The Child Care Business Podcast

Episode 11: A Framework for Child Care Financial Success | Kathy Ligon

July 22, 2021 Procare Solutions Season 1 Episode 11
The Child Care Business Podcast
Episode 11: A Framework for Child Care Financial Success | Kathy Ligon
Chapters
The Child Care Business Podcast
Episode 11: A Framework for Child Care Financial Success | Kathy Ligon
Jul 22, 2021 Season 1 Episode 11
Procare Solutions

In this episode, we talk with Kathy Ligon, a titan in the child care space. She’s someone who has not only taken the child care real estate industry by storm, but also has become a sought-after resource and source of inspiration for child care business owners and operators looking to think more strategically and grow their operations.

At the helm of HINGE Brokers for more than 17 years, Kathy has amassed a wealth of knowledge that addresses the gamut of child care business issues. In this chat, you’ll hear about:

  • How Kathy works with child care business owners to purchase new locations or exit their businesses successfully. 
  • Kathy’s child care financial model for success – something she’s been perfecting for 25 years.
  • A preview of Kathy’s new app called Framework, which will assess a center’s total financial health and provide guidance on how to improve it. 
  • Current trends Kathy’s seeing in the child care space, including more government funding.
  • The upcoming SHIFT Childcare Leaders Conference, an inspirational and informative event aimed at giving owners and operators clear strategies they can use to grow their businesses.

 
About Kathy:

Trained as a public accountant, Kathy has a unique 30+ year background in educational operations. Early on, she was named Financial Director for a growing educational organization and subsequently moved to COO, directing growth management and helping the company multiply from five to 125 sites operating in several different states. During this time, she gained a wealth of knowledge in growth strategy, target selection, pricing and negotiation, cultural analysis and post-closing integration tactics.

In 2003, Kathy started her own early education brokerage firm—called HINGE Brokers, providing support to the private early education sector by developing price analyses, negotiating strategies and matching buyers with sellers. Her important work has led to the successful transactions of more than 250 early education business.

If you want to learn more about Kathy’s incredible work, including her annual SHIFT Conference, check out the following links:  

Additional Resources:
To get more insights on ways to succeed in your child care business, head over to our Resource Center at https://www.procaresoftware.com/resource-center/.

Contact Us:
Have an idea for a podcast or want to be a guest? Email us at [email protected].   

Show Notes Transcript

In this episode, we talk with Kathy Ligon, a titan in the child care space. She’s someone who has not only taken the child care real estate industry by storm, but also has become a sought-after resource and source of inspiration for child care business owners and operators looking to think more strategically and grow their operations.

At the helm of HINGE Brokers for more than 17 years, Kathy has amassed a wealth of knowledge that addresses the gamut of child care business issues. In this chat, you’ll hear about:

  • How Kathy works with child care business owners to purchase new locations or exit their businesses successfully. 
  • Kathy’s child care financial model for success – something she’s been perfecting for 25 years.
  • A preview of Kathy’s new app called Framework, which will assess a center’s total financial health and provide guidance on how to improve it. 
  • Current trends Kathy’s seeing in the child care space, including more government funding.
  • The upcoming SHIFT Childcare Leaders Conference, an inspirational and informative event aimed at giving owners and operators clear strategies they can use to grow their businesses.

 
About Kathy:

Trained as a public accountant, Kathy has a unique 30+ year background in educational operations. Early on, she was named Financial Director for a growing educational organization and subsequently moved to COO, directing growth management and helping the company multiply from five to 125 sites operating in several different states. During this time, she gained a wealth of knowledge in growth strategy, target selection, pricing and negotiation, cultural analysis and post-closing integration tactics.

In 2003, Kathy started her own early education brokerage firm—called HINGE Brokers, providing support to the private early education sector by developing price analyses, negotiating strategies and matching buyers with sellers. Her important work has led to the successful transactions of more than 250 early education business.

If you want to learn more about Kathy’s incredible work, including her annual SHIFT Conference, check out the following links:  

Additional Resources:
To get more insights on ways to succeed in your child care business, head over to our Resource Center at https://www.procaresoftware.com/resource-center/.

Contact Us:
Have an idea for a podcast or want to be a guest? Email us at [email protected].   

Speaker 1 (00:08):

[inaudible] welcome to the childcare business podcast brought to you by ProCare solutions. This podcast is all about giving childcare, preschool, daycare, afterschool, and other early education professionals, a fun and upbeat way to learn about strategies and inspiration you can use to thrive. You'll hear from a variety of childcare thought leaders, including educators, owners, and industry experts on ways to innovate, to meet the needs of the children you serve from practical tips for managing operations, to uplifting stories of transformation and triumph. This podcast will be chalk full and insights you can use to fully realize the potential of your childcare business. Let's jump in

Speaker 2 (00:53):

Morning, everyone, and welcome to the childcare business podcast. Uh, again, my name is Ryan. Gwaltney really excited to have you join us today. And, uh, you know, I'm always excited about our guests, but I was just talking before he came on the air with today's guests that I've been really looking forward to this episode. I've heard a lot about, um, Kathy, over the years, I'm going to let her talk a little bit about herself here as we get started, but our guests today. Um, yeah, uh, we don't use the purlative lightly on this show, but I would say she's a Titan in our space. She's someone who's, uh, not only taking the childcare real estate industry by storm, but she's also become a real sought after resource and source of inspiration for childcare, business owners and operators looking to think more strategically about their business and to grow their operations, um, who is Kathy?

Speaker 2 (01:41):

And I hope I'm going to say this right, but I'm going to let her correct me if not. Um, Kathy Ligon, uh, Kathy, did I say that right by the way that perfect. I said, all right, Kathy Liggins. So a little bit more about her really quick, and then we'll let her we'll we'll let her get going here on some of the things we're going to talk about. Um, Kathy was trained as a public accountant. She has a unique 30 plus year background in educational operations back early on. Uh, she was named the financial director for a growing educational organization and she subsequently moved into the COO role. Um, she directed growth management and help that company multiply from five locations to 125 sites nationwide. Um, during this time she obviously gained a wealth of knowledge and growth strategy, target selection, pricing, and negotiation, cultural analysis, and post-closing integration tactics. Uh, so, uh, in 2003, Kathy, uh, went out on her own and started early education brokerage firm, uh, recently, uh, kind of rebranded, I believe to hinge brokers and they provide support to the private sector in our industry by developing price analysis, negotiating strategies, and she also her and her team, they matched buyers and sellers. Um, her important work has led to over 250 successful transactions. So that's a mouthful. It was a little bit, uh, me talking too much, but Kathy, welcome to the show. We're excited to have you

Speaker 3 (03:10):

Well, thanks so much, Ryan. I really appreciate being here and love the work that you guys are doing at ProCare to bring support to the industry as well. So thanks for having

Speaker 2 (03:19):

Me. Yeah. It's going to be a lot of fun and, and, um, so let's start here cause there is a lot of ground I want to cover. I want to obviously spend the bulk of our time talking through industry and what you and your team do and a little bit about what you see moving forward, but can you set the table a little bit? Let's talk about Kathy. Uh, you know, I, I hear the accent a little bit, so I'm guessing you're from, maybe you think I have the accent because I'm west coast, but uh, born and raised. What part of the country, where are you from and where'd you grow up? Okay. And do you want to guess, um, I, I'm going to guess one of the Carolinas

Speaker 3 (03:53):

That's so good. I usually get Texas you're actually right. Is South Carolina. I live in South Carolina and have my whole life

Speaker 2 (04:02):

Born and raised South Carolina. All right. So for somebody who's never been there. I had one of my, one of my guys on my team was actually just there over the 4th of July weekend was in Charleston. Um, so for people who haven't been there, if you are like the tourism advocate of South Carolina, like why do people visit the state? What is, what's it all about? Yeah.

Speaker 3 (04:24):

Two things. So on a Charleston, absolutely. For the history, the architecture, the food. So I'm a big foodie and, um, it's just a fantastic town that everyone should get to. And then, um, on equal par with that is the town I live in Greenville, South Carolina that has just exploded in the last 10 years with a beautiful downtown, which is where I live and work. I'm in the same building and we have beautiful long jog trails and parks and festivals. And again, the food, the food, the foods. So we have to maybe do a conference in Greenville one day, but it's on the base of the mountains. So we're a few hours from the coast and we get a mountain view. So it's a great

Speaker 2 (05:07):

Place to be. Yeah. Best of both worlds mountains and the ocean. Yeah. I think Greenville, like if I I've heard about it a lot over the years, big outdoor community, I think it's attracted that culture. Right?

Speaker 3 (05:17):

Absolutely big Nike, big biking, hiking, big running. Yeah. Great place

Speaker 2 (05:24):

Or somebody who's from there. Cause I'm, you know, I'm from Southern Oregon. I'm actually right now I'm working remote, um, this week. But, uh, we've seen that too. People like flocking to, you know, smaller areas and to our town. So for somebody who's there it's changed a lot, but you embrace it. It, it brings a lot of change, but also a lot of good things as well.

Speaker 3 (05:44):

It does actually. It, um, I actually took a little bit of a chance on a downtown residential property that was right on the fringe of all the goodness downtown, about 10 years ago and watch the explosion of residential properties and restaurants and people and ball games. And, um, I am a big lover of real estate, which is one thing I love to help clients with, but I just love the growth and the energy around this city and others that are doing cool things with their data.

Speaker 2 (06:19):

Yeah. I agree. There's a lot of, I mean, real, estate's a huge topic right now. So we'll obviously spend a little bit of our time dive into that a little bit kind of some of your expertise on the commercial side. Um, but you're right. We've seen that too. So what about, so South Carolina grown up was education because it's the space you're in now and it's where you spend a lot of your time as a, as a child, like growing up, was education a huge emphasis for your family? Was it always something that was really important to you? Or is it something that you've kind of grown into? Were you a, a good student or was school?

Speaker 3 (06:53):

Yeah, well, I was a good student when I wanted to be Ryan, but I have to admit that I did not always want to be, um, you know, South Carolina gets historically low on the ratings for educational concepts and as a, especially as a young parent and having my work all over the country and seeing the different models like Reggio when and fantastic Montessori concepts and language, immersion schools, and really cool things helped me bring some of that back to my family and my children, even if it wasn't an opportunity in the area where we were. So, uh, the work has been a blessing, both from a, just a business standpoint, but also growth of, uh, my family and three of my children now work in the company with me, which is something I never would have expected and is a big blessing. So, um, yes, to be involved in an industry that is so focused on what's important in especially early education. It's just been, it's been one of the greatest joys of my life that I certainly did not see coming in my early career.

Speaker 2 (08:08):

Yeah. Which is oftentimes how it works. Cause I do want to talk a little bit about your path to your current company and when you found it, I think in 2003. So if I, if I understand correctly, I think maybe at some point you did study as a public accountant, right. Was that kind of the original like career direction starting and kind of starting your career?

Speaker 3 (08:29):

Yeah, a little bit. I actually wanted to be a psychiatrist which has been exciting. I was a psychology major and found that accounting classes just came really easy to me. So I joke, and this isn't far from the truth that my counselor one day said, I think you can graduate if you just got an accounting degree. And I said, okay, well, let's do that. Um, so I went to work for several years, public accounting and really knew right away that wasn't my career path, but what a fantastic way to get exposed to a lot of different companies and people. And in my fourth year there, I had my second child. So I had a four year old and a six week old and it was taxis. And I was the first woman on staff to have a baby. And it was just expected that I would work 60 hours a week, which I did.

Speaker 3 (09:22):

And I didn't know to expect anything different either. So after three months of that, I decided to go to work for the five site early education group, where they went to school fully expecting to go back to accounting. But I found the industry instead to be very dynamic, very energetic, lots of opportunity for creation and growth. And we were able to navigate growing a company from five to 125 schools that gave me the opportunity to move from a financial role to an operations role. Then to a growth role where I built schools for the company, I acquired schools from the company. We learned how to price, the things that we bought. We learned how to integrate people, which is a very important part of our work. We learned how to communicate through a very difficult emotional process. And then 17 years ago, I launched that into hinge brokers, which is now a 12 member company that serves the country. And, and also we work with some international clients now and helping them grow their companies and also helping people exit and the very best way possible with a successor company that continues the work they're doing that takes care of their people. That is a good culture fit. And also secondarily pays them the best consideration that they can get for their business and real estate. So it couldn't be a bigger joy, the work that we do and the people that we get to work with, I would never consider another industry.

Speaker 2 (11:04):

Yeah. And when you, when you originally started with that organization, because I kind of want to step through your career and obviously spend a bulk of our time talking about hinge and, um, I'd love to talk some of the framework of how you partner with, you know, owners as they're getting ready to sell and what that relationship and process looks like. But when you, when you went on that initial organization that had five locations at the time you started working with them, when you got hired or join them, was the original plan. Like, Hey, we actually want to scale this organization to the extent that you did, or was it more, Hey, we have five sites at this point, we're looking for somebody to come in and help us understand the financials better. And then it just organically started to grow. Or was that the plan when you, when you came aboard

Speaker 3 (11:44):

Really great question, Ryan, because I say this to others, I think you have to be open to everything. So first of all, I'm a big believer that your, you have to grow. If you have a dynamic team and you are creating opportunity for people, you have to continue to give them opportunity to grow. So am I work? I've always found that if I create opportunity for other people and give them the bandwidth to meet their dreams and goals, if my natural and get met. So that's just been a big, joyful part of my work. But what we did was set in motion, the idea that we had something really good to offer the parent community and early education space. And then we were opportunistic. So things came our way. We made some big mistakes in the beginning, and that was the best way to learn. We did some things wrong really quickly, and then we started to get it right. And some big opportunities came our way. At one point we grew from 12 to 40 schools in a 12 month period. And we were only able to do that with, uh, the people that came along with that growth. So very often is not only more scale and more mass and more schools that you want, but the acquisition of people, assets and expertise are critical when you're doing a fast growth path

Speaker 2 (13:13):

Like that. Yeah, I can imagine back then, because this was, if I'm reading your bio correctly, if you started a hinge in 2003, this had to be like in the nineties that this was happening. Is that timeline correct?

Speaker 3 (13:25):

Yeah, that's right. I started with that company in 1986. So that 30 years is actually 35. We need to update that little bio and I feel every one of those years and I've, I've loved every bit of it. Um, but yes, that would have been the nineties and some years we're slower in growth and others. And again, um, I think that you have to be ready to grow before you have the opportunity to grow, and then you're opportunistic when the good things come along. So it's equally difficult to have a specific growth goal because then you might make the wrong choice if you don't have the best opportunities.

Speaker 2 (14:05):

Yeah. Interesting. And you, and you went initially you joined that. And again, I know I do want to get into just talking hinge, but I think it's really interesting. Not many people have experienced growth like that in a role like, especially in a leadership role. So the insights that you gained during that period of time obviously have served you really well and a big part of what you do now, but when you started, uh, on the financial side, moved into operations, explain to me the difference. So for people listening, like at first, you were looking just at the financials and then operationally, where you actually going in as part of the acquisition team, kind of looking at real estate, looking at the market, if it was an acquisition talking to the existing team and planning the transition kind of a to Z, you were handling that whole process.

Speaker 3 (14:49):

Yeah. That last Dan actually came in the third phase of my work, which was the growth work. So, um, in the financial end I would have produced financial information, run payroll, managed, accounts, payable, and accounts receivable, council directors, and managers on how they could do better. I actually created at that time, the basis of the financial modeling that we use today to coach our clients on how to be as strong as possible financially, and to show them what a school at their size and given their tuition right structure would make and would spend if they were the average financially healthy school in the country. So we've kept that model going for about 25 years now, after that, I, um, you know, replaced myself with somebody much stronger and better at that and moved over to a role where I directed the operations of the schools.

Speaker 3 (15:48):

So I would have managed the managers and assured quality control in the services and curriculum and operations, and then eventually moved to a role where I specifically help companies grow. So we would seek acquisition targets. We would talk with them. We would explain the benefits of selling their company to us. We would've talked to them about what our process looked like and how we handled people and confidentiality and all of the things that were very important in going through that. And a lot of that is really, um, people will call it handholding or drama management, but it's a very emotional process, especially in this industry to be sure that children, families, and staff that they have come to love as their own family are treated well and have a good future after their exit. So that was a big blessing and, uh, developing the basis of the way that we work.

Speaker 2 (16:49):

Yeah. And I, you know, when I, the first time I've, we're talking before we came on the air a little bit, Kathy, but I, you know, I know the first time that I heard about you, you know, we both worked in the industry for a while and, um, you know, one of my customers talked about, and I think actually, Joanne as well, like, you know, like, Kathy's come up with this financial formula. It's like a, uh, a real framework for childcare owners to make sure that their business is structured in a way that they're going to be successful from a business standpoint. And like you said, a lot of customers have to have that because they just want to sustain their, that this is what they love to do. It's their livelihood. They love it. But the business side of it oftentimes is, you know, a lot of our customers, a lot of our industry don't have that background. And so in, in 2003, talk to me about what was going on for you personally, then in 2003, because you had spent a good chunk of time at the organization that you'd helped grow from five to 125 centers, but just at that point, did you feel like it was a natural launching off point to go out on your own or what was happening? What led to the start or the formation of what we know as hinge brokers now?

Speaker 3 (17:52):

You know, I think I knew for about three years of my last years in my former company that I love dearly that gave me great opportunity. The people are still some of my favorite people in the world, and that part was difficult to leave, but I felt for a long time that I was ready to do something on my own and that I could create something unique if I had the cuts to do that. And I think it took me about three years to, to gain those guts. I'm by nature, a little bit of a risk taker, um, which I also really respect and the people that we work with because they have taken tremendous risk in the way that they, um, started a company and they managed it and they've become successful and they've had challenges and setbacks and pushed their way through it.

Speaker 3 (18:43):

And it's one of the things that makes me really like the people that I work with, but it was quite, um, I will have to say that at least the first couple of months were quite stressful when I'd wake up in the middle of the night with a heart rushing and go, what in the world, what was I thinking? But, um, there and there had been really, really hard times since then, but I think my experience has been that I'll get on a good track with work. And in the early days, something would not go well. And I would have the panic feeling again. And the very next day the phone would ring and a new opportunity will come. And it's happened to make so many times now that I, I have the faith that we'll, we'll be fine, no matter what. And so I went through the 2009 and 10 recession would making pretty close to zero for two years.

Speaker 3 (19:40):

Um, I was not prepared for that. It was prepared for the traditional tuck away, six months of cash in case there's a injury in your life. Um, but I had borrowed money to live off of. I had people in the company say, maybe we should go get jobs. And I just felt like that if we did the right things through that time, we built relationships, we focused on what we could do to support others that were suffering also in the industry that we would be okay at the other end of it. And thank goodness. And I tell my children this, now they did not know that was going on. And today they say, thank you for not sharing that with us when we were teenagers. But, um, but today I really don't question them. So when we went into COVID, it was easy for me to, um, so now I'm prepared for a two year shutdown.

Speaker 3 (20:34):

And let me say that, which is what I expected COVID to be for us. And it did not turn out that way, thankfully, but I have built on those experiences, a great deal of faith, that if you do the right thing, if you focus on the needs of other people and meeting those needs, then your own needs will be met. And so we are navigating a little more, um, solidly today than we did 18 years ago and 12 years ago in the economic downturn, but it was not always great and not always easy and stressful a

Speaker 2 (21:09):

Lot of times. Yeah. I mean, I think that's words of wisdom that everybody needs to hear. I mean, so much of like getting through is just sticking with it, right? Like, I mean, I'm sure there was points in 2008, 2009, when, you know, all the real estate turned upside down, everybody stopped buying and sell and where you think maybe this is the time to get out, but to stick with it. And like you said, you found your why, you know, I mean, actually it was, I think Rhonda Meyers that talked about that when she was on the show, but just, you know, understanding like why I wake up every day and do what I do and to serve other people and to be able to contribute and, and serve, then you just trust the process. So I love that. D did talk a little bit, Kathy, if you would, about the services that you provide, Andrew, I want to, maybe we can talk like about a case study. I'd love to talk a little bit about, you know, what happens prior to, you know, a childcare owner wanting to sell their business, how you guys get in touch with them, what the presale process looks like and kind of the framework of that. Um, but can you just talk a little bit about, I don't think that's all you guys do, or maybe it is, is strictly, um, brokers for childcare centers. Is that the business, or do you provide services outside of that for your clients as well?

Speaker 3 (22:21):

So, um, we'll circle back around to this Ryan, but you've used the word framework twice in the last five minutes. So I'm going to piggyback on that in just a minute. So keep that in your head. Okay. Um, the way we make money in our company is to manage transactions. So you're correct. That the way that we earn a living is to help someone sell their company. And unless they get paid, we don't get paid. So we might sell their business. We might sell their real estate. We might do both at the same time. And that is the core of our work at the, our mission is a little bit different. So that is part of our mission is to help people exit successfully. But the front end part of our mission is to help people be as financially healthy, as possible throughout their career in the business, and then to prepare for their eventual exit.

Speaker 3 (23:20):

And I say to people, a lot of times you're going to exit at some point, you probably never thought about that when you started your business and especially educators are not in this business to exit and make money, if they are, they won't make it very long. I say to them, because it is tough work, it requires a dedication and a passion and a love for what we do. And it, um, so they don't, you know, clients don't typically think about their own financial health. So I take that on as my mission to be their advocate for being as financially strong as they can, because financial strength and quality operations are not at odds with each other, they're necessary to accomplish what they got in the business for. So yeah, we coach people on what that model should look like and what their financials. So pictures should look like if they were as strong as they could possibly be.

Speaker 3 (24:21):

And what that does is allow them to reinvest in their company and provide the resources to families and teachers and children, and invest in their building and also invest in themselves. Because if you know, I say to people, if they're awake in the middle of the night, worried about the rent and worried about the payroll, they are not good for anyone. They can't possibly get up the next morning and serve the hundreds of people that depend on them every day for what they're doing. So, um, to, um, jump back on your framework comment we have for twenty-five years provided our simple model where people can insert their license capacity and their tuition rates, and the spreadsheet will populate to show them what they should be earning and spending at different occupancies. And we've given that to people for years, we've done a one day training that we call thrive.

Speaker 3 (25:18):

That's now done twice a year, virtually we limit to a hundred people and we coached them on everything. Financial using this model, we coach around the five things that they should focus on in their financial picture, not the 2000, the five that will get them to nine, 5% of the way there we do. We have our shift conference once a year, which is business and financial only content to bring together people who were doing diamonds, things in the industry. We always focus on what the biggest pain points are this year with our conference in October, we have a heavy focus staff and staff issues. We have a financial focus with, um, information on advocacy and grants. And then we have a day on where are the opportunities today in this industry and where are those going in the future? And then we have just begun.

Speaker 3 (26:16):

Um, I guess what I'll say, we're at the end of our time test phase on a expanded app of our financial model called framework. So, uh, we haven't billed for the day. That's the word for that framework? Um, so we have built an app that we hope to get out into the community at our conference, and it will not only analyze the sprint structure. It will, it will analyze people's rates. It will give them information on common practice and discounting and what that's costing their company. It will look at their salaries. It will look at their facility costs and it will look at their occupancy. So those are the five keys to us to financial success and where it will also have a community where we can give information and we can tell them how to implement the strategies to move closer to that financial health. So we're just, it's been a, uh, 10 or 15 year vision of mine. And thankfully my team has taken that over and just been a champion with getting it developed. And we're really excited about where that's going.

Speaker 2 (27:23):

Yeah, that's amazing. When, when you look at those five pillars for your clients, when, when providers reach out you're you begin working with them, am I right to assume that every schools, the way their formula looks when you first start working with them is different. Like everybody's numbers. Like some people are charging, not enough intuition, others are spending too much on operations, but if I'm understanding, right, kind of your, your framework will allow somebody to put their current state of their business into that financial model. And it gives them really actionable, you know, data to say, this is where I need to go improve to get myself in a better financial position. Because to your point from earlier, that whole equation is not just for being able to go exit someday successfully, but it's to run a successful business for as long as you want to. It's both.

Speaker 3 (28:15):

That's exactly right. Um, it has to be for today's financial health for all the reasons we mentioned. And then also, I just want people to exit successfully. I want them to go and have a different life and know that their company is being cared for, and that they have the financial resources to do what they want to do and the next phase of their life. So you're correct that it will, um, say to them, your discounting, your tuition may be hurting your company. We have specific benchmarks that we like for discounting. And if it's over that benchmark, we might make the suggestion that certain discounts are no longer a part of mainstream, early education, and those should be considered to remove. We might also say that tuition rates, um, in respect of what they're spending probably should be higher. We might say that they could possibly renegotiate their facility costs like their rent.

Speaker 3 (29:20):

We might give suggestions on how to spend their salary costs better, to be more effective, but to also spend less money. So we have certain benchmarks that we've developed in the program. We'll identify areas of opportunity, and then take that a step further. We don't want to leave people out there hanging. We don't, we don't want to say, oh, you're not really doing as well as you could here, but what do I do about that is the most important part. So now that you've told me that, how can I work to fix this in the best way? And so we think we have some good models for that as well.

Speaker 2 (29:58):

Yeah. And what about like, is there a best practice, like in your experience, Kathy, over the past, I guess, 18 years now running hinge, if there's a, if there's an owner out there who, you know, is, is starting to think about exiting their business, is there, is there a certain amount of runway that you have found is the best time for you and your team to start talking with that individual? Is it, you know, six months, a year, two years before you actually make that, want to make that exit so that you can get things in order? Or is it different for everybody? Or is there something that you guys have found to be kind of like, Hey, this is a great practice. If you can make it happen. Yeah.

Speaker 3 (30:37):

Great question. And you also asked for a case study. So I have one just from last week and this is not unusual. So first of all, if we are asked to run an immediate process, that's fine. You know, a lot of people go along and maybe they're struggling a bit emotionally and they hit the wall one day when all the toilet's clogged up and nobody shows up for work and licensing comes in and we get the call and it's get me out of here quickly. And that was okay. We can, we can maximize the numbers that already exist to create the best value. And there's also an art to that. There's an art to knowing what the numbers should look like and can look like for presentation to a buyer. What w what we love is what happened to me last week when I got a call from someone that said, I run a very successful school and thinking about selling in a year or two, I'm considering adding more pre-K classes.

Speaker 3 (31:38):

Uh, also not sure if my expense control is in line. Uh, what do you suggest to me? So what I said to that person was, um, we, we had some conversation around the strategy with public pay versus private pay. And then we, um, decided that our financial analysis team would go ahead and run a valuation for her, which is something that we do as a complimentary complimentary service for sellers or future sellers. And that way we can look at her current expense and income structure. We can make recommendations on changes that can be made over the next year or two to get her in the best financial place possible. And for our processes, all that really matters as the last 12 months of data. Um, and actually right now, during COVID, we're basing sales on 2019 performance, because 2020 was a wash for everyone. And 2021 is a rebuild.

Speaker 3 (32:43):

It may be will. What most of the world expects that we'll be back fully recovered by September of this year. So that's our hope, but in a normal world, we look at the last 12 months, so you can make changes really quickly. And certain things make a difference. And certain things really don't. So we can make recommendations to people along their path and help them time their exit. We can also, if we get a specific buyer that's interested in a company just like theirs, in the meantime, we can also reach out and say, I know you wanted to wait a year or two, but like, would you like to consider this opportunity? There's a specific buyer that wants something just like yours. So that also happens at times, but in a perfect world, we do like to know people and help them align themselves a year or two ahead.

Speaker 2 (33:37):

Yeah. Yeah. I would imagine that gives you the ability then to get to know that owner potentially their team, their philosophy. And I know you've, you've emphasized this a lot, which I think is worth noting is it's not just about finding the most attractive financial buyer, but one that actually will carry on their mission to the best of your ability. So there's a match, both, um, philosophy wise, not just the financial side, if that's fair. So you guys, as part of, you know, hand, are you also, since you're, you're kind of working in that marketplace, it's representing sellers, but I would imagine that you're also building a network of interested buyers then as well. Is that kind of the other side of the business? Does it go hand in hand for you guys?

Speaker 3 (34:17):

It, it, that it definitely does. So while we don't represent buyers, we are collectors of buyers. So we have about 450 buyers who are active buyers in the space and our database. Um, we also don't hesitate to not include buyers if we don't like, uh, the way their process runs or the way they treat people. And we have the luxury to do that. We did coach our sellers very strongly about our experience with different buyers is likely that we've already closed one or multiple transactions with repeat buyers. And we know how long their process takes, how well they do people integration, how their legal process goes, how their diligence process goes, and we can really let our sellers know what to expect, and then let them make the decision about where their tolerance is. You know, this buyer is wanting to pay you more, but it's going to be a little painful in the middle. If you want to do that, we're with you, you know, just want you to know in the meantime. So we do have the luxury of working with repeat buyers, and there are many, many, many of those. And so that is a benefit, I think, to our sellers.

Speaker 2 (35:34):

Yeah. That you guys obviously have experience in that. And if I'm, if I'm a seller, like it correct me if I'm wrong, if this is not a true statement, but if I own a childcare center or centers, and I'm looking to sell, like the benefit for me of hiring Kathy and her group is that I can keep my focus on operating my business. They've got experience in making sure that the transaction goes smoothly and I get the, you know, the highest valuation for my company. And, you know, in reality, I'm probably going to, even with any fees I pay do better than if I tried to do this on my own, just because there's a lot to know about the entire process. Is that fair statement, true statement.

Speaker 3 (36:14):

Yes. I definitely think that, um, you touched on so many important things there. I think the main one being consideration and the thought that, and, and look, I'm guilty of this too. I've sold houses before and thought, maybe I could just do that myself and save that fee, you know, and I think I actually tried to do that one time and then had a real appreciation of residential brokers. But I think that our experience in financial modeling of what a value should be very, I think probably every single time gets more consideration than a person could get on their own. So that's one factor. We know how to model, we know what expenses we can remove and, uh, that are acceptable in the industry. We know what companies pay the best consideration. We run a competitive process, which always drives the value up. And also the negotiation.

Speaker 3 (37:19):

Isn't always just about the money. It's also about some of the soft features. What, what, what are they going to pay to lease my building? What is, um, what is the whole bat going to be? In other words, how much money are they going to key to, to be sure that there aren't risks for them in the future? How much cash am I going to get at closing? What does the legal process cost me? What does the accounting process cost me not to mention the tracking of so diligence, you know, all of the information that has to be provided to get a business and real estate closed has just exploded in the last couple of years with buyers being much more diligent and careful, but we have a whole team of people that track and work through those with sellers. And they're sure that they produce the right information and they keep them on track.

Speaker 3 (38:15):

And then the last thing I'll add probably is that it's a very, very emotional and tough process to get through. And I think we do a lot of buffering of stress and concern and take confidentiality very seriously. We take people very seriously. We want communications to go, well, we want the culture to be right before consideration to make culture fit as much more important than consideration. And so I think all of those things come together to mean that a person who's versed in the industry and specific, and only does that industry is just in my mind, it's a huge resource. And, um, it scares me honestly, for people to navigate that by them

Speaker 2 (39:11):

Yeah. On their own. And are you guys seeing, just in terms of talking about current trends right now, Kathy, with what you're seeing is, is it an active, you know, buyer and seller market right now? I mean, I know I I've seen trends around, um, transactions are taken, you just referenced this a little bit longer. There's more complexity, but we've seen even private equity firms coming into the industry. And so at least from, I guess, the outside a little bit on the inside, cause I work in the industry, but it appears from what we're hearing from customers that there's a lot of interest in the industry right now. There's a lot of investment interest from outside is that, are you guys seeing that

Speaker 3 (39:51):

It is so big, it's so big, right? It has just blown me away. So we went into COVID with me expecting COVID to look like the last recessionary period, meaning people wouldn't buy or sell anything for two years. That was my benchmark. And why would they, because the world was scary and unpredictable and why in the world would anyone think about buying more companies with that kind of environment? And I'll have to say the first three months did look like that. It was very slow. Our team shifted our focus to trying to support our clients and navigating what was just a crazy world and get an information out on what others were doing. Well, what things worked and what things didn't work. But after three months we could not have been more surprised. So as of the summer of last year, so I guess we're in our 12th, 12th month here, our activity has doubled in those 12 months, our best year ever.

Speaker 3 (40:54):

And what that means is more opportunity for our selling clients and the things that we hear from buyers who are super aggressive and super hungry for the industry is that the industry got so much positive recognition during COVID that they believe that we will not only come out of this stronger as an industry and better supported, but also more highly recognized for the things that we were already doing. We all know it, but now the world also knows that we saw another phenomenon in that we have now brought two of Europe's, three providers into the U S and the European providers see the opportunity here in the us to be great. And that will continue. So beyond those two, there are two more that we have direct communication with that would love platform opportunities here in the us. And so the, the competition for good businesses and quality real estate has increased. So our business values are higher than they ever have been. We did see a little dip in real estate values last year, but they've rebounded back to 2019 numbers. So we've never seen such strength and competitive buying in the industry. And it's very exciting for people who have worked so hard and fought their way through recessions and COVID, and, you know, it's time for them to exit now. And it's, uh, the opportunities that we can bring to them are very exciting.

Speaker 2 (42:32):

Yeah. And they can take advantage of it. And is that both, are you guys seeing that in terms of like the, the interest from investors, is it both from the business model standpoint of just operating childcare and the actual real estate itself? Or is it, are you seeing a lot of your transactions being both business and real estate and it's, it's both of them combined that's driving the value or is it, is it everything it's, it's the business, it's the real estate

Speaker 3 (42:57):

In general, those are two separate assets for us because business buyers don't usually also control their own real estate. So we have business buyers and we have real estate buyers and our sellers can make the choice to sell their business and, and retain their real estate as a, a revenue source. And, uh, um, and Lisa to the business operator, or we can do a simultaneous closing and they can close both at the same time. What I'm finding is that more people today want to exit everything. And I think that's for two reasons, one reason is that they're fearful that there'll be another event and a new operator might not do well, and they don't want their building back and empty. Um, and the second reason for that is that they expect capital gains to go up significantly, maybe in a year or so. So they want to exit as soon as they can. So those two things coming together are, have flipped things really into more people wanting to completely. Yeah.

Speaker 2 (44:01):

Yeah. That makes sense. It's exciting times. I mean, we've seen that too, and I mean, there's been a shift. I just, a couple more questions. I know we're running on time, but low on time, but I, I could keep picking your brain here for a while, but I, I think the other thing that's really interesting that we're seeing is have you guys also started to see a shift from like how government is influencing providers in terms of subsidies and funds. And is that like, in terms of looking forward, do you see more of that influencing like revenue streams and cashflow for providers or that we'll get back to the same balance? It was pre COVID where it was, you know, if you were private pay before you're going to be fully private pay again,

Speaker 3 (44:40):

I think that it will be the first thing that you said. So we do expect that the government will continue to not only invest, but increase their investment in the early education space. We also are seeing an interesting turnaround of buyers who historically wanted to stay away from public funded schools, or I will say a majority public funded and preferred private pay, um, that now recognize that the tremendous support that industry got during COVID will continue in some way, and that they feel more secure with a higher mix of public versus private pay dollars. So, uh, we do have, uh, uh, some strong content at our conference about what is the money from Washington is expected to look like how we can navigate and influence that money as it gets down to the state level, which is where the decisions will be made. And so that we can make meaningful, sustainable, um, change happen in our schools that isn't just, uh, we all appreciate the direct hits of cash, but to solve some of the sustainable issues like staff pay in a way that helps forever in the future would be a beautiful addition to the industry.

Speaker 3 (46:09):

So there's some of those initiatives are going.

Speaker 2 (46:12):

Yeah. And you, yeah. The last question, or maybe second, the last question I was going to ask you, and you, you kind of mentioned it again. I want to give you a chance to talk about your conference coming up, because I know it was maybe this is your fourth iteration of the shift conference, and it's continued to gain momentum. I think it's coming up in early October. Um, if I'm not mistaken, it's three days, I think you described it at you and your team is like trying to plan three weddings three days in a row with all the logistics and planning. But, uh, you know, for owners out there who are listening and directors and administrators that are trying to kind of lean into their business and get stronger with some of this framework we've been talking about, can you describe what they would expect that your conference and the benefits of what you guys cover in those three days?

Speaker 3 (46:58):

Sure. It's just such a fun event for us. And I have to again give credit for my own team who create a wonderful experience for our guests. I would just love to have people treat them really well, have a good time and, um, help them relax and make some strong connections and gain some knowledge. We, um, this is our fourth year. We have business and financial, unlike content. We're a little bit different in that we don't do traditional vendor halls. All those, some of our vendors do join us. And we love that. We focus on content delivery and connections this year, we're built around staff strategies, uh, for improving, um, staff communication and onboarding and hiring. We have a speaker fund indeed that has always been a favorite that will help people with their strategies to attract new team members. We'll have a panel of people and business owners who had just rocked it where their teams during COVID they'd come out even stronger than before.

Speaker 3 (48:05):

And they'll talk about the strategies that they used. And then, um, we have Jim lamb, who is the author of delivering happiness will, will speak with us as our keynote that day. The second day is all around financial content. What has changed during COVID financially for the industry? What is our operating model look like? What will it look like in the future? What steps should I be taking right now to be sure that I aligned with that? And so set myself up for success. In the future, we have Radha Mo Han, who was the executive director of ECE, who largely led the charge in Washington to get us all those beautiful, um, grants and monies during COVID and continues to work with, um, lawmakers there and on the state level to be sure the money gets in the right place. And in the last day, we want to focus on the future and where the opportunities are, how people can grow and take advantage of a market like this. So sometimes it feels like we're just beat up and beat up, but markets have changed like this create also great opportunities. So we want to talk about where those are and how people can take advantage of what's going on. So we're always really excited about it and love for people to join.

Speaker 2 (49:28):

Yeah. And all because you, maybe you wouldn't plug it, but I'll, I'll say, you know, I think it's coming up early October. It's going to be in Southern California this year. If anybody listening did want to find out more information. And for some reason isn't familiar, Kathy, where can they find more information about that? Yeah.

Speaker 3 (49:45):

Um, so we kick off on October 5th in the evening with the opening event and we finish up at noon on Friday the eighth, and we're at Newport beach, California, and a very cool venue. And we will have the small boutique hotel right on the water all to ourselves. So that's really nice. And they can go to either hinge brokers.com and there is a link to our conference or to shift childcare leaders.com. So shift is the name of our three day event. And, uh, we would love to answer any questions anyone has and get them the support they need to try to get there. We are, um, uh, filling up fast for conference. So we'll, we'd love for people to go and get themselves registered if they like the join.

Speaker 2 (50:34):

Yeah. And I will, I mean, just, this is just me adding this little tidbit, but I, you know, I shared this before we came on the air, but you know, for anybody out there who, you know, any of the content Kathy has shared, that you feel like is compelling and, uh, resonates with you and where you are in your business. I mean, I've heard nothing but amazing things about this conference and the value it delivers for you to kind of keep growing and, and add value to your business. So, so definitely check it out. And then, you know, Kathy, last question. Um, so three days of craziness and early October, what's the week after that looked like for you have a vacation plan or some downtime for you and your team, is that

Speaker 3 (51:09):

Like a catch your breath week? That's so funny, Ryan, because, you know, since that is not our work where you usually double timing it when we get back. But yeah, that would be really nice because we're close to wine country and we're also a really appreciate good food and good wine. So maybe that would be a thought, but probably we'll be in front of the fund,

Speaker 2 (51:31):

Probably get back to it the next week. Well, uh, I'll tell you what we really appreciate you. I know you're extremely busy, Kathy, appreciate you carving out time to join us. The information you shared, what you guys are doing in the industry is so important and valuable. And so I hope, you know, in fact, I know it will be for our audience really helpful and, and, um, we appreciate it. Hope you have a great rest of your week. Well,

Speaker 3 (51:52):

I'm honored. You guys would have me Ryan and, uh, always very impressed with the work that you guys are doing at pro care and appreciate you having me. Absolutely. Have a great day. Thanks Kathy.

Speaker 1 (52:05):

Thanks. Take care. Thank you for listening to this episode of the childcare business podcast, to get more insights on ways to succeed in your childcare business, make sure to hit subscribe in your podcast app. So you never miss an episode. And if you want even more childcare business tips, tricks and strategies, head over to our resource [email protected] until next time.