Finding A Logical Buyer For A Janitorial Business
This article will discuss the process of deciding which type of buyer(s) to pursue when selling a contract cleaning company.
When we help owners create exit strategies we begin by asking the following questions:
- If you could write the script, when would you sell and who would buy your company?
- What would you like your legacy to be?
- What would you like to accomplish with the proceeds from the sale of your business?
The answers are not mutually exclusive, as legacies are often tied to financial outcomes; however, each gets to the root of a different subject and all three help to define the most logical buyer for a particular business.
The first question helps us to establish an owner’s baseline perspective. Many owners contemplating an exit strategy are doing so because they already have a general timeframe in mind. They may or may not have given much thought to who they’d like to buy it, and they may or may not care. How they answer these questions enables us to provide context around the answers that follow.
The legacy question is more complex. It’s not always what comes to mind when someone sets out to sell a business, but certainly becomes real as the process unfolds. It intertwines personal, emotional, and professional concerns, and helps people think about a bigger picture.
Legacies can be financial — “I want to be known as someone who sold their business for a lot of money;” or, simply, “I don’t really care, I will sell to whoever makes the best offer.”
They can be customer-focused — “I want to be known as an excellent owner, who played a critical role in my community, and who left my business in the hands of someone who will live up to the high standards I’ve set.”
They can also be industry-driven — “I want my company to remain independent, owned and operated by another janitorial contractor, not a corporate buyer.”
More than likely, the legacy discussion flushes out several objectives. It becomes our job to help owners think through a prioritization exercise so we can sharpen our focus on those that matter most.
Finally, we have what everyone thinks of when they think of selling a business — the money. Defining financial requirements is the final piece in determining the most logical buyer. When asked what they want the proceeds of the sale to accomplish, owners may say that they want to pay down debt, fund retirement, create trusts for children and grandchildren, achieve a certain level of liquid net worth and/or investible assets, or generate a certain minimum return on their initial investment. The exact requirements for any of these goals helps to determine a target valuation.
We now have a set of inputs that help us identify the most logical buyer to achieve each goal, and can help the owner analyze buyers on a goal-by-goal basis. Then, we take a step back and evaluate the best buyer for all non-financial goals (in aggregate) as well as the best match for the financial goals.
In a perfect world, the buyer who most closely aligns with the non-financial criteria can also meet the valuation expectations. When that is not the case, we work with the owner to help him or her understand the underlying reasons for the valuation gap as well as the steps required to close it. Then, the owner has a choice — create and execute on a value building strategy to position the business to be sold to the desired type of buyer without compromising on valuation, or reframe expectations.
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 email@example.com or by visiting www.caberhill.com.
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