Commercial Cleaning Company — Southeast U.S.

A $1.8M janitorial and commercial cleaning business listed on a major marketplace. 22 employees, recurring contracts, and an owner who claims 15 hours a week. Here is what the listing tells us — and what a buyer should ask before going further.

What the numbers tell us

The headline math works. $480K in SDE on $1.95M revenue is a 24.6% SDE margin. For commercial cleaning, that is on the high side of normal. Industry benchmarks for janitorial companies in this revenue range typically fall between 15% and 25%. Being at the top of that range is not a red flag by itself, but it is worth understanding why.

A few possibilities: the owner is underpaying himself relative to replacement cost, the business has unusually favorable contract pricing, or the SDE figure includes add-backs that a new owner would not actually realize. We cannot tell from the listing. That is the first thing to verify in financials.

The multiple

3.75x SDE for a commercial cleaning company with $1.95M in revenue is a fair asking price — not a bargain, not egregious. Comparable businesses in this range typically trade between 2.5x and 4.5x depending on contract quality, customer concentration, and owner dependence. This listing is right in the middle.

But "fair asking" is not the same as "fair deal." The multiple only means something if the SDE number is real and sustainable under new ownership. That is always the question.

Revenue-to-employee ratio

$1.95M across 22 employees is roughly $89K per employee. For janitorial services, this is reasonable. It suggests a mix of full-time and part-time staff, which is typical. What we cannot see: the split between W-2 employees and subcontractors. If a significant portion of the workforce is 1099, the economics and risk profile change meaningfully — particularly around labor compliance, workers' comp exposure, and the ability to control service quality.

What we would want to verify

These are the questions a buyer should have ready before requesting financials. They are ordered by how much they could change the value of the deal.

1. What does $480K in SDE actually include? Owner salary, personal expenses run through the business, one-time add-backs — the composition matters. If $80K of that SDE comes from adding back "owner health insurance" and "personal vehicle," the number a new owner takes home is closer to $400K. That reprices the deal at 4.5x.
2. How concentrated is the revenue? If two or three contracts represent 40%+ of revenue, this is a customer concentration problem. In commercial cleaning, losing a single large contract (a hospital system, a property management group) can erase the margin overnight. The listing does not mention contract details.
3. What does "15 hours a week" actually mean? Listings routinely understate owner involvement. "15 hours" might mean 15 hours in the office — not counting the phone calls at 6am when a cleaner does not show up, the Saturday walk-throughs after a client complaint, or the time spent quoting new jobs. The real question: what happens to revenue and service quality in the first 90 days if the owner disappears?
4. What is the contract structure? Recurring revenue in cleaning can mean a signed 3-year contract with a hospital system or a month-to-month handshake with a strip mall landlord. Both are "recurring." They have very different risk profiles. We need: average contract length, renewal rates, cancellation terms, and whether contracts are assignable to a new owner.
5. Who are the two managers, and would they stay? In a 22-person cleaning operation, the managers are the business. They handle scheduling, quality control, client complaints, and crew supervision. If they leave — especially in the first year — the new owner is not running a semi-absentee business. They are running a staffing operation with a mop.
6. What is the labor situation? Turnover in commercial cleaning runs 100%–200% annually at the crew level. That is an industry reality. The questions: what is the current turnover rate, what does recruitment and training cost, and is there a pipeline? Also: W-2 vs. 1099 classification. Misclassified workers are a tax liability that does not show up on a listing.
7. Why retirement, and why now? The owner is 14 years in. "Retirement" is the most common stated reason for selling a service business, and it is usually at least partially true. The follow-up: is the owner willing to stay for a transition period? How long? Paid or unpaid? A clean handoff in commercial cleaning typically requires 3–6 months of active transition, minimum.
8. What does the equipment situation look like? Commercial cleaning equipment is not capital-intensive, but a fleet of vehicles, floor machines, and specialty equipment can be $50K–$150K to replace if it is end-of-life. The listing says "equipment included" but not the age or condition.

Industry context

Commercial cleaning is one of the most frequently listed business categories on acquisition marketplaces. There are structural reasons for that — and they matter for valuation.

What works in this industry

• Recurring revenue. Contracts create predictable cash flow. A well-run janitorial company with long-term contracts is closer to a subscription business than most service companies.
• Low capital intensity. Equipment is relatively cheap. There is no real estate to finance (unless you want to). The primary cost is labor.
• Fragmented market. No single player dominates the $1M–$10M range. Growth through contract acquisition is straightforward. Adjacent services (carpet cleaning, window washing, pressure washing) create natural upsell opportunities.

What to watch for

• Labor is the whole game. The business model is: recruit reliable people, train them, keep them, and bill their time at a markup. Everything else is secondary. If the current owner has a personal network that fills crew vacancies in 48 hours, that advantage does not transfer to a buyer.
• Margin compression is real. Commercial cleaning is competitive on price. Large property management companies run RFPs annually and switch vendors over small differences. Margins that look good in year one can erode if the new owner cannot hold pricing.
• Owner-dependent relationships. In many cleaning companies, the owner personally manages the top 3–5 client relationships. The contracts may be with the company, but the trust is with the person. Transition risk here is not hypothetical — it is the most common reason post-acquisition revenue drops in this industry.

Would we take this further?