To buy a nursery?

[raininginspringtime]

There's one for sale. I could (just) afford it.

Here are the problems:

I have an educational background although not in early years.
I haven't ever owned a business before.
It would take ALL my money!

Here are some solutions such as they are:

I own my apartment outright (lucky I know)
Do I need to be physically present at all times? I was wondering about possibly doing a day or two of supply teaching while things get set up.

I can't think of any other relevant info but I'm sure there is some.

As the very first step OP you should demand to see the audited accounts of the business for the last three years.
That will tell you a great deal about the viability of the operation and how much operating profit (or more likely loss) to expect.

Fading, I am pretty sure that is what business start up loans are for. Also if you own the property you can use that as collateral.

Finally crowd funding, peer to peer lending and other non traditional methods of finance are now available at very reasonable rates.

Of course there are a lot of issues but it all really boils down to demand for the service you are offering.

If there is demand you can charge enough to pay for the added costs of regulation, minimum wage and pension. You can demand payment in advance.

Successful business is about providing a good or service that is in such demand you can charge a price that allows for a reasonable economic profit.

My instinct is to say no.
You want to buy a business is an area you have never worked, you have never been in business before, and the area you want to move into is going through massive stresses at the moment.

If you are serious about this, try and get some work in a nursery first or volunteer, so you at least have some idea of the stresses. Also recruiting and managing staff, especially for jobs like early years that are highly skilled, but low paid, is very difficult. Nurseries depend on having good staff. By working in a nursery you will get some idea of what to look for in a potential employee.

I have recently read about two women who succeeded with a similar enterprise.

The difference was, well, they were two, and they had a concept of how they wanted their nursery to be different. So they had a market niche, so to speak.

(And they did it in Germany, though the legislation is probably even more complicated here)

That's their site: www.erdenkinder.eu/

We own a childcare business (although in Scotland so under different regulations) and it's certainly not easy. Few things to think about:

-do you have the appropriate qualifications to be the official manager of the nursery? I've had a quick look and it looks like for EYFS you need to have a relevant level 3 qualification and at least 2 years experience in early years, which I think from what you've said you wouldn't have. This means that you need to...

-hire a GOOD manager. They're hard to find, especially if you are effectively setting up a new business where there is inherently a lack of job security. Realistically you probably don't want someone who is taking their first managerial role either, you need someone experienced as there is a lot more to think about with a new setting

-it is hard to find and retain good staff, a lot of nurseries have a pretty high turnover. You can reduce this (we've managed to keep all our staff since opening) but it takes work and interviewing childcare staff is a slow and frustrating process - we had a very high number of people who just didn't show up.

-Income: it can take a long time to build up a reputation so you might be very quiet, but you still need to have enough staff to cover your ratios and to cover for sickness, holidays, random departures...it's tough.

-Paperwork. Oh dear god the paperwork! You will need policies and procedures in place for everything you can think of, and then more.

-Dealing with clients can be very hard work and time consuming, I'd imagine teaching is similar although in a lot of ways I think nursery would be worse.

-Costs; it's expensive. Staff costs are increasing, you go through an insane amount of toys, art equipment, cleaning materials etc. If you're running a larger setting you might need admin staff (unless you're going to do it yourself), also think about things like payroll, accounts etc as this takes quite a bit of time and is easy to get wrong unless you know what you are doing.

The big question is whether there is a lot of excess demand in your area. Do you know what the market is like? If there's a shortage then it will be a lot easier to get going whereas if the markets pretty balanced you're relying on competing against the established nurseries which is much harder.

I'd definitely try to find out why the nursery closed down and also what its reputation was like before hand as even though it will be a new nursery under new management with new staff people tend to remember bad reps and they can be very hard to shake off.

Why did the business close before going up for sale? That's massive alarm bells to me

All extremely helpful, thank you.

Silver it wouldn't necessarily be that one although I concede I wasn't clear about that.

I would say if your budget is tight and you would have to sink all your money into buying the business then you can't really afford it. You are going to need extra for all sorts of things.

I don't think personally I would like to go in to early years provision for many of the reasons stated like paperwork and legislation.

If you have some money to put into business take your time and consider your options. Think about what you would really like to do.

Best of luck !

You might find this useful.

www.nurseryworld.co.uk/management-guides

I've no idea of which one it is!! I'd just be thinking that selling a business as a going concern is a far better option so why didn't the owner do that. You wouldn't even have any cash flow to get started!

8angle in theory what you're saying is correct and since the OP has transferable skills then lack of experience directly in nurseries wouldn't necessarily stop a lender from giving a business loan. What I would say about using property as collateral is that obviously it's very dependent on the property and its suitability for the end use. Also banks and traditional lenders are saying 'no' much more often now.

Crowd funding, peer to peer lending and other non traditional methods of finance are rarely available at 'reasonable' rates, and it adds on another layer of research for the OP. They'll have to weed out the most reputable from the plethora available and then ensure they have the necessary safeguards and insurances.

You can demand payment in advance but its rather naive to assume that means everyone will pay you in advance. The average small business is pursuing over £4,500 in bad debt and that's based on the ones who have gone to a small claims court so the figure will be higher as most have at least a three step process before going to court. Over 60% of SMEs experience late payment. It's a real issue and it's one that has to be taken into account to ensure you have the cashflow to keep your business afloat.

I'm not trying to be all doom and gloom. There are lots of new businesses launching all the time and unquestionably some go on to be successful but you need to take into account all the pitfalls first. and then there will still be some that surprise you

I can well believe it! It's certainly a lot of work.

APlace, bearing in mind I would have to sell a property before even thinking about this could you possibly advise me on what my next steps should be? I'm guessing drawing up a proper business plan?

I don't know much about this specific sector but in my area (which is also quite practical rather than desk based) I think you'd struggle to get the respect of the staff (or to hire good quality new staff) if you have no experience of working in, let alone running, a similar workplace.
Might be another point to consider?
(education of older children not similar enough I don't think).

I know a couple of people who have bought nurseries in the past 3 years - Both are successful now but they have out a massive amount of work. None of them had any experience in nurseries but they have hired a manager to run their respective nurseries and now just deal with the business side, they don't get involved in the kids side of it as such - they do hr, wages, organise maintenance etc. Etc. Neither of them had any issues getting business loans from the banks though so not sure what pp said is completely true.

The one thing one of them realised after a couple of years was non-payment of fees was becoming more common. They have took a hard stance on it and said fees need paid up front for that week - if the week isn't paid up front they will not take the child in - simple. They have turned children away because fees have not been paid and got a bit of abuse for it but said they would rather do that than be out of pocket for 1000s of pounds.

one of them has raised quite a few writs against non payers and said it did cost money but they didn't care, they were pursuing it no matter what and they have won all their cases and have payment plans set up now.

Many thanks for helpful post :)

I closed my nursery yesterday
I have a level 7 (EYPS)
I'm pretty good at what I do (Outstanding twice), done it for 13 years

There was no way to break even with the current situation never mind make a profit/pay me a wage

Good luck

I love business plans - can you tell?

But actually having a good peer group will help you with your business plan so I would take two steps simultaneously:

1. Find your local BusinessEnterprise group and join one of their networks or free training courses (local knowledge is invaluable as is information on LA funding, etc plus they should have an introduction to business course or similar)

2. Download a business plan and start working on it. (You could join the Business Bakery to help you with this. They don't offer advice on business planning. It's a process to help you identify actions and take them. But there may be other nursery owners in the group who could offer advice too)

What I find time and again is that people view a business plan as something for a lender to get funding and actually you should view it as a time investment to see if your business is viable. It's not about balancing the books for a bank. It's about seeing how many patrons you would need to break even; how much of a float you would need to tide you over if there were unforseen problems, etc. Good luck!

You're a star, APlace - I've no doubt I will come back to you!

Katymac

So sorry, I have followed your posts on other threads and hoped it wouldn't come to this. I know you did everything possible, it must be an awful feeling.
Good luck to you, hope something good comes from this.

OP, I'd suggest finding a USP in this climate and also a business plan to present to the bank for your loan.
Unless you have a lot stashed away in savings there is no way you'll afford it if you only have the money to buy the property.

What would you actually be buying? If the business has closed then you are not buying goodwill, their reputation, you are just buying the physical assets. You would be starting from scratch, building up slowly - the children the nursery did have on their books will now be going elsewhere, some may return but I would not rely on that.

No working capital is a concern. It costs a lot of money to get things going. Whilst you can start on a shoestring by using equipment you get with the purchase or from friends/family, you will have staffing costs to pay, insurance, business rates, utilities, marketing activities including sign writing. If you spend all your money buying the premises, you will need a loan for day-to-day costs.

Do not do things on a whim... plan ahead. Sure it may be an available building but is it in the ideal place, will it be still available in a few months time?

beta.companieshouse.gov.uk is useful for looking up business accounts. If you were buying the business as a going concern (so the business was still trading) you would get access to their full accounts. If you are just buying the premises then you are not going to get full accounts but companies house may have something on record.

Talk to local authority early years - they can tell you about demand for childcare places and about any funding schemes available.

Nanny, in terms of money I have about £125,000 although this is dependent on how much my property might sell for.

It seems you can buy a business for anything between £50,000-90,000 (obviously there are some v expensive ones which include the price of the house and I just couldn't afford that) but one of the cheaper ones with an existing client base might well be possible. I could be hopeless at it and hate it of course!

Do you know anyone with the expertise you need? Qualified early years with experience, sound business person, all that sort of thing? You could go into a partnership of some sort to cover the things you have no knowledge of and come to some sort of arrangement vis a vis money.

I do know a couple of people but none who would be in a position to step in, sadly!

I would hope to buy a business with an existing nursery manager to help with a smooth transition.

To be the manager of a nursery you need to have a relevant qualification and at least 2 years experience in early years