Determining a Selling Price for Your Private School
This is the essential question for any private school owner considering selling their school on the open market.
You will not find an easy calculator on the Internet to determine the value of your school. There is no simple formula to use for valuing your private school for sale. There are multiple factors that need to be considered when preparing the valuation of your school. Many of today's school buyers are international investors, private equity firms, and/or school operators looking for safer areas to invest their money or expand their portfolios. Due to the reputation of the educational system, schools are considered safe investment platforms for investors. The broad figures for goodwill calculations range from four to six times the net profit, plus the commercial value of the freehold property, depending on the school type and its assets. A market assessment is also important, as it will evaluate your local competition, the school's reputation, recent trends in student enrollment, regulatory reports, and the balance of supply and demand.
However, the basic answer to the question, "How do I value my school?" is based on a variety of elements, including the sum of the school's fixed assets and a goodwill calculation.
The first element of "fixed assets" can be attained from your recent set of full accounts. It comprises all the physical items that your school owns and includes the freehold commercial value of any property owned by your school.
The second element is a goodwill school valuation component that is not as apparent or easy to determine as the fixed asset element to your overall school valuation.
There are three methods commonly used to value the goodwill of your school:
- Multiple of the net profit generated by the school;
- Multiple of the EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization), and;
- Multiple, based on the school's gross turnover.
There are also a number of other factors to be considered when making a goodwill valuation, including:
- Local reputation;
- Outstanding legal claims against the school;
- Fluctuations in freehold/leasehold rent negotiations and break periods;
- Competition;
- Recent regulatory reports;
- Fluctuations in enrollment; and
- Loyalty and motivation of the staff.
Next Step To Sell Your Private School:
To better assist you with your interest in selling your K-12 private school, boarding school, post-secondary institution, college, ESL language school, or any other educational business, please complete the form below. We will then make arrangements to contact you confidentially.
Please do not hesitate to contact HEG if you would like to learn more about our services. You can set this up by sending an email to info@halladayeducationgroup.com or calling directly at +1-800-686-1492. Click here for an overview of our schools for sale. We also invite you to continue browsing our website.
