How To Value Your Private School

Deciding to sell your private school is a big decision, and your main concern is probably your school’s value. Given, if someone asked you the value of your school, you could probably list off how many graduates you average each year, your intrinsic fulfillment when talking to students and the chance to give top-notch educators a chance to use their methodology on students. However, potential buyer’s primary concerns are going to be the financial value.

When deciding on the monetary value of your school, you need to take several factors into consideration. This guide will help you see what you should consider when valuing your school.

Remember EBITDA

EBITDA simply stands for:

• Earnings
• Before
• Interest
• Taxes
• Depreciation
• Amortization

In other words, it’s what your school earns each year. Depending on how long you’ve owned your school, a buyer may as for 1-2 years as well as a longer time period to obtain an average and a general idea on profitability.

Your EBITDA (prepared in financial documents) will be give buyers an expectation of what they can earn, and this is what will seal the deal.

Your EBITDA will be different than the EBITDA of other industries and even other schools. A specialist will help you figure out how to present the correct documents.

Finally, it’s important to note that some unscrupulous brokers will try to get you to agree to stretch the truth when it comes to your EBITDA, potentially opening you up for a collapsed deal or even a lawsuit.

Always be honest about your EBITDA to let buyers make an informed decision. If a deal falls through, they simply were not the right buyer for your school.

Compare to Other Schools

If you’re in an area with a large number of schools, look to see how your competition is doing. If you’re losing a lot of students to a school on the other side of town, you may have a problem. However, if your competition is performing about the same as you (or you’re doing better), you’re going to want to include that information when discussing selling your school to someone else.

Look to see about new construction as well. Sadly, some deals fall through because a new private school is going in nearby.

Finally, look to see what your competitors recently sold for. This information is usually available and can help you gage the market value of your school if you’re struggling to decide how much it is worth.

Consider Your Reputation

Are you really active in your community? Is your school known for academic success? Have you been recognized for your contributions to the field? All of these are excellent achievements—and they can help you increase your valuation by a large amount of money.

If your school is recently recovering from a bit of a slump, that’s okay too. You’ll be able to show how your school is recovering by showing your enrollment numbers.

Look at Enrollment and Staffing

How many students are enrolled at your school? Are you at full capacity? Or do you have empty seats? Is there a waiting list to join? Is there room for expansion (i.e. enrolling more students per class)? Your enrollment numbers will reflect how much interest is present for your school as well as what you are feasibly earning.

As far as staffing, most buyers will want to know about your teachers and how long they’ve been there as well as the loyalty of your administrators. Private schools are usually pretty tight-knit communities, and high turnover rates can sometimes allude to a problem.

Legal Issues

We’re not going to say that every school eventually finds itself in some sort of legal struggle, but it does definitely happen, and byers will want to know the ins and outs of both past and pending legal problems. While problems with schools are often not black and white, many buyers do not want to see themselves facing a problem that you are currently dealing with. If you are in any sort of legal limbo, take the time to get it settled.

Location

Are you right in the middle of your city’s downtown area? Are you near the suburbs? What is the value of real estate in your area? Private schools in highly desirable areas are going to be worth much more than those in more repressed communities.

When looking to sell, you do need to take into consideration exactly where you are in your town. A beautiful school in the middle of nowhere isn’t likely to attract a lot of students for a long commute while a dilapidated school in an affluent area probably won’t have a lot of students.

Take the time to really examine your school and where it is located in relation to your city to figure out a fair market value.

Is It The Right Time to Sell?

Both private and public schools will face slumps ranging from legal issues to decreased enrollment.

This is just a given when it comes to anyone in the education sector.

However, if your school is facing a particularly difficult challenge, including lawsuits or a temporary dip in enrollment numbers, it may not be the best time for you to consider selling.

Instead, look to see if you can fix these issues before listing your school. This can lead to a much higher selling price.

Considering selling your school is a difficult decision process, but the first thing you need to do is come up with a fair valuation. Far too often, schools are overpriced or underpriced, leading to no offers or seller’s remorse after realizing they could have gotten more for their school.

To get the best price for your school, you need a dedicated team on your side who will fight for you to get high offers from qualified buyers. JAG Consulting is dedicated to helping school owners find buyers who are looking to purchase quickly. JAG will market your school, field offers and simplify both the buying and selling process faster and easier to ensure your deal closes quickly. Contact us today to find out more by clicking here.