Framework for a Local Commercial Cleaning Company
This business is a local commercial janitorial service company operating in a metro area with approximately 2.3 million residents. It services mid-sized office buildings, medical clinics, schools, and churches across 61 active accounts, with contracts ranging from three days per week to seven days per week. The company generates $2.4 million in annual revenue with $410,000 in adjusted EBITDA. It employs 38 janitorial staff and 5 field supervisors, operates 3 cargo vans, and leases a small warehouse for equipment, supplies, and administrative functions. The majority of clients are under one-year auto-renewing contracts with 30-day cancellation clauses.
This business presents a highly attractive service-based acquisition opportunity due to its recurring contract revenue, low customer concentration, and operational leverage through route density. However, acquisition structure must address typical janitorial risks: (1) high staff turnover, (2) pricing erosion from commoditized bidding, (3) lack of enforceable long-term contracts, and (4) service dependency on local field supervisors.
For acquirers pursuing this transaction, a prudent structure using SBA 7(a) financing could be as follows:
Purchase Price: $1.5 million (3.65x EBITDA)
SBA Loan: $1,125,000 (75%)
Buyer Equity Injection: $150,000 (10%)
Seller Financing (Subordinated): $225,000 (15%) with performance-based reductions if key staff depart or revenue declines
This type of acquisition hinges on frontline team continuity. While janitors can be replaced, the five field supervisors are critical: they handle daily site checks, supply orders, quality audits, emergency dispatches, and client interface. The buyer should ensure each supervisor signs a retention agreement with a bonus at 6 and 12 months post-close. The seller note should contain a clause that reduces the payable amount by 20–30% if more than two supervisors exit without replacement in the first 120 days.
Client retention is tied less to pricing and more to service consistency. Most accounts have been with the company for 3+ years. Churn is low (8–10% annually), primarily due to property management changes or clients downsizing space. While the contracts are cancellable with 30-day notice, the company's average client tenure is 4.7 years—indicative of strong relationship capital. Still, a buyer should prepare for the possibility of short-term loss of 2–3 accounts during ownership transition and structure a 10% holdback of purchase price for 90–120 days to provide financial cushion.
The company’s warehouse lease is $2,100/month gross with 2 years remaining and a 3-year renewal option. The location allows easy access to all major service zones. The lease is assignable. The buyer should confirm chemical storage, janitorial supply vendor contracts, and zoning compliance during diligence.
Fleet consists of three aging cargo vans with minor maintenance issues. The buyer should consider replacing at least one unit via equipment financing rather than from cash at close. Cleaning crews typically take vans to restock from the warehouse but commute directly to job sites using personal vehicles, reducing fleet dependency.
All cleaning teams operate with standardized checklists, and supplies are pre-kitted. The seller has developed a proprietary cleaning SOP handbook that includes job site setup, chemical handling, alarm codes, customer escalation protocols, and janitorial safety procedures. This intellectual property should be acquired explicitly via the asset purchase agreement.
Employees are W-2, paid weekly, and average tenure among janitors is 14 months. High turnover is typical for the industry. The company minimizes disruption by cross-training all crews, designating floaters, and using a centralized team dispatch system. Buyer should retain the HR/payroll provider (currently Gusto), which handles onboarding, background checks, and scheduling integration with Deputy.
Sales have historically been owner-driven through property manager relationships and word-of-mouth. A buyer should plan to immediately hire a B2B sales rep or outsource lead gen to a firm experienced in janitorial and building services. The top 25 property managers in the city should be mapped and targeted within the first 90 days. Offering a 15-day satisfaction guarantee for new accounts could reduce friction and allow the company to expand into adjacent verticals (e.g., auto dealerships, retail, gyms).
Operational optimization post-acquisition includes:
Routing Analysis: Reducing travel between job sites to improve crew efficiency. Some crews currently service accounts 20+ miles apart due to legacy assignments.
Service Tier Packaging: Introducing bronze/silver/gold service plans with increasing scope (e.g., window washing, carpet extraction, bathroom deep cleaning) to increase average contract value.
Specialty Add-On Services: High-margin periodic services like VCT floor stripping/waxing, carpet shampooing, and COVID sanitation fogging can increase EBITDA without new customer acquisition.
Client Portal Implementation: Allow clients to submit complaints, schedule deep cleans, and review service checklists via branded portal to improve transparency and reduce service calls.
Customer Churn Forecasting: Create a dashboard based on ticket volume, complaint type, supervisor notes, and unpaid invoices to identify clients at risk of attrition.
Legal diligence should confirm compliance with OSHA janitorial safety standards, workers compensation policies, and labor classification laws. The company is E-Verified and does not use undocumented labor. It has never had a significant workplace injury or OSHA citation. However, the buyer should confirm that MSDS (Material Safety Data Sheets) are up to date for all chemicals and that chemical safety training is documented for all staff.
Ideal acquirers include:
First-time buyers seeking a cash-flowing service business with low capex
Existing building services operators (e.g., HVAC, pest control, landscaping) seeking janitorial cross-sell
B2B roll-up operators targeting route-dense, recurring-revenue businesses
In all scenarios, buyers should focus on maintaining supervisor continuity, deepening client relationships during transition, and increasing margin via route optimization and higher ticket services. The janitorial industry will always face high labor churn and competitive pricing but businesses with clean books, dense routes, recurring B2B contracts, and well-trained supervisors can produce highly stable EBITDA streams ideal for SBA financing and long-term ownership.
