Aspiring to the goal of nursery ownership

What opportunities are there for first-time buyers currently?

There are significant opportunities for first time buyers. We currently are marketing a number of smaller nurseries which are ideal for these.

One of the biggest issues which has traditionally faced first time buyers is the funding gap between deposit and purchase price - especially if the buyer is looking for a leasehold property. Since January 2009 the UK Government has launched the Enterprise Finance Guarantee scheme which facilitates additional bank lending to viable small and medium enterprises which lack the security to secure a normal commercial loan. In certain conditions it is now easier to obtain finance for a first time buyer to purchase a leasehold nursery than before the credit crunch took place particularly if the buyer is experienced within the nursery sector.

As an example we sold a nursery to a lady who had been a registered nurse for 18 years, as she reached a cross roads in her life she decided that she wanted to purchase a local nursery. Despite a sizeable deposit and also a good track record, the deal on paper looked difficult due to the security shortfall. Using a £71,000 loan backed by the EFG scheme the deal was completed enabling the purchaser to complete her first nursery acquisition

We are currently working with many managers who are looking to buy their own nursery. Often the manager will need advice on funding for the purchase and help along the way with regard to due diligence. Redwoods Dowling Kerr work with teams of experienced nursery financial brokers and solicitors experienced in selling nurseries – we cannot recommend strongly enough that first time buyers take suitable advice before deciding to buy.

We are also working with a nursery operator who has asked us to help sell her nursery to her manager to allow the owner to maintain a professional distance with her employee.

What factors should drive the decision to launch a site in a particular location?

The main factors to consider are:

• Demand – Look for areas with baby booms as this will provide future clientele. We also recommend that if you are looking to start up a nursery that you speak with the local authority to see  if there is a demand for nursery places. If so you may even find that funding could be available to help as you will be providing a much needed local service.

•  Innovation – owners who innovate usually differentiate their services and, if successful, increase their profit position allowing them to grow and develop their business in the future.

• Cash Reserves – if you have cash stored away and can move quickly then you are in a very strong position to make an offer on a business. If you are a cash buyer you will be considered a premium buyer and proactive agents will go out of their way to find a business for you to buy in your preferred area

What are the prospects for expansion in the nursery sector over the next 12 months?

It’s interesting that we have a number of small-to-medium sized operators who are looking to expand during 2012. No matter what the economic climate a new wave of entrepreneurs will emerge.

I think the nursery industry as a whole needs to encourage the goal of ownership. I completely acknowledge that first and foremost the standard of care for the children should be the priority. However, I constantly speak with nursery owners who tell me that recruitment is one of their biggest challenges - particularly with regard to male recruitment.

In my opinion the increase in university cost provides an excellent opportunity for nurseries to recruit high calibre individuals from local high schools and colleges. If a student is going to progress to an average university and undertake an average degree then it is likely that they will graduate with over £30,000 of debt. But what will their starting pay be? What will the return on their investment be?

Compare that with a 16 year-old who by the age of 21 has five years nursery experience and work-related qualifications? Could they be a deputy manager? They may only be a further two to five years away from becoming a nursery manager, or even owner? They certainly will not be over £30,000 in debt.

One owner recently told me that recruiting men was not the challenge but retaining them was, as once trained the male staff would leave due to the level of pay. I question whether they would be so quick to leave if they believed that within a five to ten year period they could develop into a nursery manager and ultimately into a nursery owner. Would the sector recruit and retain better if entry level staff felt ownership was a possibility?

• Andrew Steen is managing director of Redwoods Dowling Kerr www.redwoodsdk.com