Business Roadmap: Financial Planning for Purchasing a Summer Camp

There are a lot of expectations when acquiring a new business. Even if you’re familiar with the industry, your new situation likely looks different than what you might have experienced in the past. If purchasing a summer camp is something you’re considering for the future, there are several steps you can take now to position yourself for success when the right opportunity comes along.

Organize your personal finances

Your credit score, personal liquidity, and net worth are important aspects of your individual strength as a personal guarantor on the business loan. Before you meet with your bank, draft a financial statement that demonstrates your net worth through personal financial assets. This supports your ability to generate cash should you need to make a personal contribution to the business, such as cash down toward the purchase of the business.

A gift from a family member may also be considered toward your down payment on the business. In that case, your banker will want to see that your personal debts are in alignment with your personal income and that you demonstrate the ability to build reserves and live according to your income. If your personal credit score is strong, it can provide better payment terms with suppliers or access to more attractive insurance premiums. A bank will assess your personal strength by looking at a combination of things including your credit score, personal financial statement and past tax returns.

Work with a banking partner who knows the industry

As seasonal businesses, there are a variety of factors to consider when deciding whether a specific camp is a smart investment. For more established camps, there’s value in repeat clients and early registrations that fund the season ahead well in advance. Not only does a camp in this situation look more attractive to a buyer, it also establishes the camp as a strong business in the eyes of the financer because there’s an existing recurring revenue stream. Find a partner who will help you evaluate the business’s current financial situation to be sure it’s viable before you make a big commitment.

Consider multiple financing scenarios

There’s no “one size fits all” solution to something as significant as purchasing a business. Even if you think you know what to expect, it’s important to consider all the options available to you. There may be something you weren’t yet aware of that would be a better fit for your situation. Work with your banker to review different financing scenarios and walk through loan options that might be a fit. Is there a minimum amount that the seller has to have at closing in cash to sell the business to you? Would they be willing to hold a loan with you for a portion of the selling price?

Map out the numbers

In addition to reviewing options for financing the business, when the right opportunity presents itself, you want to be sure you’re making a financially sound decision. You might go into this process with a fairly good understanding of how the numbers will play out, but modeling options and being sure the numbers line up will allow you to move forward with confidence.

Reviewing a monthly profit and loss statement for a full year is an important step that illustrates the timing of different expenses throughout the year. This helps validate what you need for working capital or cash reserves to fund seasonal cash flow differences between collecting tuition deposits and paying for expenses of the business (including wages, debt payments and overhead etc.). Your accountant and your banker will want to understand your projected monthly income and expenses in comparison to the seller’s profit and loss statements to ensure that there will be adequate cash reserves on hand to support expenses and debt payments taken on with the purchase of the new business.

It’s important to find a partner who can help you think critically about what lies ahead and review all your options with you. At Machias Savings Bank, we have deep expertise in working with the summer camp industry and are well-versed in the unique scenarios that come along with running a seasonal business. We’ve supported summer camps throughout New England for decades and would be happy to talk to you about how a Maine-based bank can help you lay a solid foundation for purchasing your camp.