Industry guide
Commercial cleaning and janitorial
Contracted, recurring revenue is the appeal. The risks are concentration, thin margins and labor.
What drives value
- Contracted recurring revenue from offices, medical facilities, schools and property managers.
- Diversified accounts. Many mid-sized clients are safer than a few large ones.
- Supervision and systems. Inspection checklists, scheduling and quality control that do not depend on the owner.
- Retention. How long clients stay is often more telling than how many there are.
Where the risk hides
- Cancellation clauses. Many cleaning contracts can be ended with 30 days' notice. A contract list is not the same as guaranteed revenue.
- Customer concentration. Losing one large account can erase most of the profit. Consider an earnout or seller note tied to key accounts.
- Labor. Wages are the largest cost and turnover is high. Check wage rates against the local market and verify worker classification; misclassified contractors can create liabilities.
- Owner relationships. Clients may have bought from the owner personally.
- Insurance and bonding requirements, and any claims history.
Questions to ask
- What share of revenue comes from the top five clients, and what are their contract terms?
- How long has each client been with the company, and how many were lost in the past three years?
- How are cleaners employed and paid, and what is annual turnover?
- Who supervises quality, and how?
- What insurance and bonding does the business carry, and what claims have been made?
- Which clients deal directly with the owner?