When buying or selling a nursery, due diligence is a crucial step. It’s essentially a ‘health check’ of the business to make sure everything is in order. Here’s a simple rundown of what both buyers and sellers should expect during the due diligence process.
1. Financials
Perhaps the most significant part of the process is the financial due diligence. Both parties need to get the numbers right. Buyers will examine financial statements, tax records, and debts to ensure the nursery is financially sound and meets their goals.
This crucial step can take a long time so business owners looking to sell their nursery should ensure their financial records are clear and up to date ahead of seeking a buyer.
2. Legal compliance
A key aspect of due diligence is taking a thorough review of any legal concerns that the target nursery is facing, or any areas that a legal issue could arise. Legal due diligence includes checking that all licences, registrations, and regulatory requirements are in place.
Sellers should be prepared to show that the nursery complies with the law and any Ofsted regulations.
3. Staffing
Any successful nursery relies on its staff. Buyers should take the time to look at contracts, pay, and qualifications of existing staff. Making sure the contracts are in line with the future goals of the new owners will be of utmost importance.
A high staff turnover could raise red flags and for any sellers, it is a good idea to address this well before listing your nursery for sale. Ensuring that staff are on the right employment contracts is the first step. Separately creating workplace policies allows sellers to show their employees, and any potential buyers, how the staff operate at each setting.
4. Property
No nursery can function without an appropriate premises. Whether the nursery owns the freehold of the property, or it is leased, buyers must secure the future use of the property. Agreeing future use of the property can be valuable for both buyers and sellers.
Our advice to sellers is to make sure they know what is included in the sale and review any current lease contracts.
5. Reputation
A nursery’s reputation is paramount. Customer reviews and waiting lists will identify a nursery with a strong reputation and this should form a key part of the due diligence. Sellers should be honest about any challenges and highlight positives, such as parent satisfaction.
