Preparing to Sell Your Dog Daycare Business

Selling your dog daycare business is an exciting opportunity. You will enjoy reduced owner stress, financial liquidity, and freedom to take on life’s next adventure. But you only sell your business once. So how do you make sure you sell to the right person, and for the price you deserve? To make the most of the sale, preparation is essential. 

So, how do you prepare to sell your dog daycare business? There is a lot to consider, from legal paperwork to assessing your equipment. Keep reading to learn how to sell your business with confidence.

Understand Your Goals

If you don’t enter the selling process with a clear view of what you want to achieve, your buyer’s goals can dominate the transaction. The first question to ask yourself is, how involved do you want to be after the sale? For example, you could sell the majority of your business, retain a minority stake, and take on a passive ownership role. Or you could be looking to sell in full and exit completely.

It is also important to consider what type of buyer you’d like to sell to. Are you hoping to sell to an individual, an operating company with multiple locations, or a private equity firm? Each of these options will likely take a different approach to owning your business. An individual may not have the resources or expertise to grow your company, while a private equity firm might not value upholding your culture. 

In this post, we break down evaluating potential buyers.

Prepare Financial Documents

Make sure your financial records are clean, accurate, and well organized. Disorganized books create extra work for your buyer, and make it harder for them to understand your facility’s financial performance. The more easily your buyer can see profitability, the clearer your value will be. This aids in purchase price negotiations and helps you receive what your business is truly worth. 

Preparing financial documents can feel overwhelming. We recommend working with a certified accountant and starting the process early. They will help you compile the relevant documents and ensure accuracy. 

Fundamentally, a buyer is looking to understand your historical performance and use this data to project the business’ future profitability under their ownership. Almost all buyers base their bids off of a profitability metric known as EBITDA (earnings before interest, tax, depreciation, and amortization). EBITDA is a measure of profitability that is meant to highlight a company’s operating performance without the noise of financing and tax considerations, which vary by person/company. 

As mentioned, buyers are interested in what profitability will be like for them in the future. This is not always the same as what profitability was like in your specific situation. You’ll want to separate out specific and/or one-time expenses that a buyer won’t expect in the future to get to a true picture of profitability. These are called “adjustments” and are used to calculate “adjusted EBITDA”. Say, for example, that in a given year you earned $150K of EBITDA but you paid yourself $100K in owner compensation and $10K in legal expenses to change your company’s structure. From a buyer’s perspective, those are both expenses they won’t incur going forward and would accordingly add back those adjustments to get to an adjusted EBITDA metric of $260K.

Another important consideration for your financial analysis is to break down your revenue by service type, so buyers can see growth across major categories. This helps a buyer understand your service mix, how they are growing relative to one another, and even understand what profitability is by service type. 

Eventually, a serious buyer will ask for your bank statements, tax returns, balance sheet, and credit card statements. This is to verify that your reported expenses and revenue are accurate and gain further insight into the financial performance of your business.

Prepare Legal Documentation

Nearly all of your boarding and daycare operations require legal documentation. Key activities need a paper trail: who your employees are, compensation and benefits information, and any agreements you have with outside vendors. For example, if you have certain people who plow your driveway, mow your lawn, or fix your heating, it is helpful to have these documented so future buyers can maintain these services going forward. At Argos, we use past employment agreements as a basis for drafting new agreements so we can keep all employees onboard with the same or better comp packages the same day we close.

Verify that you have all required licenses and permits for your organization, as most buyers will request to see those. This can include a Certificate of Formation for your LLC, a dog daycare or boarding business license, or a special use permit for zoning. The permits and licenses required vary by business and location. We recommend consulting with an attorney who understands your market and business to ensure everything is squared away.

Highlight Unique Selling Points

What makes your dog daycare business stand out goes beyond financial statements. Why do pet owners choose your business and not your competitors’? If you have something to offer that is unique and desirable, then your business is valuable in the eyes of your potential buyers. 

Be sure to mention any future plans that will add value to your business, such as partnerships, marketing strategies, or additional services. These future plans are a part of your growth strategy, and if the buyer approves, they could easily add value to the sale.

Make Sure Your Facility Is In Top Shape

Before a prospective buyer arrives to assess your dog daycare business, make sure it looks as clean as possible. It’s not a bad idea to hire a cleaning service. But appearance is not the only thing to investigate. Is everything working properly? Is there any equipment that needs to be fixed or updated? When your equipment is all clean and in working order, your buyer won’t feel like they are inheriting a problem. And you, the seller, will benefit from boosting your facility’s value.

Conclusion

Even if you’re ready to sell, it is wise not to rush into the process. Taking time to prepare beforehand goes a long way for you and your business: it allows your employees to keep working under new ownership, and helps you receive what your business is truly worth. 

Are you getting ready to sell, but unsure what the appropriate asking price is? Getting a professional business valuation is a great place to start. Argos offers free, no-strings-attached valuations to help you get the most out of the selling process. Lock in your free valuation.