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Day Care Facilities

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of day care facility businesses. Below is a brief synopsis of the industry.

Description of Business

Establishments primarily engaged in the care of infants or children, or in providing pre-kindergarten education, where medical care or delinquency correction is not a major element. These establishments may or may not have substantial educational programs. These establishments generally care for pre-kindergarten or preschool children, but may care for older children when they are not in school.

General Industry Information

The child care industry is relatively new, a residual effect of women taking up work outside of the home. As this industry has matured into a large employer and an irreplaceable provider of child care services, oversight and government regulation have followed.

Although the US Census reported more than 68,000 operators in this business, levels of competition do not challenge this industry as severely as other fields. This can be attributed to consistently high demand for child care providers. Trends of dual incomes and rising birthrates are strong indicators of a positive future outlook for child care services. According to the US Bureau of labor statistics, the industry’s outlook is most promising for individuals licensed as child care providers.

Several aspects of the physical day care are inspected for licensing by state regulators. The building’s sanitation and safety features are assessed periodically. Arguably the most vital aspect of the licensing process is the certification of caretakers. Individuals are screened by way of criminal background checks, abuse history reports, and adequate first aid education. Day care facilities are required to abide by mandatory employee to child ratios. States may impose penalties on operations that are caught without a license or in violation of such requirements.

This industry is largely fragmented, and includes diverse operators. There is a large presence from non-profit day care centers, the most noteworthy being the Head Start program. Top industry leaders gave grown quickly in the last decade through acquisition activity. KinderCare Learning Centers Inc., Tutor Time, Childtime Learning Centers Inc., and La Petite Academy Inc., are amongst the largest Child Care businesses.

Red Flags and Risks

Rising costs of high quality labor is probably the largest risk factor for these businesses. Turnover is high, and retaining good long-term workers can be costly, especially in areas facing increasing wages. This risk can be managed if parents are able and willing to absorb additional labor expenses, but without such clientele, day care centers may not be economically feasible. Childcare facilities face relatively high levels of regulation and licensing requirements by governing entities. Code revisions and additional mandates can be costly, especially for small operations. Potential buyers should review the licensing status of the center and all employees. A wise investor will request a detailed report of any prior code violations associated with the center. This is important for many reasons, primarily because insurance providers refuse liability coverage for unlicensed day care centers. Positive relationships with local employers can add value to a business, given that many subsidize employees’ child care expenses.

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