Does anyone have experience in Commercial Cleaning Business?

October 30, 2018

by a searcher from Babson College in Chicago Loop, Chicago, IL, USA

I am evaluating an acquisition opportunity providing commercial cleaning services to residential buildings, offices, and businesses with large sports and recreational area. Services are typical of those you see around you: Janitorial, Carpet Cleaning, Common Area Cleaning, Trash Removal, Mat Service etc. It's a fairly small deal in a fragmented industry so wanted to understand key evaluation factors from anyone who is familiar with the business and industry. So far I have prioritize customer contracts, customer loyalty, and employee reliability as key factors to evaluate the deal besides sales growth and margins. It would be great to get more insight from you.
On a side note: I would also like to get few recommendations for a lawyer and accountant.

Reply by a searcher
from Harvard University in Grand Rapids, MI, USA

One of my neighbors recently bought a commercial cleaning company and shared his experience. As expected, labor is 'the' main factor to consider. The company he bought services offices, government buildings, and construction site cleanup. All of his employees were experienced W-2 employees who passed background checks and had driver licenses to drive company trucks (auto and liability insurance was lower). His cost structure was higher than companies with simple 1099 employees -- he thought his cost structure was needed to service his 'more demanding' customers (e.g. government buildings wanted tenured cleaners with a background check or employees working on a dangerous construction site). After a year of ownership he was surprised when he lost a few government building contracts because they went with cleaning companies with 1099 employees and limited/or no background checks.

Reply by an investor
from University of Canberra in Perth WA 6000, Australia

Luke I reviewed a commercial cleaning business here in australia a few years ago. It was a master franchise operation so may be different model to the one you are looking at. Regardless, what is your workforce turnover rate as it can be a very transient one. What are the HR incentives to keep and develop your workforce etc? Is there a client relationship system that enables digital real time communication? Also is there an opportunity to partner with other specialist services to expand your customer value proposition?

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