Yield A Better Purchase Price For Your Janitorial Company

When a building service contractor decides its time to sell his or her company, which type of a buyer should he or she pursue?

Selling to a strategic buyer can yield several unique rewards in addition to a higher purchase price. Owners who regularly see customers or are intimately involved in the day to day operations are oftentimes required to continue working in the business for several years after the sale. Many owners love their business but feel burnt out from the stress of ownership, and this enables them to focus exclusively on what they love doing – such as being in front of their customers.

Continuing to work in the business means the seller also receives a comfortable salary and improved benefits. Compare the sum of the purchase price and the owner’s income during her years as an employee to alternative scenarios and you likely have a much more lucrative transaction.

Further, strategic buyers can offer staff benefits that no independent owner can match. Health insurance and retirement savings plans are made available to all full-time employees, and they are almost always better plans than the independent owner provided (if benefits were provided at all). Larger companies can also offer opportunities to advance and grow within the organization, providing the flexibility and upward mobility absent in small businesses.

Selling to a private equity buyer may offer an even greater financial reward if the business is the buyer’s first investment into the janitorial industry (known as a platform investment), because the seller will likely retain some equity in the company. Private equity buyers typically plan to own companies for 5-7 years and then sell them. The former owner who retained equity would cash out alongside the private equity firm at this point, effectively enabling them to sell the business twice. If the firm accomplishes its stated objective, namely to double or triple the size of the company during this time, then the original owner pockets considerably more than he or she would under any other scenario.

The point is, selling to a strategic or private equity buyer produces a very different type of legacy, but a legacy is still created. Regardless, owners who face a conflict between the best financial and non-financial buyer can resolve their issues with proper planning.

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.