10 Year Old Denver Residential Cleaning Company

The trailing 12 months revenues were 519K with earnings of 177K.  That is a 34% profit margin which is very good for blue collar businesses especially a service company.  The sales price is only 430K which is under 2.42 X the 177K in earnings.  Both the revenues and earnings have grown at 20% a year over the last couple of years using online advertising and referrals. 

90% of the revenues are individual homeowners(residential) with 75% of those revenues being from window cleaning.  They also provide pressure washing of the entire house, gutter cleaning, solar panel cleaning, concrete cleaning and sealing, driveway cleaning, and air duct and dryer vent cleaning.  

The owner started the company 10 years ago, works around 30 hours per week on business growth and processes, does not do any cleaning or field work himself.  He hired a manager who is doing a great job.  The manager does the estimating,  overseas all jobs, technicians KIPs, tech retention, customer satisfaction and has recently started doing sales also.  The owner will fully transition the new buyer but is selling because of immediate family medical reasons and looking to move out of state to care for aging parents.

The owner states “I enjoy this business and want it to be successful as it moves into the future”

    The company’s revenues are approximately 65% recurring revenues.   This is a very valuable structure for a company and creates a lot of safety and predictability for the buyer.  He has relied on online advertising until very recently when his new manager started calling on potential commercial customers to help grow the commercial side of the business.  The company has a great foundation for future growth with a Google 5 Star rating and a Yelp 4.8 Star rating.  This is very valuable to the new owner also because of how much time it takes to generate that many reviews and because of how much those reviews help the company’s placement toward the top of online searches.  The owner has done the heavy lifting and the new owner should be able to take this company to the next level without changing anything. 

The company has 4 employees plus the owner, and a part time employee who works 20 hours a week as a part time bookkeeping and answers the phone when he can’t.   3 of the employees are field techs and 1 is the new manager.  He works out of his house which has an area the size of a 2 car garage that he uses to store some equipment and inventory but the techs typically have what they need in the company vehicles that they use and take home with them.  The vehicles are outfitted with heads up displays for hands free navigation, dash cams, and GPS tracking. They are mobile and don’t need an office except for bi-weekly employee meetings which could be at coffee shops and to switch out small equipment and to pick up cleaning supplies from time to time.  It is smart for service companies to train their techs to have a mental checklist of potential work that needs to be done on each house that they work on.  Examples are grout issues for brick houses, a worn out roof, older/inefficient windows, need for paint, repairs needed on siding, stone, or wood, patchy grass indicating the need for sprinkler repair or a new system, and always leave a radon detector with a sticker on it or something similar.  Most importantly offer a small discount if they sign up for monthly cleaning either all year or over the warmest 6 months of the year.  Have it pre-filled out for the techs to present before they go on the appointment or have an iPad or similar.  Keep in mind that any work that this company doesn’t do can still get a referral fee which is typically 5 to 10% of the total bid for other specialty service companies like roofers, tuck pointing(masonry), etc.  This is a profit of around 1/3 of what they would get if they were to do the work themselves.

  Additional Growth and Profit Potential:  The seller believes that there are many ways to grow or to make this company more efficient.  The new owner can buy software that will allow automatic online scheduling of work, expanding their service area which would be as easy as adding a storage unit, a used truck, and a couple of employees, add residential home cleaning(inside) or commercial nighttime cleaning, multi-unit residential cleaning by reaching out to property management companies, add construction cleaning, and by calling on referral partners such as Realtors and short/long term rental company owners/property managers. They also can add pay per click or additional landing pages for their website for other services.  

There are a lot of things to like about this company: 34% profit margin, steady growth, cleaning companies have the highest rate of recurring revenues in the service industry, bidding jobs is very easy which is one of the main areas of risk to a new buyer, most customers have regularly scheduled cleanings, inexpensive employees compared to other service companies who are easier to find because of their lower skill level and no licensing requirements, low capitalization to grow, 4.9 Star average online ratings will help to drive online searches to the owner, the majority of the billing is monthly which he is in the process of converting to auto withdrawal, 178K in current value assets, easy model to continue to grow , and there are many add on services that the new owner might want to consider.  

The business owns 5 vehicles that are used for the business by the employees who take them home.  They also have vent/duct cleaning equipment/filters, a large power washer, tools, ladders, cleaning supplies, and small equipment.  The total of the assets are currently estimated to be 178K.

No cleaning experience is necessary for the buyer.  There are no required licenses but some vendors offer various certifications. He will offer a full transition for a negotiated amount of compensation for up to 60 days. 

The Sales Price is 430K.   The Seller is willing to carry 5% of the sales price.  The business will qualify for an SBA loan for a qualified buyer. This means that with the Seller carrying 5% of the sales price, it leaves 408.5K which a bank will provide 90% of, with the buyer providing 10% in a traditional SBA loan.  Working capital is estimated to be 50K which means the 10% down payment of 37K(10% of 368K which is 90% of the 95% of the sales price) plus 50K in working capital is only 87K which is all that it will take to buy this business.  Most of the time, the buyer only needs to prove working capital and does not have to write a check for it which may or may not save spending all of the 50K.  The sales price includes all of the assets and cleaning supplies.

Location:  The current Buyers house is East of Downtown Denver but the new owner can be anywhere in or near Denver most likely working out of the new owners house or a storage unit near a centrally located area.