Advice about buying a preschool please?

[bonkerz]

Hi, i just wondered if anyone had purchased a pre-school as a buisness?

I have been offered the opportunity to go into a venture and dont know if i should take a risk. Ive always wanted to run my own nursery and am a qualified nursery manager and also been a childminder till recently.

There is a pre-school for sale nearby and another chilminder is interested but is not qualified yet and wants a buisness partner who is qualified.

The pre school is already open and been established for over 8 years now. It only offers morning sessions at the moment but is apparently set up to start PM sessions. The current owner is emigrating hence reason for sale. All staff and toys and lease is included in selling price as well as waiting list, paperwork/planning etc.

It up for sale at 35k and apparently last year gross profit was 41k but i dont know what net was so its hard to judge if its a profitable buisness.

The plan is to go and view this week and get more info about lease and net profit etc but i wondered if anyone had done anything like this. How did you fund it? Would it be worth taking out a small buisness loan at 20k each or cheaper to remortgage at 20k each????
Does anyone have any idea about cheapest way of funding a venture like this?

Any info about questions i should be asking at visit would be greta and info about funding etc too.

thanks

you need KatyMac - she is the expert

The main problem you face is the fact that you can't charge extra on top of the 3-5 year old profit. The reality of this for most preschool owners is that they can't break even (or anywhere near) never mind about make a profit. That's why preschools are up for sale at reasonable prices.

It's obvious, isn't it? If your school takes 20 kids and you can only charge 400 quid per term (or whatever your local authority pay), you can only bring in a maximum of 24 thousand per year. Out of that, you have to pay rent (usually in the region of 10 to 15 thousand a year) and staff costs (approximately half of what you bring in). There's nothing left at the end of it and that doesn't even account for running costs.

It's better if you can offer full day sessions, but you only have to read these boards to know that most people only want what they can get for free. Which is fair enough in a sense, but then state school nurseries cost hundreds of thousands to run. The nursery grant enables the government to turn private preschools into state schools at virtually no cost to them.

Unless you're prepared to run your preschool as a day care nursery, I wouldn't bother. You won't make any money and you'll probably end up in debt.

thanks for the posts, i think i know we couldnt ever be rich running the pre school TBH. I also think that if the preschool can make enough net profit to pay the loan and the wage then it would be a good thing to do bearing in mind its something me and firend have always wanted to do. She is currently childminding and desparately wants out and i gave up childminding a few months ago and need a job!

It's really really hard running a nursery. You have to deal with the demands of Ofsted (which aren't always realistic to say the least), the demands of the parents (which you would not believe, even after reading these boards) and the demands of the staff (who know their rights and know how to exercise them). Bits of it are fulfilling (it's nice watching the kids grow up) and you have days when you think it's worth it, but most of the time it's a bloody hard slog for very little reward.

The kids are brilliant and most of the parents are ok. Some of them are horrible though, and they can make life very unpleasant indeed. You wouldn't believe how nasty they can be. And I'm not talking about people who get upset when their kids have accidents or get bitten or scratched by other kids or whatever. I'm talking about people who have screaming confrontations with you because you've put the fees up by 50 quid a year or had the audacity to close early on the day of the Christmas play when they've paid for a full day's childcare.

There are easier ways to get by, believe me.

I have been a nursery manager at 3 different nurseries, one of which i was in sole charge down to accounts etc so i do understand how pressurised the job is. I also understnad the pressures of OFSTED as i was a childminder until august and agree that OFSTED make childmindersd life horrendous and can identify that means play school would be even harder!

I don't understand this thing about not being able to charge more than the free session place rate. I've always paid more - sometimes for half days. Is that because it was classed as a day nursery rather than a pre-school. Ds3 is at a pre-school now- fees are more and the free session entitlement is deducted out of them.....

Funny story about Ofsted. First inspection after it switched from SS to Ofsted they visited my son's then (wonderful) nursery. They said that there should be jugs of water left around the room for the children (aged 2-4) to help themselves. The owner-manager refused saying spills made accidents more likely- so they said OK but she had to put a sign up saying "children if you would like a drink please ask a grown-up' So she did. Then everyone sniggered at it.

Im sure you can actually charge more than funding TBH, My DD is starting a play school next week where they charge £8 a session so i will have to add money when DD starts to get the funding.

You're not supposed to charge more than the funding. People get round it by having longer sessions. For example, at the moment, the funding covers two and a half hours. So nurseries have three hour sessions and charge over and above for the extra 30 minutes.

Theoretically parents are supposed to be able to demand that their kids only stay for the two and a half hours so that it's completely free. But in practice, I don't think nurseries accept kids whose parents try to pull this. How could they?

State nurseries cannot run on 400 quid per child per term. It just isn't possible. And nor is it possible for private nurseries (if you could even class them as private when all the money is coming from the local authority). You might just cover the rent and the staff wages (depending on where you live - definitely not in London), but there would be no money left to buy things like toys or even paper.

If you offer full day sessions, you might be able to make it work as a business. Otherwise, I'd steer clear.

It depends if you could get it changed from just "pre-school" to accept younger children who don't receive funding thus turning it into a day nursery.

Thinking about it, your staff alone would cost you 24 grand. For 20 3 year olds (as an example), you'd need three staff. I can't imagine you'd get anyone for less than 7 or 8 grand a year. And I think (I'm not sure) that your manager has to be an extra person.

You'd have to do it as a charitable venture - you wouldn't be able to afford to pay yourself!

You could take 2 year olds of course, but you don't make money on them - the staff ratios are too high.

Why don't you buy a shop instead? Far less liability and you might make some money.

Sorry to boycot the thread...

Bobysmum - if we were starting up a nursery from scratch will OFSTED let us start with only 3 or 4 staff - I am confused as to how it would work i.e you can't afford to employ loads of nursery staff without the children but can't have children without nursery staff iyswim.

bobbysmum you sound like dh talking about his career choice (completely different area).

I couldn't cope with the parents. Kids would be fine, but really couldn't cope with the parents!

Willmouse - You have to make sure that you work within the required ratios - so if you have 16 three year olds, you need a nursery teacher and an assistant. What I'm not sure about is whether you can have a working manager or whether that person has to be an extra. It doesn't apply in my nursery because we have loads of kids and loads of extra staff. But it's taken years to build it up.

It's really hard at first and it takes a long time to get the nursery running well. My advice would be to get as many people in as you can to help out in the first few weeks.

Be careful who you employ and remember, people lie. Never trust anyone who gives another staff member in a nursery as a reference. Always speak to the owner or manager.

I could go on forever about the bad experiences I've had with staff. And don't get me started on the parents! The kids are great though.

Hi Bonkerz

My Husband and I have owned a day nursery now for the last 10 years (bought as a going concern) and have a friend who has recently (Well last August) bought a pre school and has gradually turned morning/afternoon sessions into a day nursery.

There are many things that you need to check when buying a business of this type for us the main problems we had where finding out a week after we had taken over that we actually had no planning permission to be running and had the hassle of reapplying (went on for months - all the time we were thinking what have we done?). We also had BIG problems with people knocking on the door for money as the previous owner had not paid any of her bills before she scarpered.

The best piece of advice we had when we bought the nursery was - Look round and if you feel you can improve the place then it is the one for you - we looked around and the nursery was such a mess - so much we could do to improve we new straight away it was the place for us!

Yes it is bloody hard work and there are times when we sit back and think why are we doing this - but these thoughts soon go away when we go to work and see all the happy, smiling faces!!

If you have plans to add sessions, change building etc there may be grants available to help and you can usually find out about these through the local council.

It is great that you may have a buisiness partner to help but remember if you are the only one who is qualified then she cannot be left in charge and this may tie you to the place. You will need to register with Ofsted as registered person but if you have experience with Ofsted through childminding then you will generally know what is expected anyway - there really aren't that many differences.

TBH it really depends on you and what you want to do with the place and what you want to put in / get out of it.

We are very luck we are not in the nursery for the money and are doing it because we love our job.

Sorry - have got on a bit but have loads of experience and advice to give - let me know specifically what you need help with and i will do my best.

Linzs

Willmouse

Yes you can gradually build up staff in a new nursery as long as you are always in line with Ofsted ratios.

Obviously take on a few to begin with and gradually increase staff as children's numbers rise.

You will always need on site, at all times, a qualified first aider and a nursery supervisor (With qualifications of at least a level 3). You should also make sure that 50 percent of your staff are qualified.

Linzs

Sorry Willmouse forgot to say - as far as i am aware the manager only needs to be supernumary if there are 26 children or more in the nursery.

Linzs

Hi Bonkerz......do you want to chat?

Hi thanks for replies have been really busy!

Katymac, your expertise would be much appreciated.

Linz thanks for your post it was very helpful.

I know this would be a tough project and im still not 100% certain im up for it but want to look in to it more. Am compiling a list of essential questions to ask at our visit next thursday and any more info oyu can give me would be great.

It appears at the moment that the buisness IS making a small profit BUt obviously i need to ask about that as im not sure i want to get into debt for this project TBH. If it can cover the payment on a buisness loan for now then it may just be viable.

Can you CAT me or find my email?