Four foundational steps to a successful sale of your cleaning business.
I’ve sold residential and commercial cleaning companies as a business broker. These businesses are not only good prospects for other cleaning companies; they’re also attractive to individual buyers who feel they can learn the business quickly because the work is not technical. Four things the owner of a commercial or residential cleaning company should have in place for the successful sale of their business are as follows:
1 Clean Financials
This is the most important thing you should have in place when you prepare to sell your company. Clean financials mean having well organized records and accounting ledgers, and not having undeclared cash off the books. It doesn’t mean you can’t expense some normal “quasi-personal” items through your business. Just record them. Clean financials are very important to a successful sale. They show potential buyers that your business is well run and that you’re trustworthy. They’re also crucial when buyers apply for financing.
2 Diversified Customer Base
You know the saying, “Don’t have all your eggs in one basket.” The same is true of your customer base. If your revenues rely too heavily on a small pool of clients, your business is too risky. It should make you take pause, and it will certainly make a buyer think twice. You should diversify your customer base now for your own security. If you’re planning to sell your business in the next few years, though, diversifying your customer base should become a top priority.
3 Continuity of Customer Base
Just as a diversified customer base is important to you as a business owner and seller, so is the continuity of that customer base. If you have a lot of client turnover, that’s a red flag. Perhaps it’s time to assess your quality assurance systems or solicit customer feedback. Now think of how a high turnover rate might look to a buyer. Part of what they’re buying is your company’s reputation. How long your customers have been with you is an important indicator of how well your company is satisfying customers. Happy clients should always be a priority. You’ll reap the rewards of your customer satisfaction efforts when you sell your business.
4 Profitability
Even if you have a broad and happy customer base, you still might not be as attractive to buyers as you should be. Why? Perhaps you’re not profitable enough. Maybe you haven’t charged enough for your services or haven’t closely monitored costs. As a business owner, you need to constantly analyze profitability when making business decisions. This becomes crucial when prospective buyers start assessing your company’s value. Even if a buyer sees great potential for higher profits, he or she will make an offer based on your profitability.
Consider getting an estimate of your company’s value now. If it is not as high as you need, find areas for improvement and work on them. Not only will you reap immediate benefits, you’ll definitely profit from your efforts when you sell.
Marc Gudema is a principal with BayState Business Brokers. He has an extensive background buying, operating, and selling small businesses. He is on the Board of the New England Business Brokers Association.
