Aspiring to own your own school? Here is what you need to know to get started
Owning your own business can be very rewarding, both emotionally and financially. If you’re ready for a change of career and are considering buying your own independent school, here are some things to consider.
Know yourself and what you want to achieve
It may be a bit of a cliché but, for your business to succeed, you’ll need to have a genuine passion for what you’re doing. Successful business owners never underestimate the amount of work they’ll need to put in and the potential impact on their family and friends. It’s not enough to be acquiring or starting your own business because you are fed up with working for someone else, or because you are tempted by the idea of a millionaire lifestyle, albeit rare in education. You won’t get there unless you have the deep enthusiasm and drive which are necessary to succeed.
How to find the right school business for you
For many school proprietors and trustees, the decision to sell their school can be a very difficult one. Typically, they will wish to keep the sale highly confidential to mitigate any risks associated with the potential departure of staff and/or pupils, uncertain as to what the implications of a sale may mean to them as employees, or equally concerns arising from parents as to the implication that a sale may have on their children’s education.
Because of the confidential nature of the independent school sales market, it’s essential that, alongside making web and press-based searches for possible acquisition opportunities, you speak directly with agents that specialise in the sale of education businesses (such as Christie & Co). Concisely advise them of your specific requirements: what type of school are you looking for, what location, operational profile, capacity, and tenure. Once the agent understands your needs, they will be able to determine which opportunities are best suited to you, and they may ask you to sign a non-disclosure agreement (NDA) prior to any sensitive information, such as management accounts, being released to you.
The agents’ role when acting for the vendor (business owner/trustees) is to introduce suitably vetted and serious prospective purchasers that have the pre-requisite experience and financial ability to successfully conclude a transaction.
How are you going to fund your acquisition, what options are available to you?
You might have the benefit of being a cash buyer, but should you need bank funding to finance your acquisition, firstly speak to a financial broker that specialises in securing loans for business acquisitions, such as Christie Finance. This will be advantageous to you from the outset and will ensure that your aspirations on the funding front are realistic.
Since the global economic downturn and, most recently, the pandemic, banks’ desire to mitigate risk has increased, therefore educational experience and business acumen is essential, and a comprehensive CV will assist in demonstrating this. Presenting both yourself and your business acquisition intentions and ideas in the best possible way to potential lenders is a vital part of securing any additional funding that you may need to buy and invest into the business you seek to acquire.
What are other key considerations?
The agent’s primary objective is to achieve the best possible price for their client, often the vendor, and then subsequently nurture the transaction through to completion. Most acquisitions will be subject to financial, operational, property, and legal due diligence and, if a bank or lender are to provide acquisition funds, it’s likely that they will require a formal RICS ‘Red Book’ valuation for secured lending purposes, and a building survey so that the condition of the asset can be assessed and any defects or requirements for capital expenditure identified.
Once you’ve identified a school you’re interested in, think about…
Location - This is of prime importance to the success of a school and dictates the catchment areas from which students will predominantly come from. Think about demographics, competitors, local trading conditions, fee levels, average house prices in the area and so on. If you intend to be a hands-on proprietor, locality will be a matter of personal choice for you and your family. Also consider the direction of travel for the school: if you’re contemplating growing boarding provision and seeking to serve international pupils, then ease of access to international airports, road, and rail will be key.
Tenure - Does the school trade from freehold or leasehold premises. Think about both the long-term and the short-term, and how much money you can afford.
Property - Consider the condition of the building and any repairs needed. If you are planning to acquire a school which has Listed Building status, do not underestimate the complexities and costs that ongoing regular maintenance and refurbishment may entail. Does the asset have scope for further development, or does it already benefit from purpose-built facilities which set it apart from other local competitors? Are sporting facilities held on the same legal title as the rest of the school campus, and, if they are leased or held on a licence, how secure are your rights as a buyer to occupy and use them?
Financial information is fundamental in formulating your offer…
Many factors act together to determine the value of a school: its location, its buildings, their configuration and condition, the school’s tenure, its assets and liabilities, its fixtures and fittings, and goodwill. But the single most important factor associated with the value of a school when being sold as a going concern is its financial information. This comprises the business’ accounts, management accounts, cash flow forecasts, and profit and loss projections.
To be able to read the accounts associated with the school that you are thinking of buying, you need to have a good grasp of accounting principles, forecasting, and business planning. A concise understanding of how the school is currently performing is essential, but the best way to look at accounts is to take as long a view as possible and to examine accounts from the last few academic years. Good, dependable, and accurate termly management information will be vital. You and your accountant will have to decide whether the accounts represent the true situation, and, from there, you should be able to determine whether the business is well run, is over-priced given the level of current earnings, and/or if it has potential for more efficient commercial operations or growth via alternative changes or expansion.
Understand the market
Before you formally begin the process, speak to a specialist business property adviser about the market so you have a good understanding of pricing, competition, etc.
So far in 2022, our childcare and education team has seen a 51% increase in owners deciding to sell their businesses. Appetite from those seeking to acquire and invest in independent schools remains robust and continues to come from a wide pool of buyers, many of whom have educational backgrounds.
To read about recent market trends, read Christie & Co’s Childcare & Education 2022: Mid-Year Review which you can find in the publications section of the Christie & Co website.
Christie & Co has assisted clients in buying and selling businesses for over 80 years. To find out more about the Independent Schools market, or for a confidential chat about your options, contact Courteney Donaldson MRICS on 07831 099985.