Episode 226 – How to Sell a Cleaning Business for Top Dollar
What is Your Exit Strategy?
How to Sell a Cleaning Business for Top Dollar
Today Mike coaches Victoria Amador, owner of Bostons Best Commercial Cleaning on how to sell a cleaning business for top dollar. Victoria has done an amazing job building her family cleaning business. She started her family business 7 years ago as residential cleaners and has transitioned into exclusively commercial cleaning. It’s been an exciting and successful journey. She never thought she would sell, but has come to the realization she needs to have an exit strategy.
It’s the dream of many entrepreneurs to be able to get that 7 or 8 figure payday for all your hard work. The problem is, they don’t really know how to sell a cleaning business. First and foremost the worst time to sell the business is when you’re panicked, hate the business and just want out and want out. Buyers are absolutely going to sense something is wrong with your business. It’s repellent to buyers and extremely repellant to top dollar buyers. Often times in that situation someone will try to take advantage of you.
Consider visiting our guide to growing a cleaning business before going any further
KEY POINT: Buyer’s don’t want to be buying a job or a business they have to work 100 hours a week at to make no money, they can do that for free! they want to buy a profitable company they can run.
There are some unscrupulous buyers out there that will go all the way down to the closing table, knowing you’re in pain and ready to get out of the business. They know that in your mind you’ve already sold the business, bought the boat, planned the vacation and told your friends and family. Then at the closing table, they drop the hammer. Suddenly they’re offering 30% less than agreed upon previously. They know full well you have to make a HUGE emotional decision to either accept much less money or go back to working, cancel all your plans and tell everyone it’s not happening.
The way you combat that is to work smarter and harder than ever during that closing period. With the intention of increasing your company’s value so that if the buyers go sideways or try to offer less money, you can show your business is even more valuable than before. So, if they want to lower the offer, you can justifiably raise it! Or be OK with walking away.
For all of those reasons the timing has to be right. The best time to sell is when you love your business and you’re making so much money and doing so little work you feel almost guilty for the pay you are receiving.
You can get top dollar for a business that is doing well financially
The story that you don’t really work more than 10-15 hours a week and am making good money is very appealing to a buyer.
If you just want to know how to sell a cleaning business so you can sell yours today and get rid of its, there’s not a whole lot you can do to get top dollar. But, when you have a year or two and want to prepare for a sale, that’s when you can really make huge differences.
KEY POINT: 1-2 years ahead is the perfect time to start
First things first, you want to have your books in order PERFECTLY to the dollar. No missing cash, or “ask my accountant, I am not sure where that money went”. Nothing should have to be explained in special circumstances.
Personal expenses are only personal and never run through he business and business expenses are always really business expenses. Things like a personal cell phone can be legitimate business expenses when you’re using it for your business all the time. Even part of you car can be a business expense if you’re using it for work. But things like your Spouses car or a vacation to Tahiti, shouldn’t be in there.
RESOURCE ALERT: Learn more about having amazing Cleaning Business Books in this special guest expert Podcast
Believe it or not, having immaculate books is actually very unusual. Most business owners know how much they’re making but it’s not on their P&L or their tax returns. They want to sell for what they feel they are making or think they are making but they’re only going to get paid on the amount they can prove they are making.
Buyers don’t care about your story on how you take money out of your business to pay for your personal things, they’re only going to pay you for what you can prove. And if they are getting a loan for the business, the bank loaning them that money is also only going to be interested in what you can prove.
If you are serious about how to sell a cleaning business the right way, you should be trying to pay as much taxes as possible for the next couple of years. When you can show a business paying a lot of taxes buyers will think, “wow if they’re making this much money after they’ve tried lowering their tax burden as much as possible, they’re probably making even more.”
Steps 1-3 of How to Sell a Cleaning Business:
Be in a position of “you don’t want to sell, but they want to buy”
Pay as much tax as possible for 2 years
Clean Books, Every dollar is accounted for
Step 4 of how to sell a cleaning business is Systems.
The narrative when Mike sold his last two businesses for 7 figures was “I work here 10-20 hours a week tops and I am here because I love it, not because I have to be. I am only here when I want to be here and I enjoy working on it.”
For a new buyer, any time you work in the business he/she is going to have to work 20 hours on top of that learning how to take over the controls. So if you’re only working 10-20 hours a week, a 40 hour work week is very appealing to a new owner.
The only way you ‘re going to be able to achieve that autonomy in your business is systems. Either you’re running the business and making all the decisions or you have made all the decisions in advance for your employees to follow, that’s a system.
Every time a new situation comes up, you decide on a course of action for that situation, codifying it into a system and putting that into a book or training video so that any employee can see and know what to do without you.
Consider these two scenarios:
Hey buyer, we made did a million in revenue last year and I made $150k for myself. I can’t really prove that I made that much because the books don’t show it, but trust me, I took all this money. I’m working 50 hours a week but I love it so I don’t mind that I don’t get much time off. We also built all our business off of referrals, that’s how we get all our customers.
I’ve got this business, doing about a million in revenue, I made $151, 019.82 profit last year, $60,000 was W2 salary the rest was profit and it’s in these three accounts. If you have any questions I can show you exactly where all the money went with receipts. Honestly, I’m in the business 2-3 days a week for 4-5 hours. We’ve been growing at a rate of 12%/year and I can tell you that we are going to grow 12% next year because here are the 6 places we get our customers. Our Facebook budget is $1000/mo and we get 27 inquiries, 4 bids and 2 customers a month off of that. Our Direct mail budget is $2000/mo… and you go through the 5 0r 6 things you do every month. Here’s how many inquires we get, bids we give and customers we get. And if you spend more money in any of venues you can increase those numbers. You have numbers and systems for all of them. None of it is a guess or “we spend some money on Facebook and get ‘a lot’ of customers that way”
Which one of these scenarios are you more likely to want to invest in? You won’t be the only cleaning company for sale, but if you want to know how to sell your cleaning company for top dollar, you better start working towards being scenario 2.
How to sell a cleaning business BONUS:
The ace up your sleeve when selling your cleaning business is your customer list. Mike talks often in his speeches about selling below the iceberg. You don’t want to be bidding against all of your competitors out there for the few customers who have raised their hands and said they’re ready to buy now. You want the people who haven’t raised their hand yet but are going to buy in the next year and you want have a system you use to communicate with them.
RESOURCE ALERT: Get more in-depth content on the“Iceberg” concept HERE
Having a list of people who have raised their hands saying they are interested in cleaning services in the near future is incredibly valuable to a prospective buyer. You build that list by having them going to your website, you offering them a lead magnet, them downloading it in exchange for their information and you have a system for following up with them.
RESOURCE ALERT: Check out this episode on Landing Pages and how they can help you build your prospective customer list!
The final piece on how to sell a cleaning business and getting top dollar for it is finding someone who can pay 5x your profit vs 2x. So where does this magical unicorn exist? They’re called strategic buyers.
Strategic buyers are someone who is not only interested in your business but in your customer list because they have another business that can sell to them as well. This is part of why building that prospective customer list can be so profitable!
RESOURCE ALERT: Learn how to build automated customer attraction/list building systems with the Million Dollar Customer Attraction System
What does a strategic buyer look like? For example, if you are a residential cleaning company they might be an HVAC or Pest Control Company. If you are going out and cleaning monthly or every 2 weeks, they can increase that revenue by selling your customer list their existing services. Now they aren’t just getting the benefit of your company’s revenue but amplifying theirs with a whole new customer base!
Now that you know how to sell a cleaning business for top dollar. We want to know how you are going to start preparing your cleaning business for your 7 figure exit. Comment below and tell us what you think!
To close it all out, Victoria shares her incredible wisdom in the…