How to Sell Your Cleaning Business Quickly and Confidently

By Tim Murch, CBSE, and Andrew Rust

4M Building Solutions, a leading commercial cleaning provider established in 1978, has completed over 30 successful acquisitions in the cleaning industry. Drawing from extensive experience, 4M presents this article series to guide business owners through the process of selling their commercial cleaning business. This installment offers a detailed roadmap to navigate the complexities of selling a commercial cleaning business.

Why Sell Your Cleaning Business?

The decision to sell a commercial cleaning business is significant, often driven by retirement, financial challenges, burnout, or new interests. Understanding the process of selling a business ensures that business owners avoid common pitfalls, maximize valuation, and achieve a smooth transaction. Owners must be prepared to address both personal and business goals and communicate these goals effectively throughout the sale process.

Step 1: Preparing to Sell
Preparation is the foundation of a successful sale. To ensure readiness, streamline the process, and attract a quality buyer, business owners should take the following steps:

Organize Financial Records - Ensure the financial statements and operational data of the business are detailed, accurate, comprehensive and insightful. These records should include detailed profit-and-loss statements, balance sheets, and tax returns for the past three to five years. A prospective buyer relies on this information to assess the business’s stability and profitability.

Document Personal, Non-Business Expenses: Identify and prepare a schedule of personal expenses impacting the income statement to present a clearer picture of the company’s profitability.

Engage Experts - Hire a CPA to organize and validate financial records. A CPA can verify the accuracy and completeness of financial statements.

Digitize Key Documents - Key business records, such as contracts, employee records, customer agreements, and operational files, should be digitized and organized. Having these documents readily accessible and organized can simplify the process of satisfying buyer inquiries.

Address Legal and Operational Issues - Resolve any legal disputes, employee conflicts, and compliance concerns. Addressing potential red flags early helps avoid delays during due diligence and improves the probability of a successful outcome.

Document Processes - Document all the systems, processes, workflows, and policies in detail to showcase operational efficiency and scalability. Detailed manuals and process guides demonstrate the business’s ability to operate smoothly post-sale.

Personal Preparation
Along with business preparation, owners should engage in personal preparation for the sale of their business. This preparation includes defining goals and priorities beyond financial outcomes, developing a post-sale plan for how they will spend their time, and assembling a trusted internal team to provide support them throughout the process. Senior managers can contribute valuable insights, share the workload during due diligence, and help ensure continuity during the transition. 

Thorough preparation enhances efficiency, mitigates risks, and increases buyer confidence, often resulting in a higher valuation.

Step 2: Identifying and Evaluating a Buyer, Preliminary Diligence (15-45 Days)
Once an owner has prepared themself and their business for sale, it’s time to identify a potential buyer.

Common sources include:

Industry Contacts: Peers, competitors, mentors, and advisors familiar with the commercial cleaning market.
Solicitations: Many business owners receive acquisition inquiries during their careers. Owners should review these inquiries with discretion and due diligence for a viable potential buyer.

Networking: Relationships developed through trade associations and industry events can provide leads for a potential buyer.

Key Actions During This Phase:

Establish Confidentiality - Buyer and seller sign a non-disclosure agreement (NDA) to protect sensitive information. This step ensures that financial data and operational details remain secure.

Respond to Buyer Inquiries - Seller provides the interested buyer with financial statements, sales data, employee information, and organizational information. Respond to Q&A accordingly.

Indication of Interest (IOI) - After receiving requisite information, an interested buyer presents preliminary terms, including valuation and key deal points.

Throughout this phase, a seller should also evaluate a buyer’s compatibility with their organization. The following are some key criteria a seller should use to evaluate a buyer:

Alignment of culture and values with those of their organization.

Commitment to employee retention and growth. A buyer who values the seller’s team’s expertise will ensure a smoother transition.

Financial resources and a proven ability to close transactions. A seller should verify funding sources and request references from previous acquisitions.

Relevant industry experience and an established acquisition track record. A buyer with prior knowledge of the cleaning industry is more likely to understand a seller’s business model.

A seller should trust their instincts and address any red flags, such as rushed timelines, vague commitments, or lack of transparency.

Step 3: Conducting In-Depth Diligence and Negotiating an LOI (30-45 Days)
After identifying a qualified and right-fit buyer, more detailed due diligence begins. This phase provides a buyer with a deeper understanding of the business and includes:

Documentation Sharing - Detailed financial records, employee information, and sales performance data must be provided to ensure transparency. A buyer typically requests this information to validate the company’s financial health and operational stability. A buyer is keen to understand product/service mix, end market composition, customer retention and tenure, and employee turnover and tenure.

Q&A Sessions - A buyer engages with the seller in detailed discussions to evaluate financial performance, revenue streams, customer relationships, and operational nuances. Questions often focus on customer retention, customer satisfaction, scalability, and competitive positioning. Transparency at this stage builds trust and benefits the entire process.

The Letter of Intent (LOI) - The culmination of this phase is the issuance of a Letter of Intent. The LOI is a formal offer outlining:
Purchase price and payment terms.
Deal structure (e.g., asset purchase or stock purchase, mix of cash at close vs. earnout).
Timelines for closing and post-sale transition.
Contingencies such as financing or due diligence requirements.

LOIs are detailed and reviewed by M&A attorneys. Both parties negotiate terms before signing, setting the stage for confirmatory due diligence and purchase agreement negotiations. A comprehensive LOI minimizes surprises and sets clear expectations for both parties. Once the LOI is signed, both parties move quickly into due diligence.

Step 4: Confirmatory Due Diligence and Documentation (30-45 Days)
This phase is the most rigorous and requires close collaboration between the seller, buyer, and their advisors. This phase is focused on validating previous claims made by the seller. Key elements include:

Responding to Buyer Requests - Seller addresses questions promptly and provides requested documentation. Seller should be prepared to share updated financials, customer details, contracts, asset schedules, and vendor details. Accuracy and timeliness are crucial to maintaining buyer confidence.

Legal Documentation - Buyer’s attorney drafts the purchase agreement and other ancillary legal documents. These documents define the terms of the transaction and safeguard the interests of both parties.

Tips for Success - Seller should engage an experienced M&A attorney to protect their interests. Their expertise ensures that legal language is clear and equitable.

Manage attorneys closely, ensuring they spend time negotiating only the material and relevant legal points.
Delegate administrative tasks to trusted team members to maintain business operations during this demanding phase. Avoid disruptions that could impact performance metrics.

Once due diligence is complete and agreements are finalized, the sale progresses to the integration phase.

Step 5: Smooth Integration (30-45 Days)
Integration ensures a seamless transition of employees, customers, and operations. This phase is critical for preserving the company’s value after the sale.

Employee Communication - Open and transparent communication fosters trust and stability among employees. During this critical phase, seller should coordinate with the buyer to do the following:
Host company-wide meetings to announce the transaction and reassure staff.
Share FAQs addressing job security, new processes, and leadership changes.
Provide regular updates throughout the integration period to keep employees informed and engaged.

Customer Communication - Like employees, customers will expect to be notified of the transaction and will have concerns that need to be addressed. Best practices for customer communication include:

Arrange face-to-face meetings or personalized outreach for key clients. Demonstrating continuity and care will ease their concerns.

Address questions about service continuity, pricing changes, and account management. Customers will want to be assured that they will not experience any changes in service or staff.

Operational Integration - The final component of integration focuses on systems and processes which includes:
Transition HR, payroll, billing, and marketing systems to the buyer’s platforms. Seller and buyer will collaborate to ensure compatibility and functionality to prevent service disruptions.

Buyer and seller coordinate and collaborate on training programs to familiarize employees with new systems and processes.

Step 6: Closing the Deal
When all due diligence is complete and the pre-close integration is near complete, the deal moves to closing. This involves the release of signature pages and execution of legal documents, the transfer of funds from buyer to seller, and the official handover of the business. This milestone marks the beginning of a new chapter for the business under its new ownership and a new chapter of life for the seller.

Your Roadmap to a Successful Sale

Selling a commercial cleaning business is a complex yet rewarding process that demands careful preparation, clear communication, and collaboration between all parties. By following a structured approach — from initial preparation to integration — business owners can maximize valuation, ensure a smooth transition, and achieve their goals. This comprehensive roadmap provides the necessary guidance to navigate the intricacies of the sales process with confidence and success.

Tim M. Murch, CBSE, is CEO & Managing Partner of 4M Building Solutions, a 46-year-old janitorial services company with sales just under $250million, operating in 27 states with 6,700 team members. Tim and 4M have successfully completed 34 acquisitions (as of press time). 4M partnered with O2 Investment Partners at the end of 2022 with 4M being the platform company leading acquisitions and further organic growth. 

Andrew Rust is Head of Corporate Development & M&A for 4M Building Solutions. Andrew has over a decade of experience in finance, operations, corporate strategy, and mergers and acquisitions. Having closed more than 30 transactions representing over $700 million in transaction value, Andrew is an expert in acquiring and partnering with founder-owned & operated businesses.