Preparing your Day Nursery for its Formal Valuation

What is a formal RICS Valuation and why do you need it?

A RICS (Royal Institution of Chartered Surveyors) Valuation is essential to establish the market value of your business and is carried out further to detailed analysis of the turnover, wage and other costs to arrive at what we consider the sustainable profit to be in the hands of a reasonably efficient (average) operator.

Unlike an appraisal for marketing purposes, which is based on what a selling agent considers achievable from the open market, a RICS Valuation is based on having regard to a formal inspection, property and statutory enquiry searches, financial analysis, benchmarking, competitor analysis, and comparable evidence searches.

A market appraisal is where one of our business agents provides a verbal opinion of what price to ask in the market with a view to potentially selling the property and business.  We do not charge fees for the provision of initial marketing advice.  This is distinctly different to a formal opinion of value which is a service that would attract fees.

What do you need to have ready before your business valuation?

The worth of a day nursery is not calculated based solely on the value of other similar properties on the market. Much like the valuation process with other trading properties, the value of a nursery is derived from the profits method of valuation which includes an assessment of that business, and it’s important to gather the following data which will help to form the assessment.

• History: Give a brief overview of your business and its beginnings. In the case of day nursery valuations, trading performance is compared with historic, projected, and sustainable performance, with the latter providing the basis for the valuation.
• Income: This will be based on Full Time Equivalent (FTE) occupancy levels, fee rates, and any additional income the business generates.
• Expenditure: This will be based on several factors, including staffing levels and staff costs, which represent the highest level of expenditure. Running costs and premises costs will also be considered, which include rates, heating, electricity, and, lastly, admin costs which consist of smaller fees such as printing and stationery supplies.

The ‘Market Value’ of your setting is a number that includes all of the above, with consideration to transactions involving other similar properties that have sold in the market to help support our opinion of value.

Factors to consider

While it’s important to value the strengths of your business, it’s equally important to assess the areas where it may need improvement, so prepare to be transparent. Consider impacting factors such as:

• Number of local competitors
• Quality of facilities/ fixtures and fittings
• Initial impressions and kerb appeal of the property
• Supply/Demand

Have the right team behind you

It’s essential to have your day nursery’s valuation carried out by a RICS-accredited Valuer who has specialist knowledge in the childcare sector and experience within the relevant transactional markets.

For a confidential chat about your business valuation, contact Richard Green: richard.green@christie.com / +44 7717 335 613