How Much Is a Cleaning Business Worth?

How cleaning companies are priced

Start with normalized discretionary earnings — reported profit plus owner compensation, plus personal expenses run through the business, plus genuinely one-time items. Then make the two adjustments that matter in this category. First, if the owner cleans, supervises routes, or handles all the sales themselves, deduct what it costs to replace them; an owner-operated crew is a job with a customer list attached, not a passive asset. Second, if crews are paid as 1099 contractors under employee-like control, re-run the earnings on fully burdened payroll including employer taxes and workers’ compensation. That single correction routinely removes a third of the apparent profit. The general mechanics live in how to value a business, and SDE vs. EBITDA explains which metric applies once a salaried operations manager runs the routes.

Segment then sets the band. Commercial janitorial — offices, medical suites, schools, industrial — earns the higher multiple because the work is scheduled, invoiced monthly, and rarely re-shopped as long as complaints stay low. Residential maid service carries better gross margin per hour but a customer base that turns over faster and responds to price, so buyers discount it. Specialty work such as post-construction cleanup, window cleaning, or restoration is project revenue, not recurring revenue, and should be valued at a lower multiple than the recurring book even inside the same company. If you are still deciding whether to buy at all, the buy a cleaning business playbook covers the operating side.

What moves the multiple

• Recurring share of revenue — Split the revenue into scheduled recurring work and one-time projects. The recurring portion carries the multiple; project work is worth materially less because it has to be re-won every year.
• Account tenure — Get a customer list with start dates and monthly billing. A book where the average account has been served for five years is a different asset from one where half the accounts arrived in the last twelve months.
• Customer concentration — One large contract carrying a quarter or more of revenue is the most common reason a janitorial deal reprices. Structure around it rather than arguing about it.
• Labor stability and turnover — Cleaning has high turnover industry-wide, so a company with tenured supervisors and a working recruiting pipeline is genuinely rarer and worth more. Ask for a twelve-month roster with hire and termination dates.
• Worker classification — Employees on a compliant payroll support a higher multiple than a contractor arrangement that a buyer’s lender or insurer may refuse to continue.
• Insurance, bonding, and claims history — Commercial customers require certificates of insurance and often bonding. A poor workers’ compensation experience rating raises the buyer’s cost permanently and belongs in the price.
• Owner independence and sales function — If the seller is the only person who wins accounts, the growth engine leaves at closing. A documented sales process or a compensated salesperson supports the top of the band.

What pulls the price down

These are the findings that most often reprice a cleaning company between the letter of intent and closing. Each is a reason to bid below the mid-range, or to shift part of the price into a seller note or an earnout rather than paying it at close.

• Crews paid as contractors while being scheduled, supervised, and equipped like employees.
• A single account above roughly 30% of revenue, especially one already out to bid.
• Contracts with change-of-ownership termination clauses, or no written agreements at all.
• Revenue growth driven by low-margin post-construction work rather than recurring accounts.
• A workers’ compensation experience rating above unity, or an open claim the seller has not disclosed.
• Supervisors who are the actual relationship with the customer and have no retention incentive.
• Undisclosed supply and equipment deferral — worn floor machines and vans past useful life.
• Pricing set years ago and never escalated, so the accounts are only profitable at the seller’s wage rates.

Worked example: a commercial janitorial book

A janitorial company bills $1,150,000 a year across 34 commercial accounts. Reported profit is $118,000; add back the owner’s $85,000 salary, $12,000 of personal vehicle and phone expense, and $6,000 of one-time legal costs, and normalized SDE is $221,000. The seller asks 3.5x, or $774,000.

Two corrections follow. Eighteen of the cleaners are paid on 1099s while working fixed routes on company equipment under a supervisor. Re-running that payroll with employer taxes and workers’ compensation adds about $46,000 of annual cost, taking SDE to $175,000. The owner also personally holds every customer relationship and does all the bidding; a compensated account manager to replace that function costs roughly $25,000 loaded, leaving about $150,000 of passive earnings.

Then the concentration. One hospital-adjacent medical office group is $310,000 of the $1,150,000 — 27% of revenue on a 30-day cancellable agreement, signed originally by the seller. At 2.6x, the corrected earnings support roughly $390,000. A sensible structure is not to argue that number down further but to split it: perhaps $290,000 at close and $100,000 as a seller note that offsets if the concentrated account terminates within twelve months. That prices the risk honestly for both sides, and a seller who genuinely believes the account is safe should have no objection to it.

Before you rely on any of this

Ranges orient a first conversation; they do not price a deal. Get three years of tax returns and reconcile them to the invoicing system and bank deposits. Ask for a customer list showing start date, monthly billing, and service frequency, and read the underlying agreements rather than a summary spreadsheet — cancellation notice, assignment consent, and change-of-ownership clauses are the terms that decide what you actually acquire. Have an accountant assess worker classification, pull the workers’ compensation loss runs and experience rating, and confirm that insurance and any bonding requirements can be met at your own rates. Where accounts are concentrated, ask to speak with those customers before closing under a mutually agreed script. Our due diligence checklist, how to verify business financials, and red flags when buying a business cover the process.

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