A daycare owner posted in an industry group recently asking what she should be doing now to be ready to sell in a year. The best answer in the thread was not about brokers or multiples. It was about prepaid packages.
The point, roughly: every pack you have sold and not yet delivered is a service you owe, so it is a liability, and the value of it either gets paid to the buyer or deducted from what they pay you.
That is correct, it is worth more than most sale advice, and almost nobody acts on it early enough.
The maths that catches people
You sell a ten-day pack for $520. Nice day when it lands. The money is in the account and, realistically, it is spent.
Eleven months later that customer has used four days. Six days are still sitting on their account. At settlement, those six days become the buyer's problem: the dog comes in, the staff mind it, the floor gets cleaned, and no money changes hands, because you already took it.
Now multiply. Thirty-five customers holding an average of three unused days at fifty-two dollars a day is a bit over five thousand dollars of free work. Fifty customers averaging six days is fifteen. A buyer's accountant will find it, will price it at full value, and will take it off the top.
In Petboost that number is a tab rather than a fortnight of spreadsheets. Reporting and Intelligence, Packages: outstanding balance, remaining uses, value remaining, and a row per customer you can export and hand over. It is a booking system rather than an accounting system, so treat the overview as the starting point for the conversation with your accountant rather than the final figure.
Two things worth knowing about it. Package credits in Petboost do not expire, so nothing ages off the balance on its own. And credits are returned when a booking is cancelled without forfeiting, so the liability moves both ways right up to settlement.
Why a membership values better than a pack
Same customer, same three days a week, same money over a year. Two completely different things to sell.
The pack is cash you have already collected and spent, against work you still have to do. On the settlement statement it is a deduction.
The membership is a payment that turns up again next month whether or not the dog came in, and the month after that, and it keeps turning up after you have gone. That is the thing a buyer is willing to pay a multiple for, because it is the closest a daycare gets to predictable income.
The customer behaviour is similar in both. People come more often when they have already paid. The difference is entirely in what happens to the money at the point of sale, and it is a large difference.
A daycare membership does not need to be clever. A monthly fee that includes a set number of days, priced so a regular saves against the casual rate, billed on a card that stays on file. If you want the customer to feel they have a long runway while you keep the cash flow steady, a three-month commitment with a better rate does both: they get months of certainty, you get a renewing line rather than a lump that sits unused.
The full comparison between packs and memberships is here, and the plan shapes that work in daycare specifically are here.
The twelve-month conversion
You do not have to cancel anything or upset anybody. Do it in order.
Month one. Stop selling new packs. Quietly. Take the pack off the booking page and out of the front-desk script, and put a membership in its place.
Months one to three. Work the existing balances down. Export the package list, sort by remaining value, and start with the customers who bought a long time ago and have barely used it. Ring them. Offer to roll the remaining value into the first months of a membership, or book the days in. Both outcomes are better than a balance sitting there at settlement.
Months three to nine. Convert the regulars. Anybody in three days a week or more should be on a plan. Anybody on two consistent days should be offered one.
Months nine to twelve. Let the membership book season. A buyer wants to see tenure, not a spike. Six months of members who have been paying for six months is a far better exhibit than sixty members who all joined in August.
By the end of it the deduction has shrunk and the recurring line has grown, and both of those move the price in the same direction.
Enrolled dogs is the wrong number
The other thing daycare sellers over-report is the size of the book.
Four hundred dogs on file is not the business. The business is how many dog-days walk through the door in an average week, and how reliably the same dogs do it.
Present it as average daily attendance by day of week across three years. Tuesday, Wednesday and Thursday full with Monday and Friday at half is the normal shape and there is nothing wrong with it, but a buyer should see it from you rather than discover it. Show what share of attendance comes from households in four or more days a week, because that group is the spine of the business and it is usually smaller than owners assume.
Then be honest about concentration. If your top twenty households are a third of revenue, say so and explain why they stay. A buyer who finds that themselves reads it as risk. A buyer who is told it upfront reads it as a business with strong regulars.
The things that quietly come off the price
Capacity you are not approved for. Check your consent. If the approval is for forty dogs and you have been taking sixty on a Wednesday, that is not trading history, it is exposure, and it stops the day the new owner takes over.
Staff ratios. If the numbers only work because one person supervises more dogs than any reasonable standard allows, a buyer either prices in the extra staff member or walks. Both are worse than fixing it beforehand.
Accrued leave. Daycare is staff-heavy and entitlements build up. Know the figure per employee before somebody else calculates it for you.
Lease term. A daycare fit-out does not move. Two years left and no option turns the business into a wasting asset. Exercise the option before you list.
Deferred maintenance. Flooring, drainage and fencing are the expensive three. Daycare staff asked what they would build first put drains at the top by a distance, and a buyer who has run one knows exactly where to look.
What the data room needs
- Three years of reconciled accounts
- Average daily attendance by day of week, by year
- Package balances per customer, with value remaining and a total
- Membership count, recurring revenue, and tenure
- Revenue concentration: what the top twenty households represent
- Approved capacity, and actual peak-day numbers against it
- Staff list with award classification, ratio at peak, and accrued entitlements
- Lease, with assignment and make-good marked
- Incident log, temperament assessment policy, vaccination policy
Most of that comes out of the Reporting and Intelligence tabs as a CSV, which is the difference between a seller who looks organised and one who looks like they are working it out as they go.
Before the first conversation with a buyer
Talk to your accountant about structure and timing. The small business capital gains tax concessions have eligibility tests that can take a year to satisfy, and they are worth more than anything you will negotiate on price. The ATO publishes the concessions and their tests.
Then do the unglamorous thing: take two weeks off and see what happens. A daycare that runs without the owner on the floor is worth more than one that does not, and the only way to prove it is to leave.
See Memberships · Petboost for dog daycare · Buying a daycare