In this review, we discuss the sales process for carpet cleaning business owners. We also discuss how to determine the value of your company with a market approach, along with highlighting the role your broker should play throughout each step of the sales process.
About The Carpet Cleaning Industry
Carpet cleaning businesses primarily offer cleaning services for carpets, rugs, and upholstery. This can include residential and commercial carpet cleaning services. The most recent carpet cleaning industry numbers and projects are as follows:
- There are approximately 34,000 carpet cleaning businesses in the U.S.
- There was a 3.8% annual growth for the carpet cleaning industry from 2018 to 2023
- The carpet cleaning industry generates $5.9 billion in annual revenue
- The annual profit for the carpet cleaning industry is $832.8 million
- Experts predict a sizable increase in annual growth (1.1%) from 2023 to 2028
The COVID-19 pandemic has led to an increased desire for sanitation, which extends to home and commercial carpets. Although an increased demand for laminate floors and other carpet alternatives may limit demand for carpet flooring, the industry is still expected to grow at an annualized rate of 1.0% or more.
Understanding the Valuation of a Carpet Cleaning Company
The first step for any business sale is a professional valuation. Specifically, we recommend a market approach to determine the amount you can expect to receive on the market. This is also known as your fair market value (FMV). To calculate your fair market value, your broker will determine your SDE (and other metrics) and apply it to your industry’s rule of thumb data, which is as follows:
- Carpet cleaning businesses sold between 1.81 and 3.07 times the Seller’s Discretionary Earnings (SDE)
- Carpet cleaning businesses sold between 2.79 and 4.55 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Carpet cleaning businesses sold between 0.56 and 0.59 times the annual net sales
Of course, other factors such as your location, growth potential, and reason for selling may also play a role in your company’s value as well.
About ServiceMaster Clean Franchise (With Rule of Thumb Data)
ServiceMaster Clean is one of the most popular carpet cleaning franchises in the United States. There are more than 3,050 ServiceMaster locations. They offer residential and commercial carpet cleaning services. ServiceMaster franchisors generally sell for 55% to 60% of their annual sales plus inventory.
You should also check: HOW TO SELL AN ADVERTISING AGENCY
The Process of Selling a Carpet Cleaning Business
Although we do not recommend a cookie-cutter approach for the sale of your carpet cleaning business, there are common steps you can expect throughout the sales process. Notably, these steps include the following:
- Choose a business broker
- Plan your exit strategy
- Prepare your documents
- Find qualified buyers
- Receive a signed letter of intent (LOI)
- Complete due diligence
- Close the sale
- Transfer ownership
1. Choose a Business Broker
Of course, your first step should be to equip yourself with a staff that has experience selling companies within your industry (and possibly within your state or local area). When choosing a business broker, in particular, look for one who has a proven track record of helping business owners sell for fair market value and that is willing to look beyond financial reports and see the entire value your carpet cleaning business offers.
2. Plan Your Exit Strategy
The broker you ultimately choose will conduct a valuation to determine your value on the market and help you plan your exit strategy accordingly. This involves determining the best time to go to market, your asking price, and your other exit strategy goals (i.e. find a buyer who is willing to keep your employees on staff).
3. Prepare Your Documents
The next step is document preparation. This involves the collection and organization of your financial, legal, and operational documents. Your broker (along with other members of your brokerage and consultancy team) can help you prepare the documents you need. For instance, this may include your tax returns, profit and loss statements, list of employees, list of clients, and a copy of your insurance policy.
4. Find Qualified Buyers
Once you have received a business valuation, planned your exit strategy, and prepared your documents, your broker can bring your carpet cleaning business to market. They will seek a buyer in a confidential manner. This means they may only utilize private channels (rather than public advertisements and marketing strategies). Additionally, your broker will receive and screen offers.
5. Receive a Signed Letter of Intent (LOI)
Negotiations are also an essential component of the sales process for carpet cleaning businesses. The goal is to find a qualified buyer who allows you to maximize the sales price and still meet your other (often non-financial) sales goals. Once you find the right buyer, you can secure the purchase with a signed letter of intent.
6. Complete Due Diligence
Due diligence is a necessary step in the sales process that allows the buyer the opportunity to review your business information, ask questions about the business, and oversee your daily operations. In some cases, they may also request a meeting with the buyer.
7. Close The Sale
You can close the sale after due diligence. This involves scheduling a time when you, the buyer, and both your respective attorneys can make the appointment, along with anyone else who may attend the closing. During closing, you and your attorney (along with the buyer) will review the purchase agreement and attain the final signatures. The buyer will also send the payment for your carpet cleaning business. The transfer of the company’s ownership usually occurs during closing as well (see below).
8. Transfer Ownership
This process involves updating legal documents, notifying employees, providing access to facilities, online systems, etc., and more. Your broker and attorney can help you through the transfer process. After your carpet cleaning business is officially transferred to the buyer, you are free to start life’s next journey. This may involve retirement or new business ventures.
Connect With a Business Broker to Discuss Your Sales Process
Here at Sigma Mergers and Acquisitions, we help business owners sell in a stress-free manner. We are willing to look deeper than your financial information to determine all value your company has to offer, and we ensure the unique value your company provides is seen by buyers as well. To learn more and get started, schedule a consultation today.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!