Had a blast talking with Ken and his Cleaning Tribe group about how to buy a house cleaning business. If you are buying or selling your maid service, here’s my article on how I’ve done it:
https://emilysmaids.com/how-to-buy-a-cleaning-business/
We also touched upon several other topics during the talk. Here are a few helpful resources for the listeners.
1) I recommended charging what you are worth. From my experience, low pricing leads to a race to the bottom and out: https://emilysmaids.com/cleaning-companies-go-business/
2) One of the reasons I am able to provide more value at a discounted rate at Dallas Maids is leveraging over seas talent: https://www.dallasmaids.com/the-ultimate-guide-on-how-to-hire-a-virtual-workers-for-your-cleaning-business/
3) Tying your employees’ pay to performance is one of the secrets how my companies mop up the competition: https://www.dallasmaids.com/employee-bonus-based-on-performance-plan/
4) Your competition are your friends. Help each other become better house cleaning business: https://www.dallasmaids.com/maid-services-working-competition/
Here is a summary of listener’s questions and answers:
The Cleaning Tribe Q&A
Q 1.What should you expect to pay per client when purchasing? (Michelle)
Your cost of client acquisition is the baseline I determine how much to pay for customer accounts. After all, why pay more than what you would normally pay through your marketing?
Q 2. Do you just get the client list or can we expect employees and systems as well? (Michelle)
Client list is the primary focus. Acquiring employees seems desirable but rarely works out. The workers tend to be be mediocre because former owner didn’t have the cash flow to pay for exceptional talent.
You systems are probably superior so no need to purchase the sellers system unless you are new to the industry. And you must consider systems because the closer the system is to yours, the smoother the transfer process.
Q 3. When selling, how much do systems add to the value? I feel like it would make sense for me to purchase a client list but I want to make sure I am setting my business up for the best possible value even if I am not selling? (Michelle)
When selling, systems are everything. Systems allows for automating and automation is important because a) it allows for freedom. If your business can’t run without you for 6 months, you don’t own a business, you own a job. b) A good system that automates business operations lessens risk because the business has a proven system that works.
Q 4. What are the benefits of setting your business up for sale even if you don’t plan on selling? (Michelle)
No reason other than knowing how much our business is actually worth. This may be important for situations you need knowledge of your net worth such as acquiring loans.
Q 5, 6, 7. What can I do to ensure I get top dollar? (Michelle); How can we get the most $$ when selling a business, and does owning an actual building add value? (Ellen); What things can we have in place or be doing to make it more valuable? What things shouldn’t we do? (Kate)
Assets
- Revenue – Bigger companies command higher revenue. The more revenue lessens risk.
- Cash Flow – Higher profit translates to less risk of going into the red
- Automobiles – Wrapped automobiles provides advertising
- Staff – Quality staff provides the better service. Better service lessens the risk of customer attrition.
Intangibles
- Turn key – Can the business mostly run by itself? This lessens the risk for the new owner. Worse case is the company requires the owner to survive so the new owner is not buying a business, they are buying a job!
- Reputation – Does the company have a good reputation? Have they garnered a high rating online such as Google My Business and Yelp? If so, this lessens the risk by ensuring a flow of customers.
- Employee Turnover – Less turnover with employees lessens disruptions to business which lessens risk.
- Customer Attrition – Low attrition lessens the risk of losing business.
- Established – Older, established companies are less risky because they have a proven system, reputation, staff, etc.
Risk = Selling Price
Price is related to risk. Lower risk results in higher price. If you are able to transfer a profitable business to the new owner with minimal risk, you will command a better asking price.
Ultimately, the value of your business is what someone is willing to pay for it.
Q 8, 9. Same Questions: How do you value your business, how do you know what it’s worth? (Kate); What is the average sale price? (Michelle)
The average selling price is 2 to 4 times earnings based on what I have heard from other cleaning service business owners. The most was 4.5 x but it was with a broker and the business has a solid system and great reviews.
Bank is the perfect litmus test! If they approve the loan, then you are good. If they do not approve the loan, you need to reevaluate your business’s worth.
Q 10. With regard to no selling but stepping away totally (ie. residual income), how does one ensure that those who are running the business don’t run it into the ground? (Ellen)
First, write an easy-to-understand handbook of your business processes and procedures so you staff know how to do their job.
Second, hiring the right people. Doesn’t matter how good your handbooks are, if you don’t hire the right people things won’t get done.
Q 11. What financials are needed when selling and how far back do they need to go? (Ellen)
At least 2 years. Three to 4 years preferable.
Q 12, 13. Where do we advertise our business? (Kate); Are there any services that will help us sell, like a small biz realtor?
- Network – this is how I found the majority myself – owners would approach me because they already knew me
- Online
- bizbuysell.com
- bizquest.com
- craigslist
- Facebook marketplace (haven’t had experience but good option. Best to post anywhere online you can)
- Broker – Business brokers. Expensive but if you have a good business, well worth it. The highest I heard a business going for was 4.5 times earnings and they sold via broker.
Thanks to Ken for having me on the Cleaning Tribe Expert Q & A. Ken is the master of the solo cleaning business, pulling in amazing profits while working only 2 days a week! Visit him at https://www.solocleaningschool.com/solo_teams.html and https://www.youtube.com/channel/UC4mCcXOu8t9hLX5XK-iuYrg