How to Sell a Janitorial Service Company

Whether you plan to retire within the next few years or are simply ready for new business challenges, it is important to have an understanding of the sales process for your maid and janitorial company before you begin. This review discusses how to value and sell your maid janitorial service company in a stress-free manner. We also discuss the role your broker should play throughout the sale as well. 

About The Janitorial Service Industry

The janitorial service industry includes a range of service and business types. Janitorial services notably include residential and commercial cleaning, floor care, carpet cleaning, window washing, pressure washing, restroom cleaning, trash removal, and specialty cleaning.

• There are approximately 1,300,000 janitorial service companies in the U.S. 
• There was a 6.7% annual growth for the janitorial service industry from 2018 to 2023
• The janitorial service industry generates $97.6 billion in annual revenue
• The annual profit for the janitorial service industry is $6.6 billion
• Experts predict a sizable increase in annual growth (3.3%) from 2023 to 2028

 

The janitorial industry has sustained growth that should continue moving forward. It is getting harder for investors to find well-established and successful janitorial companies for sale, which leads to high multiples for those who enter the market. Experts predict an annualized growth rate of 6.6% over the next five years, which is expected to outperform the U.S. economy overall. This is largely due to the increased demand for sanitation following the COVID pandemic. 

A Market Approach for Maid and Janitorial Companies

A market approach for business valuations determines your fair market value. This is the amount that is considered fair and reasonable for prospective buyers to offer based on the current market conditions, previous sales data, and your financial information. 

Specifically, your broker may begin with the use rule of thumb data (also known as acquisition multiples). This is applied to your earnings before interest, taxes, depreciation, and amortization (EBITDA) and seller’s discretionary earnings (SDE) to formulate a tentative, non-specific valuation range. The general rule of thumb data for maid and janitorial industries is as follows: 

• Janitorial service companies sold between 2.16 and 3.91 times the Seller’s Discretionary Earnings (SDE)
• Janitorial service companies sold between 2.73 and 9.85 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
• Janitorial service companies sold between 0.57 and 0.73 times the annual net sales

 

You can review more specific rule of thumb data based on your sector and/or franchise below. Keep in mind, although your financial information is often the primary concern for many buyers, there are other valuation actors that may not show up in financial reports, such as your unique competitive advantage, growth potential, location, the quality of your workforce and reputation, and reason for selling. 

Distribution and Wholesale Janitorial Services

Cleaning and maintenance supplies distributors sell an array of products drawn from a wide range of markets, including janitorial service companies, commercial and industrial buildings, government buildings, and retail outlets (Business Reference Guide). There are approximately 2,100 distribution and wholesale janitorial companies in the United States. 

Due to rising competition, the industry experienced a minor downturn in size (-0.2%) from 2018 to 2023. However, the industry is projected to increase slightly (0.3%) over the next five years. As a rule of thumb, distribution and wholesale janitorial service companies sell for approximately 30% to 40% of the company’s annual sales plus inventory. 

Maid Services

Maid service providers generally sell for 35% to 40% of the company’s annual sales plus inventory. Additionally, they sell for approximately 1.5 times the company’s SDE plus inventory. However, some larger maid service providers sell for more than 5 times the company’s EBITDA. 

Window Cleaning Services

Window cleaning service providers have performed relatively well in recent years. These companies often receive excellent valuations. In fact, they generally sell for approximately 60% of their annual sales. 

Popular Janitorial and Maid Franchise Types (With Rule of Thumb Data)

If you own a Maid Brigade, The Maids, You’ve Got Maids, or Coverall franchise company, then your valuation and sales process may be different. Specifically, you must understand your franchise agreement and ensure all obligations are fulfilled throughout the sales process. Below we discuss the rule of thumb data for these four popular maid and janitorial franchises. 

Maid Brigade Franchise

There are approximately 340 Maid Brigade franchise businesses in the United States. Businesses within this franchise generally sell for 45% of the individual company’s annual sales. 

The Maids Franchise

There are more than 1,300 The Maids franchise businesses in the United States. As a general rule of thumb, The Maids franchise businesses sell for 40% to 45% of the company’s annual sales plus inventory. According to recent sales data, the sales price averaged between 2.03 and 3.93 times the seller’s discretionary earnings (SDE) for this franchise. 

You’ve Got Maids Franchise

There are between 75 and 100 You’ve Got Maids franchise businesses in the United States. The sales data for this franchise is more limited, but on average, they usually sell for 60% of the company’s annual sales plus inventory. 

Coverall (Commercial Cleaning) Franchise

Coverall focuses on health-based cleaning. There are approximately 7,000 Coverall franchise businesses in the United States. As a general rule of thumb, this franchise usually sells for 4 times the company’s EBITDA and 2-3 times the individual company’s SDE. 

The Sales Process for Maid and Janitorial Companies

Every maid and the janitorial company has a unique sales process. You (along with the assistance of your business broker) should personalize your strategy according to the specifics of your company and exit strategy goals. However, there are four general stages of the sale that you can expect.

Below we provide a more in-depth discussion of each stage of the sales process for maid and janitorial companies. Although this should help you prepare, we strongly recommend speaking with a business broker for more personalized advice. 

Stage 1: Plan and Prepare

The first step is to choose a business broker who understands the janitorial industry and has experience selling businesses within the industry for fair market value (FMV). Additionally, and as discussed, you should begin with a market-based business valuation.

You will also need to prepare your legal, financial, and organizational documents during the pre-marketing stages. This helps ensure a smooth and successful process when you market, negotiate, and close the sale. You may have already prepared some documents, especially if you received a professional valuation. The documents you should collect include (but are not limited to) the following: 

• Federal tax returns (3+ years)
• Profit and loss (P&L) statements (3+ years)
• Balance sheets
• Lists of equipment, employees, and clients
• Lease and insurance information

 

Lastly, you should establish your sales goals and strategy; this is largely dependent upon your valuation. Your broker may also recommend a timeline that includes when you should market your company. In some cases, this involves waiting until the market is more favorable for sellers, although there are times when going to market as soon as possible is recommended as well. 

Stage 2: Find a Buyer

It is strongly advised to work with a business broker to ensure you maintain confidentiality throughout the process of finding a buyer. Otherwise, news of your possible (or imminent) sale could impact your business operations, the company’s value, and/or the desire of prospective buyers to make offers. 

Your broker should handle much of the marketing stage for you. Specifically, they may leverage private networks, databases, contacts, and connections. In fact, experienced business brokers are likely able to get your sales memorandum in front of hundreds of prospective buyers. This stage also involves screening offers, negotiations, and contingency planning. Ultimately, you will select the offer that is best for you according to your exit strategy goals. The marketing stage ends with a signed letter of intent (LOI).

Stage 3: Complete Due Diligence

The due diligence stage allows the buyer the opportunity to review your maid and janitorial company’s details. This process should go smoothly so long as your information is accurate and you have properly prepared. During due diligence, the buyer may: 

• Review your legal and financial documents (i.e. tax returns) 
• Request more information, which may involve a series of questions for you (the seller and business owner) to answer
• Walk through your facility in which they oversee your daily business operations
• Meet with certain employees (or business partners) that are important to the company’s success

 

The due diligence process is different for every company. Your broker should guide the process to ensure it does not last for longer than necessary. This is, of course, a necessary stage for the buyer to ensure they are comfortable with the purchase, but it should not be entirely open-ended to the point the process lasts for months at a time. 

Stage 4: Close The Sale

You, along with all other parties who will attend the closing, will schedule a time to close the sale of your maid and janitorial company once due diligence is complete. During closing, your attorney may conduct a final review of the purchase agreement; the buyer will likely do the same. The final signatures are attained for the purchase agreement thereafter. You will also confirm the payment has been sent according to the terms established in the agreement. 

Lastly, you will transfer ownership to the buyer. This usually involves notifying your employees, updating legal information, insurance policies, lease policies, etc. Also, you will provide full access to the company, which may include keys, online systems, and employee records. Once the transfer is complete, you are free to start the next journey of your life, whether it be retirement or a new business venture. 

Speak With a Broker Who Understands The Janitorial Industry

Are you considering selling your maid or janitorial service company? If so, then schedule a consultation with the business brokerage and consultancy at Sigma Mergers and Acquisitions. We have experience selling janitorial service companies for fair market value (or higher), and we look forward to assisting you with planning and executing your exit strategy.