Market View: The benefit of net asset value when selling your nursery

The benefits of incorporation are well known, and many day nurseries now trade as limited companies as opposed to sole traders or partnerships. There are pros and cons to each trading structure both during your tenure and for when you come to sell, and this debate is best had with your accountant as to which is right for you.

However, when you come to sell your nursery, if you trade as a limited company, you should give some thought to understanding (or at least ensuring your accountant and solicitor do) the term net asset value (NAV). NAV is the concept that when you sell your limited company, there is no starting and stopping, so it is not as simple as when you have a sole trader where selected assets are transferred but not ongoing liabilities. When a limited company is bought, all of the assets and liabilities transfer. This means that although you may agree a sale of say, £500,000, this is just the indicative price. The actual offer is £500,000 plus or minus your NAV figure. This means if the business is in debt because it has no cash but owes taxes/employees, etc, you might end up with a lot less than £500,000.