If you are planning on starting a business or are looking for a great investment opportunity, you might already know that one of the fastest-growing industries in the U.S. is the janitorial and maintenance industry. According to Ibis World, this industry is expected to reach a revenue of $6bn in 2019. But, with 836,002 businesses in the market, you might want to re-think starting from scratch!
Right now, you are probably thinking, “Great, but how can I find a cleaning business for sale?” The answer is genuinely obvious: use the Internet! Simply type “cleaning businesses for sale” on Google, and you will come across a plethora of options. However, the vital part is filtering the results and learning to ask the questions that truly matter.
In this article, we will explain the top five questions you should ask yourself in order to find a cleaning business for sale that suits your needs.
Should I buy a franchise or an independently owned company?
Whether you should invest your money on a small business or purchase a cleaning franchise is probably one (if not THE) first question you should ask yourself. Depending on what you are looking for, one or the other might be a better fit.
For instance, if you are buying a cleaning business that is owned by one (or more) people, more often than not, you can decide all the determining business factors such as:
- Business Plan
- Services Offered
- Pricing Structure
- Marketing Investments
You can even decide to change the name, logo, or company slogan if you see fit. However, with high power comes great responsibility. Thus, if you choose to do this on your own, you will be held accountable for making or breaking the business you acquired.
Buying a franchise, on the other hand, comes with a great deal of restraint. Yes, you will have a whole system backing you up and supporting you every step of the way; but you will also need to comply with a series of terms and conditions that might not be if your liking.
A franchise comes with brand standards you need to meet, monthly (or yearly) evaluations, and of course fees. As a franchise owner, you will need to buy the franchisor a cut of your revenues. These tend to be pretty high, depending on how the brand appears to the industry. If you buy a leading brand’s franchise, you can expect these fees to amount to 10-40% of your revenue.
How much is your future business worth?
Now that you have established whether or not you’re buying a franchise, the next thing you should ask yourself is how much is your soon-to-be business is really worth.
Keep in mind that the business sellers (especially if part of a brokerage firm) tend to highlight revenue surges, emphasize high-season demand, or focus on facts that may not be entirely accurate. Thus, focus on the ‘worst-case scenario’ rather than on the most optimistic outlook. By doing so, you will have a better feel of the business you are getting yourself into.
Moreover, when it comes to service industry companies, we highly recommend you:
- Take a look at what customers are saying online about the brand and overall customer satisfaction.
- Ask the seller to see the recurrent customer base.
- Inquire about the percentage of recurring versus one-time accounts.
- Always look at key performance indicators (e.g., profits, liquidity, labor costs.)
It is especially important to note that you should also take into consideration, especially when buying a family-owned or closely-held business if the customers are still willing to contract your services after the sale. Remember that people tend to be very cautious about who they are letting in their homes.
How well do customers know and care for your brand?
That being said, it is equally important to know where you stand in terms of popularity. What is the local, regional, or national ranking of the company you intend to purchase? Brand recognition will go a long way, especially within the service industry.
If you are buying a franchise, you need to evaluate the proximity of other branches in the vicinities. Imagine you buy a cleaning franchise and establish it in a location where there is another branch a few minutes away; chances are people are going to go to the one they already know (even if they are part of the same company). Remember that people tend to be very cautious about who they are letting in their homes and office spaces.
It is also essential to note that you need to take into account, especially when purchasing a family-owned or closely-held business if customers would still contract your services after the sale.
What are other business-related expenses should you expect?
Apart from the seemingly obvious expenses such as:
- Insurance Policies
- Sales/property taxes
- Product re-stocks
There are lots of other less obvious costs. These sometimes can even attest to a more significant chunk of the investment than the usual business-related expenses.
Hence, make sure you have a clear picture of what you are getting into. For instance, are there any individual taxes or licenses you need to renew? Does the seller have up-to-date payments on his/her employment tax payments? If so, make sure the State’s authority issues a ‘clearance letter.’
Furthermore, if you want to be extra careful, we also recommend you get an indemnity from the seller saying that he/she will pay for any fees, judgment, or payments that may arise after the sale but were due before the contract was signed. Remember that some organizations have long closing cycles (e.g., banks, IRS)
If need be, hire a specialist to help you revise the books and company’s accounting methods. This might take a while, but it can save you from a few headaches in the future.
What are the terms and conditions associated with the sale?
Last but not least, before signing any document, make sure you are clear on the terms and conditions associated with the sale/purchase of the company at hand.
Make sure you are buying the company’s assets and not the company itself. Meaning, if you are buying a small business such as an LLC or SN Corporation, under no circumstance, we recommend you purchase the company. This will protect you and your future business from liabilities associated with previous owners that can include, but are not limited to, debts, legal queries, and so on.
As you can see, there are many signs to consider before signing the dotted line on a contract. Yes, cleaning businesses are highly profitable, but they also require impeccable management (pun intended.) Explore your options, and do your homework! As we said, the key is not knowing how to find a cleaning business for sale, but how to take advantage of the information readily available on the web.
Overall this process may take some time, but trust us in the end, it will be worth it! Keep in mind that one of the top reasons why new businesses fail is not having the required skills and structure to support it. Thus, a company might seem super profitable, but if you do not know how to handle it, it may not be the right fit.
Also, below, you will find other frequently asked questions that might help paint a clearer picture of what needs to be done before purchasing a cleaning business or franchise.
What are some useful websites to look for cleaning businesses for sale?
A simple search on Bing or Google is a good start when looking for available cleaning businesses for sale. However, if you are looking for reputable websites with proven success rate, and good reviews, below are the most common sites in the United States:
Please note that we have not personally used any of these sites and that they are in no way related to us. We suggest you conduct your own research before taking the plunge. Don’t hesitate to ask for help from a specialist such as a business consultant, lawyers, accountant, or another business owner you might know.
Do I need to hire a broker?
In most cases, sellers are the ones who required a broker’s services to improve their chances of selling fast and at a fair price. Nonetheless, if you think you need the expertise of a professional, there a few things you should consider:
- Ask for references. You don’t want to trust someone with your investment if they do not have a proven success record.
- Make sure you understand the scope of services they offer and the fees associated with them.
- Work with someone local to your market. More often than not, locals will be most familiar with competitors, legal obligations, and the like.
- Never sign a long-term agreement. Always keep your options open!
Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
Get started on the path to business ownership with our cleaning business startup documents.