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Holbrook Daycare with over $500k in Sales

Deemed an essential business – provides childcare for doctors, nurses, emergency personnel, etc.!

CASH FLOW
$134,561

Specifications

  • Price
    $385,000

  • Revenue
    $552,092

  • Cash Flow
    $134,561

  • Profit Margin
    24%

  • Employees
    11: 6 FT, 5 PT; 1 Owner/Director, 1 Assistant Director, 9 teachers

  • Intangible Assets
    Solid reputation, word-of-mouth advertising, deemed essential business

  • Location
    Holbrook, NY

  • Service Area
    5-7-mile radius of Holbrook

  • Reason for Sale
    New ventures

This childcare and early learning center in New York has been deemed an essential business! They have remained open and are providing childcare for hospital staff, doctors, nurses, and emergency personnel. With other centers in the area not opening yet, this has boosted revenue. Established since 2012, this business is based out of a 4,800 sq. ft. building, houses 6 classrooms, and has an outdoor playground. Fully staffed with nine highly experienced teachers, working parents in the Holbrook, NY area benefit from the variety of services provided to meet their needs. This center boasts growing yearly sales and a profit margin of 24%. As more businesses open back up in the coming months, there will be more children who need care, as their parents will be going back to work; an increase in revenue is inevitable.

 

With two classrooms each for infants, toddlers, and preschoolers, this business also offers summer camps, before and after school care for school-age children, and daily enrichment programs such as Yoga, Spanish, music and baby sign language. The center also provides breakfast and lunch (brought in by a vendor) each day for the children. Weekly rates for childcare range from $290/week to $362/week. The owner also acts as the center’s director, handling daily management and delegation tasks. An assistant director is on staff and fully certified to handle all the owner’s responsibilities as well.

 

The business recently acquired a school bus to provide transportation for before and after school care. Adding this service is a great opportunity for increased revenue. What started as in-home childcare in the owner’s home has grown into a well-established business with a solid reputation and stellar word-of-mouth advertising from loyal clientele, proving that the growth potential for this company is exponential.

Business Highlights

  • Year Established: 2012
  • Location:  Holbrook, NY
  • Service Area:  5-7-mile radius of Holbrook
  • Services: Childcare, early learning, and enrichment programs for infants, toddlers, preschoolers and school-agers (up to 12 years old)
  • Clients: Working parents in the area
  • Licenses: Currently licensed for 42 children; license changes to meet the needs of the business
  • Lease: 4,800 square feet; 6 classrooms + outdoor playground
  • Reason for Selling: New ventures
  • Personnel: 11: 6 FT, 5 PT; 1 Owner/Director, 1 Assistant Director, 9 teachers
  • Seller Training Period: Flexible; will stay on staff if desired
  • Growth Opportunities: Expand on well-established name; increase busing services to increase clientele
  • Current Owner’s Responsibilities: Owner/Director; manages and delegates daily operations

Financial Highlights

  • List Price: $385,000
  • Gross Sales:
    • 2019: $552,092
    • 2018: $439,674
    • 2017: $366,411
    • *Growing Yearly Sales
  • Cash Flow:
    • 2019: $134,561
    • 2018: $118,643
  • Assets Included in Purchase*
    • Equipment: Furniture, fixtures, playground equipment; 1 school bus: $32,588
    • Intangible Assets: Well-established name, solid reputation, word-of-mouth advertising

*amounts may vary, assets may be depreciated, replacement cost, or fair market value 

Cash Flow Analysis

Description of Financial StatementTax ReturnTax ReturnTax ReturnNotes
201920182017
GROSS SALES$552,092$439,647$366,411
Net Income Shown on Financial Statement$73,820$73,622$65,960
ADDBACKS
Compensation to Owner$48,000$37,750$15,400Owner Operator
11% Tax on total W2 Salaries$5,280$4,153$1,694
Depreciation$3,099$1,857$4,349
Interest$1,079$207$2,368
Meals & Entertainment$837$1,054$29
Franchise Exp$2,446$0$0
TOTAL ADDBACKS$60,741$45,021$23,840
Seller's Cash Flow = Total Addbacks + Net Income$134,561$118,643$89,800
Profit Margin24.37 %26.99 %24.51 %
  • 2019 Profit Margin: 24%

Clients

  • Working parents in the local area
  • Deemed essential – provides childcare for emergency personnel in the area – hospital staff, doctors, nurses, emergency personnel, etc.

Services

  • Childcare, early learning, and enrichment programs for infants, toddlers, preschoolers, and school-agers (up to 12 years old)

Personnel

  • 1 Owner/Director
  • 1 Assistant Director
  • 9 Teachers (4 FT, 5 PT)

Growth Opportunities

  • Expand on well-established name
  • Increase busing services to increase clientele

Valuation Details

The Firm used a cash flow valuation methodology to determine the purchase price of the business. 

The formula used is as follows:

Cash Flow       x          Prescribed Multiple     =          Fair Market Value

Cash flow is the sum of business net income plus any owner perks and any non-onward going expenses.

A prescribed multiple is determined by a 20 question, 100-point parameter ranking system that is used to analyze the current business health. Each question is based on a scale from 1 to 5: 1 being low, 2 below average, 3 average, 4 above average, 5 high. The average of the responses sum is the business’ prescribed multiplier.

For this business, the 2019 Cash Flow was used with a prescribed multiple of 2.9.  With this information, the computation is as follows:

$134,561         x          2.9       =          $390,227

The fair market value found above positions the business list price at $385,000.

Funding Example

Purchase Price:                             $385,000

10%Buyer Down Payment:        $38,500

  10%Seller Financing:                  $38,500

80%Bank Loan:                         $308,000

Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $718.

Bank loan 10-year term at a rate of 6% equals a monthly loan payment of $3,419.

After business expenses and loan payments, a buyer with a 10% down payment of $38,500 would retain a profit of $84,915, which results in a 221% return on investment in the first year.

A lender is required to have a minimum 1.25 coverage ratio for any business loans extended. At a proposed purchase price of $385,000 with the terms listed above, the coverage ratio is 2.71.

Please note that the decision of whether to extend a loan on any sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available. 

*The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.

Purchase Price:

$385,000

$
%
OR
$
%
OR
$
Years
%

Bank Loan Needed: $

Years
%
$
$
$
$
$

Funding Details

Business:

Offer Price: $

% Buyer Cash Down at Closing: $

% Seller Carry Back via Promissory Note: $

year term at a rate of %

% of Purchase Price secured by Buyer and Seller

Total Bank Loan Need: $

% of Purchase Price

Desired Loan Type:

Desired Bank Terms: year term at a rate of %

Total Business Assets, Inventory, and A/R: $

Total Undercollateralized Loan: $

Loan Payments

Monthly Payment to Bank: $
Yearly Payment to Bank: $
Monthly Payment to Seller: $
Yearly Payment to Seller: $
Total Monthly Debt Service: $
Total Yearly Debt Service: $

Conclusions

Fixed Charge Coverage Ratio

The bank will require a minimum ratio of 1.5 to be lendable.

Cash Flow:
2019 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2019 Cash Flow
$
Annual Debt Service: -$
NOI:

Buyer's Return on Investment (ROI)

The rate of return on the Buyer's down payment.

Down Payment: $
NOI:
ROI: %

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210 N 78th St. 2nd Floor
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The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.