Buying an established Janitorial company

[JAVB]

i am considering buying a Janitorial and Commercial Cleaning company for $525,000 - I've never been in this line of business. The company has been around for 20 years. It gets $800k/ in revenue. No office (lease) no big overhead. Just 14 employees. Lots of work that is sub-contracted. Clients with the company for 4,7,10 years. Owner netting $165k/year. My goal is to learn all about it, grow it, and apply all the improvements I see can be applied. Any of you has had experience with this type of business? Have bought an established one? Thoughts? Shoot.

 

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[minivanman]

How long are the current contracts good for? Why are the current owners REALLY getting out? Will YOU be able to handle YOUR responsibilities once you take over? Do they do floor work? Do you have the CASH to pay for this? And the biggest question of all..... do you have a marketing plan?

 

[Walter Hay]

IF this is a good deal, you could be on the way to millions if you can scale it. In my view the best way to scale a service business is by franchising it. You can enjoy explosive growth without employing people for each new local operation.

The biggest problem I see is the relatively poor net figure, which is less than 20%. You would need to do better than that. In fact I would not buy any business that netted less than 20%.

Walter

 

[minivanman]

20% and less is why I never expanded in to the commercial cleaning. Personally, I could never make the profit work and it too long to get new work..... unless it was small 1-5 offices and there was even less profit in those, usually. But that was just me..... I could have been missing something.

 

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[JAVB]

How long are the current contracts good for? Why are the current owners REALLY getting out? Will YOU be able to handle YOUR responsibilities once you take over? Do they do floor work? Do you have the CASH to pay for this? And the biggest question of all..... do you have a marketing plan?

- Contracts are yearly. Usually auto-renew. Most clients have been for several years
- Current owner has owned for more than 20 years. He is 67 and is not interested in scaling or anything like that. He's retiring.
- I will be able to handle my responsibilities, of course. I'm not buying to continue doing the same, but to improve multiple areas I've identified I bring value to
- Company's employees only do regular cleaning. There's a big portion of revenue that is additional services, such as: Window cleaning, pressure washing, carpet cleaning... all this is sub-contracted.
- I do have the cash to pay for this.
- I do have a marketing plan AND background. I'm a Digital Marketing professional with more than 10 years of experience.

Other competitive advantages: I speak Spanish and I'm Hispanic (which is a common language and culture in this industry) / The city/area is growing like crazy and will be expanding for the next 10 years (despite the expected economy contraction).

IF this is a good deal, you could be on the way to millions if you can scale it. In my view, the best way to scale a service business is by franchising it. You can enjoy explosive growth without employing people for each new local operation.

The biggest problem I see is the relatively poor net figure, which is less than 20%. You would need to do better than that. In fact, I would not buy any business that netted less than 20%.

Walter

I know, I noticed this. The thing is that the owner has been managing this business in a lifestyle fashion, which means he doesn't or didn't want to deal with it as much, and that included employee turnover. He explains that the workers tend to leave easily (particularly in this low-employment period) so he made the decision to pay them top-dollars, so the top employees have been with the company a long time, some 10 years... He says (not that I have to continue doing this) that he pays his employees a lot better than competitors...