This blog is about the business that I spent 8 years launching and growing, and why I decided that it was time to sell…
Many people spend all their focus on setting up a business and then running it successfully, they don’t think about the future exit and maximizing the sale price. Proper exit planning can change your life financially, or it can leave you dissolving up a business penniless with all of those years of hard work for nothing.
Keeping track of finances, cash flow, your profit and loss and the changing markets is essential. You need to be able to predict the point at which your profit and loss will peak – and you need to make decisions accordingly. Big decisions.
I will tell you a little bit about my last business, Little Rascals Nurseries, and how we reached the decision to sell.
Our business was very successful, even before we opened. I remember we held our first meeting with prospective parents in what was effectively a building site – but we did a great presentation, we shared our vision, and the market research we did prior to securing the lease meant that we knew there was a big demand and we knew who our customer was (see my post ‘Vision first, strategy second’) so we could deliver what our customers wanted.
Parents were signing up then and there because they could see we genuinely wanted to provide a nursery for their children that was exceptional and that we had their child’s well-being and happiness at the heart of our business. Our vision of what we wanted to provide for them, was aligned with their vision of what they wanted for their children, so it was no surprise it was a huge success.
We never lost sight of our vision, our vision was ingrained into the whole ethos of the nursery and the staff. Within a few years, we expanded to open another nursery and both were rated ‘Outstanding’ from Ofsted. As much as we wanted the best for the children, we also wanted the best for our staff team. We focused on our staff development and well-being just as much as the children. If you invest in your staff they will remain engaged and valued and they will ensure your customer is happy, this was another big factor in our success, all down to my wonderful business partner, Esther.
After starting out on the top floor of a lovely Victorian building, we gradually grew and grew. We first took over the rest of the building, and we then took over another 3-story building across the road. Within 4 years we had gone from 20 children per day to 110 children per day and 53 staff.
In early 2017 we were full and had a waiting list, we were maintaining a great reputation, we had won an award for a research project, and we had our two Outstanding ratings. We then had to stop and take a step back and think about what we personally wanted for our lives. And what our next step should be. We had three options.
Option 1 – Carry on as we were and accept that profits would gradually fall.
We were coming up to what I had predicted to be our maximum profit year – in future years the costs would increase far more than our income could (due to increasing building maintenance costs and staff wages – the only downside to amazing staff retention!) and so our profits would gradually fall, unless we changed how we operated.
We could have cut costs in certain areas and ran the business with only essential costs, this would mean putting a stop on all of the extra things that set us above the competition, like extra staff to cover the busy lunchtimes and to help get the children to sleep, yoga and Spanish classes, lots of visits to the park, lots of fresh fruit and vegetables for snack time, really lovely healthy meals etc, but these were all of the things that were so important to us achieving our vision.
These non-essential extras enable the children to love coming to nursery, the staff are happier and we knew that we were genuinely offering the very best nursery experience that we, as parents would be happy to send our own children. So, would we be happy knowing that our vision would have to slightly change in order to maintain profits? Of course, we weren’t! If we didn’t want to expand, we would have to accept that profits would fall and our business would lose value year on year.
Option 2 – Open other premises and grow the business further.
As you can imagine, managing what had grown into such a big business was hard work – we had an amazing leadership team but there were only myself and Esther as managing directors. Expanding again would be hard, and it would mean that myself and Esther’s time would be spread very thinly across more sites – would we still be able to maintain our vision and keep what made our nurseries so special if we grew and grew? Could we guarantee that another site would bring in more profits or would it risk what we had already worked so hard to achieve? What benefit would there be to us in doing this?
We decided that our amazing business would run the risk of becoming just like any other nursery chain if we grew again so this wasn’t an option, plus we had put so much time and energy into growing the business for the past 8 years that we wanted to enjoy spending more time with our families, not less.
Option 3 – Sell the business
Now was the optimum time to sell from a business point of view if we did not want to expand or change our business model. The business had also taken it’s toll on my health, years of working hard with a lot of responsibilities whilst bringing up my two young children on my own was tough and I was experiencing numerous health issues. The thought of having some time off to focus on myself and my boys was very appealing!
We decided to sell
I knew that in my heart that selling was the best thing for us to do, for the business and also for my health and wellness. Esther agreed and we therefore decided to sell, but my god it was terrifying! Leaving our business when it was doing so well and we had put so much of our lives into it for 8 years may have seemed crazy, but here we were, completely jumping out of our comfort zone and diving headfirst into the unknown!
Once we made the decision to sell, we had to ensure we achieved the very best price for it. This was our one chance to make a massive financial difference to our future and we needed to get it right. Businesses are normally valued on a multiplier of your profit and loss (you may have heard the term EBITDA) and so we focused on ensuring we maximized any profits in this coming year to achieve the best possible profit to enable us to achieve the best possible sale price. We went to the best broker in London who specialized in nurseries, and it was all done behind the scenes, it wasn’t even put on the open market to maintain confidentiality.
We achieved a market leading price and exceeded even our brokers expectations, it was more than we could ever have imagined. As a single Mum with two children, being able to buy an amazing house in the country, mortgage free was a dream come true!
Since selling, I know we definitely made the right decision. Having time to focus on healing my body and mind after such an intense period was exactly what I needed. While we were selling the business I trained to be a health coach with the Institute of Integrative Nutrition (IIN) so that I would be able to help my own health and so that it would enable me to start a new career. I now combine my love of business with health coaching to help health coaches and other wellness professionals create and grow their own businesses, but in a way that supports their health and well-being: the healthy way!
My top tips for you if you are running a business:
- Stay on top of your finances and cash flow forecasting so that you can predict possible problems before they happen, and so you know when is the right time to expand and grow. It enables you to push your boundaries and really stay in control of your business. You will also be able to work out the best time to sell your business to achieve the maximum sale price if that is what you want to do.
- Never lose sight of your vision and values, it will help you grow in an authentic way and will help you grow a loyal customer base.
- Always prioritise your health and well-being and maintain a balanced life, to prevent stress and burn out. There are lots of small tweaks that we can make that really make a difference.
- If you haven’t got the whole skill set needed to run your business that is fine, but you need to be honest about where your weaknesses are early on, and then ensure you either bring people in to your business that do have those skills e.g. another director/co-founder, or get professional help in that area. Our business worked so well because myself and Esther were completely different in our skill set so between us we covered all bases.
If you would like my support with your business, check out my website to see how I may be able to help you. Feel free to email me firstname.lastname@example.org and I will do all I can to help!
Here is the article about our nursery sale: