The time has finally come for you to part ways with your cleaning business. Perhaps you’re looking into retirement or starting a new venture somewhere else. No matter the reason, the thought has likely crossed your mind at some point during your career. But now it’s time to put in the work, do some research, and decide how you want to sell.
Owning an enterprise looks different for everyone, meaning the selling process will also differ. During the research stage, you might type “how to sell my cleaning business” into a search bar, giving you a high-level look at how it all works. As you read through various articles on the subject, you’ll likely come across a consistent piece of advice: hiring a business broker. In this post, we’ll explore steps to selling your cleaning business and how a broker can help you throughout the process.
Table of Contents
- 6 Steps to Selling Your Cleaning Business
- What Affects the Value of a Cleaning Business?
- Should I Use a Broker?
6 Steps to Selling Your Cleaning Business
Once you’ve decided to move forward with the sale, you might be quick to get it on the market so buyers can start making offers. But that’s jumping a few steps ahead. By following the below steps in order, you can tick off all the boxes that will help make a successful deal possible.
Step 1: Plan Ahead
You can draw out this first step over a long period. Even if you decide, “I want to sell my cleaning business,” you might go back and forth on the timeline as you work through the emotions of parting with your enterprise. The good news is that there are no downsides to being prepared and you can reap the rewards of your efforts over time.
Financials are a significant component of the sale of your cleaning business. Collecting records like tax returns, profit and loss statements, and balance sheets provide a clear fiscal picture of the state of your company.
From there, you might consider the overall value of your business:
- Perhaps you’ll look at ways to increase revenue or reduce costs.
- Focusing your efforts on marketing can help build a stronger brand which could attract more buyers.
- Additionally, you may want to review the quality of your staff through training or other opportunities, should they choose to stay once you sell your cleaning business.
- Finally, you’ll want to seek advice from your lawyer, accountant, and a business broker to verify you are on the right track toward a sale.
Step 2: Determine the Value of Your Business
Evaluating your business is about more than the balance of your assets and liabilities or your yearly revenue. For a comprehensive business valuation, you’ll want a business broker in your corner as they possess the experience, tools, and resources needed to analyze your business.
A business valuation is an estimate of the fair market value of a business. It involves a comprehensive analysis of the company’s financial performance, market conditions, industry trends, and potential risks and opportunities. Valuation methods used by professionals may include:
- The market approach looks at the value of similar businesses that have been sold recently.
- The income approach estimates the present value of future cash flows.
- The asset approach values the company based on its tangible assets and liabilities.
Step 3: Prepare Your Financials
Fiscal records are an essential piece of the sale of your cleaning business. There will be some easily accessible documents that you likely have on hand, but there might be other documents that are more relevant to a potential new owner. A business broker can ensure that you have the right paperwork, in addition to tax returns, profit and loss statements, and balance sheets. Other documents might include:
- Cash flow statement: shows the flow of cash in and out of the business and provides insight into the business’s liquidity.
- Accounts receivable and payable: provide a record of the business’s outstanding debts and obligations.
- Sales records: this includes invoices and receipts, providing evidence of the business’s revenue.
- Financial projections: Financial projections, such as a projected income statement or balance sheet, can help buyers understand the future financial performance of the business.
Step 4: Finding a Buyer
The right buyer can come from a few different places. You might consider selling to a family member who has always been interested in your work. Perhaps a long-time employee will step forward because they are keen to be the next owner. Or you may find a buyer unknown to you through marketing efforts.
Working with a broker can be the difference between finding qualified buyers and those that aren’t looking to close a deal. You’ll want to consider two big factors when finding a buyer: experience and funding. Realistically, a cleaning business can’t be run by someone who doesn’t understand the ins and outs of daily operations, contracts, equipment, or supplies. But funding is the caveat to closing deals. Without it, the sale will never go through. So no matter how you find a buyer for your cleaning business, you’ll want to ensure they are a good choice before moving forward.
Step 5: Consider Your Assets
Over the years, your cleaning business has likely amassed several assets. These might include:
- Equipment such as vacuums, mops, and brooms.
- Vehicles, including branded vans or cars used for transportation between jobs.
- Inventory for jobs like cleaning solutions, paper products, and PPE.
- Physical assets. If your cleaning business has an office location, you could have computers and office furniture.
- Contracts. For any cleaning business, your contractual agreements with customers, suppliers, and employees can all be considered assets.
Additionally, you might also consider your staff a valuable asset to include. Their expertise and loyalty ensure that it runs smoothly and functions well. When selling your cleaning business, a new owner will likely be interested in understanding the continuity of the workforce. Specifically, they will want to determine whether existing employees are likely to remain with the business post-sale or if they will need to hire and train a new team. It’s important to weigh these assets when determining the value of your cleaning business and to take steps to protect and preserve them during the sale process.
Step 6: Tie Up Any Loose Ends
Business owners constantly deal with many moving pieces relating to their businesses. But when selling and transferring ownership, you’ll want to ensure you take the time to resolve any ongoing issues. These can look different for each owner, but in general, they might include tasks like:
- Completing any necessary paperwork or legal requirements, such as permits.
- Transferring contracts, agreements, and assets to the new owner.
- Resolving any outstanding debts or liabilities.
- Notifying employees and customers.
By tying up loose ends, you can ensure a smooth and successful ownership transition and minimize the risk of any issues arising after the sale is complete.
What Affects the Value of a Cleaning Business?
Rarely does the value of a business rely on a single fact or figure. A combination of several details makes up the overall value, but it can be challenging to determine these without a broker who knows what to look for. In general, the factors below tend to drive a cleaning business’s overall value.
Most buyers and sellers focus heavily on the financial aspects of a business when it comes to their personal evaluations. Revenue, operating costs, and profit margins can all play a deciding role in the value of a business. But other details still make up the big picture of the overall value.
Cleaning businesses often focus on building relationships, like with clients and suppliers. As they helped your business grow, they also improved your reputation. Perhaps impressive details of your company travelled by word of mouth, with a focus on your quality services and ability to please even the most difficult of customers. In any case, a cleaning business with a solid reputation will certainly be worth more than one without one.
Some companies prefer to have an in-house cleaning team rather than outsourcing. Other clients might require you to complete deep cleaning services per month. The shift in the past few years has seen many take cleaning services more seriously, with outsourced teams called in to disinfect and prevent the spread of viruses routinely. Although this cleanliness is important, office building capacity has faltered due to increased work-from-home opportunities. All these conditions impact the value of your cleaning business, and many may be out of your control when it comes time to sell.
Does your cleaning business focus on select services? Do you have a la carte add-ons to maximize revenue? What about your clientele? Is there room to expand the number of areas you serve? All of these answers affect growth potential. A business with a solid foundation and financials is essential, but a new owner could be looking to make their mark by expanding operations in different ways.
Assets and Equipment
Keeping the equipment your team uses daily in top condition is vital to ensure you are meeting your customers’ needs. Perhaps you’ve been putting off buying a larger vacuum or switching to environmentally friendly products. When you decide to sell your cleaning business, you’ll want to look at what you’re currently using and how that will impact a new buyer. A business broker could inform you of opportunities to increase value by investing in your equipment and assets.
Employee Expertise and Loyalty
Whether you only have a handful of staff or several teams, their skills help your cleaning business achieve its full potential. They may have expert training or credentials that make your company a leader in the industry. Employees might also understand scheduling and contracts involving extensive details, which can be important when bringing in a new owner. Their loyalty and dedication to the business add value that can’t easily be replaced.
Contracts are an important part of any service-for-hire business. Clients are a main source of value, especially the longevity and scale of your agreement. For example, long-term clients, even if their smaller enterprises, could hold more value to a potential buyer than high-profile contracts that may be few and far between. Additionally, your contracts with suppliers, whether local or otherwise, help ensure your business is secure and runs smoothly. These can be especially important if the contract has years left on the term or has repairs for equipment or other necessary concessions written into it.
Should I Use a Broker?
When considering how to sell your cleaning business, you might be interested in going it alone, feeling confident that you understand your business enough to find the right buyer. However, you’ll likely be met with several roadblocks while collecting paperwork or during negotiations. What’s more, you could spend time with a potential buyer who doesn’t have the means to buy your business, which could cost you valuable time and money. At Sunbelt Canada, we are experienced and established business brokers with a keen understanding of buyers and sellers.
Our marketing efforts ensure that the sale of your cleaning business is confidential but effective. We have access to a vast network of buyers and remain objective throughout the process to provide a bigger-picture perspective and advice. Once we get to know a little bit more about your enterprise, we can put together a comprehensive valuation and work with you through every step of the sale process. So the next time you’re wondering how to sell your cleaning business, contact us. We’ll help you work through the details and get the deal done.