LiMai Montessori Academy (Cypress)

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Offered By: Iris Chen

Sunbelt Business Brokers Pasadena
626-395-0717; 626-506-0300
iris.chen@sunbeltnetwork.com

Confidential Business Summary

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 General Business Information
Name of Business LiMai Montessori Academy (Cypress)
Address 8271 Gay Street, Cypress, CA 90630
Type of Business Preschool/Day care center
Licenses/Permits Business license; DSS license
Owner(s) 2
Type of Ownership C Corp; another LLC for financials only
Employees & Payroll 6 employees
Real Estate Amount Building: 2,800 sq.ft.; Lot: 0.29 acres
Rent N/A
Increase N/A
RE Term N/A
Option N/A
Security Deposit N/A
Year(s )Established/Owned 1975/2017
Business Hours Mon.-Fri. 7:30 am - 6:00 pm
Capacity 45
Enrolled Ages 2-6 yrs.
Online Ratings Google: 4.5 star; Yelp: 4.5 star
Social Media Account(s) Facebook, Yelp, Google Business
Website N/A
Parking exclusive residential lot with a two-lane driveway and 6 spaces
Non-Compete 5 years within a 5-mile radius
Free Training 2 weeks at 20 hours per week
Reason for Selling Other interest

Business Description

LiMai Montessori Academy (Cypress) (the School) is part of LiMai quasi-franchise preschool brand,
which specializes in early childhood education under Montessori concept. The school is one of their
three preschools that offer day care and preschool for kids from 2 to 6 years old.

The School was established as early as in 1975 and acquired by the current owner in 2017. Since
under the new ownership, the School has been the leading Montessori preschool in the industry that
offers the opportunity to continue a tradition that is truly following in the footsteps of Maria
Montessori. Their name has been recognized by the public evidenced by the high ratings on the
internet and high traffic on their Google account- over 60k views for a slow month like December.

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 The School has a licensed capacity of 45, enrolling students from age 2 to 6. By January, it would
reach its full capacity with a full house of full-time kids. For a long time, the School contained a long
waiting list and had to turn away kids and their parents on a weekly basis.

Other than the regular Montessori programs, the School provided kids with enhancement classes such
as Mandarin, Spanish, PE, Gardening and Yoga. Their monthly tuition is about $1,130 with extended
programs at additional charge.

The staff team has 1 director, 5 full time teachers and 1 #1099 besides Principal and Accountant who
work for the entire brand. The annual revenue for the School prior to Covid was about $414k with an
adjusted net of $84k. The annualized revenue for 2022 was estimated at $558k, much higher than the
past three full years.

The premises consist of 3 classrooms, 2 toilet rooms for kids, 2 toilet rooms for adults, as well as a
kitchen, breakroom and offices, totaling 2,800 sq.ft. And the entire lot has 0.29 acres.

The School is located in a residential area, a safe and quite neighborhood right between the #5 and
#605 freeways. The building is a two-story house providing a level of comfort and familiarity for the
students. The property is expansive, having a very large backyard which has as a playground, garden,
outdoor seating area and plenty of room for the students to enjoy and play. The School made a series
of improvements after its acquisition, including replacing all floorboards, repainting walls, placing a
new smart touch-screen projector, new furniture and teaching material, etc. In recent months, the front
yard was newly paved and upgraded to allow two-way driving through with 6 parking spaces.

The area is in close proximity to multiple primary and high schools, including one of the top rated
public high schools in California – Oxford Academy. Due to the limited number of preschools in the
area, there is great opportunity for the new owner to continue the stream of operation by taking
advantage of its established reputation and current good school district.

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 The reason for the sale is that the size of the School is not any more in line with the brand’s strategic
goal, which aims for large-capacity operation for further growth. The seller will provide training to
the buyer to make sure a smooth transition.

The asking price includes all FF&E, worth of $77,439. The business name can be included in the sale
upon a separate agreement on loyalty fee with seller.

The property also comes with the business for another $1,250,000. Buyer needs to submit two separate
offers to acquire business and the real estate.

Business Attributes

• Professional Montessori concept

• Located in a good school district
• Spacious premises allowing flexible arrangement
• Large backyard with a beautiful layout
• Newly paved two-lane driveway and multiple-space parking lot
• Dedicated and highly experienced faculty
• A full set of Montessori materiel in place
• Approximately $80k worth of FF&E included in the sale
• Fully enrolled with almost all full-time kids
• Well-known school with high online ratings
• Higher than the average profit margin

There are

Regional Information

Cypress is a city in northwestern Orange County within Southern California. Its population was 50,151 at
the 2020 census.
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 The racial makeup of Cypress was 26,000 (54.4%) White (43.6% Non-Hispanic White),[7] 1,444 (3.0%)
African American, 289 (0.6%) Native American, 14,978 (31.3%) Asian, 234 (0.5%) Pacific Islander, 2,497
(5.2%) from other races, and 2,360 (4.9%) from two or more races. Hispanic or Latino of any race were
8,779 persons (18.4%)

The city is a part of the Anaheim Union High School District and the Cypress Elementary School District.
Public schools:

• Cypress High School

• Lexington Junior High
• Oxford Academy
• Christine P. Swain Elementary
• Margaret Landell Elementary
• A.E. Arnold Elementary
• Juliet Morris Elementary
• Frank Vessels Elementary
• Robert C. Cawthon Elementary
• Clara J. King Elementary
• Steve Luther Elementary

(Source: Wikipedia)

Financial Information

Accounting Method
This School uses cash method on a calendar year basis for their accounting; books are kept in-house
and records are compiled periodically by an accountant.

Financial Results

The highlights of the Seller’s recasted financial results (“Seller’s Discretionary Earnings” or “SDE”),
based on Seller’s Tax Returns, are presented below. A few adjustments have been made in order to
convert the Seller’s Profit & Loss, prepared for tax-reporting purposes, to a format that reflects the actual
cash flow of the business. This is not uncommon for small, privately held businesses.

Financial Statement & Recasting

Income Data Source/Year Tax Return¹ 2019 Tax Return 2020 Tax Return 2021
Gross Sales $414,269 $215,973 $359,934
-Returns & Allowances 0 3,650 0
-Cost of Goods Sold 0 0 0
Other Income² 0 17,990 16,050
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 Gross Profit 414,269 230,313 375,984
-Total Expense 368,997 242,316 391,998
-Compensation of Officers 0 0 0
-Repairs and Maintenance 30,113 9,267 17,826
-Depreciation 13,765 550 1,097
-Interest 0 15 1,127
-Rent 0 0 0
-Salaries & Wages 240,674 130,901 156,657
-Taxes and licenses 16,015 25,002 29,896
- Retirement plans³ 0 3,654 4,613
-Other Deductions⁴ 68,430 72,875 180,782
Net Before Tax 45,272 -12,003 -16,014

SDE (Seller’s
Discretionary Earning)
Recasting 2019 2020 2021

Net Before Tax 45,272 -12,003 -16,014

+Depreciation 13,765 550 1,097
+Interest 15 1,127
+Salaries to Principal & 30,000 39,600 64,320
Accountant⁵
+Administrative Adjustments 64,089
+Salaries to Director⁶ 55,020 56,753 56,753
-Rent Adjustments⁷ -60,000 -60,000 -60,000
-One-time “Other Income” -17,990 -16,050
Adjusted Net (SDE) $84,057 -$11,013 $79,272

Notes:

1-Tax Returns: For operation purposes, the School set up an LLC to manage the financials, separate from
the C Corp which owns the entire brand including the School. All the tax returns here were from the LLC.

2-Other Income: Grant/Fund from government.

Grant and PPP loan history for the School:
Jun 2020 - Grant $10,455
Dec 2020 - PPP loan $47,700, forgiven
Feb 2021 - Grant $5,000
Aug 2021- 2nd PPP loan $43,332, forgiven
Sep 2021- Grant $5,000
Oct 2021- Grant $5,000

*The recasted SDE did Not include the Grant, nor PPP income.

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 3-Retirement Plans: the School offered to all employees retirement plans, which were joined by them
voluntarily. This is not very common for small businesses. And the recasting didn’t add this portion back to
SDE.

4-Other Deduction: included expenses of “Advertising”, “Office Expenses”, “Legal and Professional”,
“Supplies”, “Travel”, etc.

5-Salaries to Principal & Accountant: Principal and Accountant both worked for the whole brand and got
indirect pay from the School as part of their total compensation.
2019: about $2,500/moth for both from the School
2020: about $3,300/moth
2021: about $5,360/moth

6-Salaries to Director: since this is an owner-absentee run business, full time manager(director)’s salaries
were added back here to reflect the normal operation of a small business. Those numbers included payroll tax.
2019: $4,585/month
2020&2021: $4,729.42/month

7-Rent Adjustments: estimated only and may change.

The School paid the property tax ($1,000-$1,050 per month), which was Not added back in the SDE as well.

As reflected in the financials above, the revenue prior to the pandemic was about $414k with an adjusted
net of $84k, which reflected the normal operation of the School. And their net profit margin was around
20%, which is much higher than the industry standard.

If recasted aggressively, the SDE could be at least $15k more annually by adding back the portion of
property tax and retirement/Health Insurance offered to employees.

If the new owner owns the property, the net could be another $60k more annually.

During the due diligence process, Seller will be able to explain and provide supporting documentation
for each adjustment.

Up-to-date Financials (not recasted)

Based on the P&L for 2022(Jan. to Oct.):

Revenue: $465,013
Expenses: $404,186
Net operating income: $60,827

The revenue for the first 10 months of 2022 exceeded $465k, higher than the past three full years. When
annualized, the revenue for 2022 would be $558k.

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Staffing and Payroll Expenses

The School has made it a main priority to recruit and maintain excellent employees to help with the
operation. It has a diverse and extremely dedicated staff team. Most of them have been working with the
School since the business was acquired. The staff team includes six employees, one independent
contractor, and one non-employee principle/manager & one accountant. Their positions and payrolls are
as follows:

W2/ Hours
Title/Job Weekly Year Staying
Employee Pay Rate Worked
Classification Hours Hired w/Business?
1099 0:00-0:00
Employee
W2 Leading Teacher $21.50/hr 40 2022 N/A
#1
#2 W2 Leading Teacher $19.00/hr 40 2017 N/A
#3 W2 Director $27.30/hr 40 2017 N/A
#4 W2 Teacher $16.50/hr 40 2017 N/A
#5 1099 Teacher $30/hr 2.5 2019 N/A
#6 W2 Teacher $20/hr 40 2022 N/A
#7 W2 Certified Teacher $25/hr 30 2022 N/A
Principal N/A Overseeing Indirect pay N/A N/A 2017 N/A
Accountant N/A Accounting Indirect pay N/A N/A 2017 N/A

The two owners do not work for the business at all, while the principal overseeing the entire three
schools, including this location. The School generously offered health insurance and retirement plans
for employees to join voluntarily.

Employees with Health Insurance and Vacation(current):

#1: one week vacation, no health insurance

#2: one week vacation
#3: two weeks vacation
#4: one week vacation

Monthly Expenses Breakdown (subject to change):

Rent
Base Rent This business does not pay rent

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 Utilities

Water $192
Gas $14

Electricity $154
Payroll & Comps
Payroll $27,489
Worker Comps $160
Liability Insurance $253

Phone and internet $135

Trash $20

Advertisement $350

$14,070
Other

Total $42,836

Asset Highlights

The business includes the following major FF&E:

Window AC 2
Refrigerator 2
Children chair 50
Children table 25
Newer material shelves 20
Dishwasher 1
Laundry washer 1
Laundry dryer 1
Montessori material-practical life 1 set
Montessori material-sensorial 1 set
Montessori material-language 1 set
Montessori material-mathematics 1 set
etc.

The current fair market value of all FF&E included in the sale was estimated by owner at $80,743.

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 Selling Price
Selling Price $420,000 Down Payment 100%
Whether Included in Business Price (Yes/No) Whether Included in Business Price (Yes/No)
Accounts Receivable $0 N Real Estate See Below Yes
Inventory $0 N/A
FF&E $80,743 Yes Goodwill TBD Yes
Leasehold Total Assets $420,000 Yes

The School comes with the property, which is listed by a separate commercial brokerage company at
$1.25MM.

Map

The School is located in northwest Cypress between the #5 and #605 freeways, with multiple elementary
and high schools within a 1.5-mile radius.
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 Pictures

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Confidential Business Summary
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Disclaimer: This document is prepared based upon information and financial statements provided by
the above Client Company. Sunbelt Business Brokers Pasadena makes no representations and
assumes no responsibility as to the accuracy of these information and numbers. During the due
diligence process, it is the responsibility of the Buyer, with the aid of an accountant and/or attorney,
if necessary, to independently verify all representations which have been made.

Contact Information
Sunbelt Business Brokers Pasadena
680 E. Colorado Blvd., Ste. 180 & 2nd Fl
Pasadena, CA 91101
Listing Agent: Iris Chen DRE Lic. # 01933448
Cell Number: (626) 506-0300 Fax Number: (626) 584-2913
Email: iris.chen@sunbeltnetwork.com

Confidential Business Summary

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