What To Consider Before Buying a Cleaning Business

Ask any cleaning business owner how they got started, and you'll get a wide range of answers. Some will tell you they started in their garage or basement building the business slowly and adding equipment and employees as they grew.

Others will tell you they bought an existing cleaning business that was already established in the community. They have a strong client base, good financials, full inventory of supplies and equipment, and commercial property with room for growth.

And still others are considering expanding their share of the market by acquiring another cleaning business. Whatever your motivation, there are many things to consider before buying a cleaning business.

First, it's essential that you have an attorney and accountant working for you that has your best interests in mind. They can guide you, analyze the profitability potential of the business, and recommend walking away or pursuing it further.

Here are some of the things to consider:

• What do the last 3 years financials look like? (steady growth, no growth, decline in sales?)
• What services do they currently offer and how does it fit yours?
• Do you keep all their employees? Are there any that they're currently having problems with?
• Does their property offer something that would benefit you? Better location? Larger space? More amenities? Are they locked into a lease agreement and if so, are they able to get out of it if you don't want to relocate your existing business?
• Will the owner stay on to help with the transition?
• How will you handle telling the customers about the change in ownership? Without a smooth transition, customers may jump ship or go out to bid.
• What happens if you lose accounts after buying the business?
• Have you looked over their existing contracts, if any, to see if the contracts can be transferred?
• How long have they had each of their customers and what is the probability that you can keep them?
• What is the condition of the assets they show on their books?
• Are there any liabilities due immediately if a sale occurs? How many and what type of liabilities are there?
• What kind of terms can you negotiate for the purchase?

If you already own a cleaning company, chances are, you will be duplicating resources that you already own. Take a look at whether the additional assets are truly an asset, or if they are going to be a bigger liability. Many items can be factored in that make the business worth either more or less such as:

• Elimination of salaries by combining staff.
• Combine the two offices, eliminating rent as well as utilities, etc.
• Keeping one accounting firm.
• Selling off extra company cars, vans, etc.
• Combining inventories of supplies and equipment.
• Combining some of the operations so that supervisors can absorb more territory. This can also translate into saved phones, vehicles, etc.

The whole idea is to find synergies that create cash flow by combining companies. As an example, when a company is sold, the buyer is able to eliminate one owners' salary, the entire marketing department salaries, human resource and payroll department salaries, etc. This accounts for a substantial amount immediately because all of these previously existed in the organization.

Look closely at the profit and loss statement and see where you can create these synergies that make it a good fit for you. All of these items can add up to substantial amounts. And remembers, your accountant and attorney can help guide you through the legal and financial aspects to make your purchase successful.

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