Have Your Cleaning Business Valued Before Selling

There are three things every owner should do before attempting to sell – have your business valued; implement a de-risking initiative; and, create a life after ownership plan. Checking these boxes will not only establish a solid foundation for your exit plan but will also enable you to more clearly envision the most logical buyer and position your janitorial business accordingly.

In this tip I will cover valuation.

First, it’s imperative to understand the value of your janitorial business. Many owners think they know what their company is worth, but most have never had it formally appraised. Instead, they rely on gossip from friends, colleagues, and sales reps, which is at best provided out of context and oftentimes completely false. When an owner bases valuation expectations on incomplete or incorrect information, he approaches the market inefficiently – ask too much and buyers won’t take him seriously, ask too little and buyers might ask “what’s wrong?”

A business valuation should be conducted by an independent third party with intimate knowledge of your industry and a history of completing transactions within it. The appraiser should have no bias toward a certain outcome, no formal affiliation with prospective buyers, and the ability to provide you with a well-rounded perspective on all potential transaction scenarios and the underlying valuations of each.

Next, identify any potential challenges to the valuation as well as key contingencies to each potential transaction scenario. Does the valuation align with a lender’s key metrics? Will you have to agree to certain deal terms in order to sell at the high end of the valuation range, and are those terms you’re willing to accept? Are there any aspects of your organization that make it unsellable, at any price?

Peter Holton is the Managing Director for Caber Hill Advisors and has been in the service industry for nearly 20 years and is well known and respected throughout facility maintenance industry. He manages the firm's practice facility maintenance sectors. Peter offers valuations, exit planning, consulting and buying or selling business. He has performed numerous speaking engagements for organizations such as ISSA and BSCAI. He can be reached at peter@caberhill.com or by visiting www.caberhill.com.