If you're building a real janitorial company, not just a job you do yourself at night, its resale value is worth understanding well before you're ready to sell. The math is more approachable than it sounds, and it's the same math a serious buyer will use whether you like it or not — better to know it in advance.
The formula buyers actually use
Most buyers price a small service business as a multiple of its owner's profit. Not revenue — profit, and specifically a version of profit called owner's profit (sometimes called seller's discretionary earnings). Revenue tells a buyer how big you are; owner's profit tells them how much money the business actually generates for whoever owns it.
The multiple itself isn't fixed. It depends on the size of the business, how much of the revenue is under contract, how dependent it is on you personally, and your local market. A business broker who works with service businesses can tell you what's realistic for yours.
What counts as "owner's profit"
Owner's profit isn't just what's left on your P&L at the end of the year. It typically includes your own salary, any distributions or bonuses you've paid yourself, and personal expenses that run through the business — a vehicle, a phone plan, anything a new owner wouldn't actually need to keep paying for.
Adding all of that back on top of your bottom-line profit is called building an add-back schedule. It's standard practice in small business sales, and it's what turns your reported profit into the number a buyer actually uses. Your accountant should be involved in preparing it; a buyer's accountant will certainly be involved in checking it.
Putting it together
Say your business shows $120,000 in profit on paper. You also pay yourself a $60,000 salary and run about $15,000 a year in vehicle and phone costs through the company. Your add-back schedule brings owner's profit to $195,000. Here's an illustrative example, not a benchmark: at a 2x multiple, that's a business worth about $390,000; at 3x, about $585,000. Where yours actually lands depends on the factors below.
Why a range, not a single number
- Contracted, recurring revenue. Nightly and weekly service under written agreements is worth more than one-off project work, because it's predictable.
- Account concentration. Commercial janitorial revenue is often concentrated. If one building or one property manager is a large share of your revenue, a buyer will see that as risk.
- Whether contracts survive a sale. Some agreements can't be transferred to a new owner without the client's consent. Knowing which of yours can, before a buyer asks, is worth an hour with your attorney.
- How much runs through you. If you personally do every walkthrough, write every bid and hold every client relationship, a buyer is partly buying your labor — and will pay less for it.
- Documented systems. Written scopes, workloading, inspection routines and a bidding method a new owner can pick up are all worth more than knowledge in your head.
- Crew and supervisor stability. A team that stays, with supervisors clients already know, is worth more than one a new owner would have to rebuild.
- Margin by account. A buyer will look at which accounts actually make money. A few underpriced buildings can pull the whole valuation down.
How CJSAC fits in
Everything CJSAC helps you do — get found by more facility managers, keep a dated, independently reviewed record of your credentials, win and keep accounts on something other than price — moves the same numbers a buyer will eventually look at. Growing your business isn't just about this year's income; it's what determines what you can sell it for.