Google the phrase ‘cleaning business for sale’ and you will immediately find several business brokerage web sites offering dozens of current cleaning businesses for sale at prices ranging everywhere from around $100K to $1-$2 million. So, what makes an established cleaning business worth so much? Here are five key questions to ask in your very first conversation with any cleaning business seller or broker:
Franchise vs. independently owned? Many of the cleaning businesses for sale via brokerage web sites are franchise businesses. On the one hand, this means that, as the new owner, you will be backed by many different types of skills, knowledge, and support that you would not necessarily have access to when buying an independently-owned cleaning business. On the other hand, it means you can expect to pay a percentage of your revenues to the franchisor. You will also be expected to adopt certain brand standards in order to remain in good standing with the franchisor, and will likely need to undergo an independent evaluation and approval process by the franchise company before you are permitted to buy the business. Ultimately, it means you need to undertake deep research into all the available house-cleaning franchise options to make sure the system into which you would be buying is a best fit for you.
What exactly is for sale? There are two basic kinds of service-company sales, those selling just customer accounts and those selling a business in its entirety, including (but not limited to): customer accounts; name, branding and trademarks; physical assets such as office space, vehicles, and equipment; employees, and so forth. If it’s an accounts-only sale, the next question on our list becomes even more important.
How satisfied are your customers? While the cleaning business seller or broker might wish to emphasize historical business revenues and numbers of active accounts, what you really need to focus on when considering a cleaning company for sale is the documented satisfaction of its established customer base. Ask the seller or broker to provide performance statistics such as average tenure of recurring clients, average client retention rates by month or year, percent of new business from customer referrals over the past year, and percent of recurring versus one-time accounts. Ask also to see examples of customer-provided feedback and performance ratings by employee. If you won’t be taking over a cleaning company’s employees, you’ll need to consider the risk that some of its customers will follow individual cleaners to other companies. If the seller has good customer satisfaction data, they’ll be happy to supply it. If they don’t have this type of data at all, treat it as a big red flag.
What are your pricing and other customer policies? A cleaning business might have very high customer counts or annual revenues because it is consistently undercutting local competitors’ rates for house-cleaning services. Do some research to ensure the cleaning company for sale consistently charges at least market rates across a majority of its customer base. It’s also a good idea to understand what policies have been traditionally offered to customers around things like last-minute cancellations or lockouts, satisfaction guarantees, security, damage, and special requests, as a failure to offer similar policies will set up a big risk of customer attrition for the owner.
What does the current owner pay him or herself in a given year? Lots can be done to make a business opportunity look great on paper, but perhaps the single best indicator of business health and profitability is how much the owner takes home in a given year. If they are not willing to share this info, and back it up with proof such as a recent income tax return, think twice before engaging in further conversations about the cleaning business for sale.