesses?

    Everyone always thinks it would be great to own their own business and that business owners make all of the money.  On the front end it may look like we make a lot of money and in some cases we do, however, we don't get to keep it.  Most of it goes out the back end.  If you don't have a source of secondary income, you can get into financial trouble very quickly if you don't understand that a private school/daycare has to be a business first that is able to pay its bills, pay its employees and have enough money left over to pay you as the business owner.

    I look forward to hearing more about your potential future venture.

    Sincerely,

    Tim Kaminski, Director/Owner
    Gingerbread Kids Academy
    Richmond, TX

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    Tim Kaminski
    Director/Owner
    Gingerbread Kids Academy
    Richmond TX

    Original Message


  • 6.  RE: Business Aspect of Private Preschools

    Posted 10-06-2022 02:22 PM
    Hi Carina,

    Thank you for sending the additional information on your center.  Based on the information you sent, here are some things to consider.  When a bank lender is looking at whether they will finance the purchase of a business (regardless of the type), they will want to know the financial history of the business, the experience and financial background of the person wanting to purchase the business, and then how successful are other similar businesses in the area.

    On the plus side, the center you are at has been around for a significant amount of time, under the same leadership and they own the property where the business exists, so it should have some good operating margins if they have been able to reduce their overhead by paying off the building/property.  The enrollment numbers are okay, but the facility is not maximizing their capacity, so there is room for growth and you have a high majority of parents that are private pay.

    When someone considers buying an existing childcare program there are typically two options.  The first option is that they are buying the operations part of the business along with the building, property and other physical assets.  The second option is that they would be buying just the operational part of the business and some of the physical assets, but not the actual building or property.  This would mean they would either then enter into a rental agreement with the existing property owner, or potentially move the business to a new location.  The value of the "operational business" and the value of the "physical property" should be determined separately in either scenario to determine a fair market value to paid for the purchase.

    Purchasing the business and the property would obviously require a bigger bank loan, but in either case, the banker will want to know if the business generates enough revenue to pay back the loan on a monthly basis in addition to covering all of its other operational expenses such as payroll, insurance, supplies etc.  The monthly loan payment would be determined by the amount that is borrowed.  If a loan is taken out to purchase just the business side of the deal, you would have a monthly loan payment due to the bank and a monthly rental payment due to the owner of the physical property.  If the loan is for the business and the property together, you would have one large payment due each month to the bank.

    In order to qualify for a bank loan of this type, you will need to have a very good credit score and credit history.  You will need to demonstrate that you have experience running a business of this type or a similar business and that those businesses had been successful.  The banks will also require that you have a certain % of the loan amount available to put as a down payment.  This can be in cash savings in the bank or a combination of cash savings and other physical assets.

    The reason I have provided so much information on the financial side of purchasing the business, versus being the owner/director and teacher of the program, is that too many people get excited about the "idea" of owning their own business (ie. childcare center) without having an understanding of the financial logistics and challenges of owning a business.  Being the director/teacher of a program can be very rewarding and although it is not an easy or stress free job, it will never compare to the amount of stress and angst you will experience as the owner/director/teacher combination.

    However, the childcare industry needs people like you to keep the industry going.  People that get excited and are passionate about working with children and advancing their careers.  With a 5 year plan and some good training, you can overcome the obstacles or challenges listed above. So here are some things to get you started.  1.  Start looking on-line to find some resources on how to run a business.  You can find some that are even specific to childcare.  2.  On-line you can also find templates that will help you start to develop a business plan, so you can have some realistic numbers to work with.  3.  Review your personal finances and credit score and see what areas you can improve upon over the next 5 years.  4.  Visit several banks in your area and ask to speak to someone who works with small business owners and the Small Business Administration (SBA loans).  Find a "personal banker" who you can get to know really well over the next 5 years and let them know your goals for purchasing the daycare.  5.  Check with NAEYC and your local NAEYC affiliate to see what kind of business coaching resources they could connect you with.  6.  Create a "vision board" with your goals and timelines listed on it and as you complete each one, cross it off so you can see your progress.

    Good luck on your journey and when you have questions along the way, keep reaching out to the Hello group as there are so many great people with tremendous resources on this site.

    Sincerely,

    Tim Kaminski

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    Tim Kaminski
    Director/Owner
    Gingerbread Kids Academy
    Richmond TX
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    Original Message