Valuation Guide
Commercial Cleaning Business Valuation
In commercial cleaning, your contracts are your business. Without transferable recurring agreements, you're not selling a company, you're selling a labor force and a client list. Understanding what makes a contract portfolio valuable is the key to maximizing your exit.
Your Contracts Are Your Business
A commercial cleaning business with $800K in annual revenue and no written contracts is worth dramatically less than one doing $500K with 40 signed recurring agreements. That's a fundamental truth that catches a lot of owners off guard.
Buyers of cleaning companies aren't buying your mops and vacuums. They're not even buying your employees. Cleaning staff turnover industry-wide exceeds 200% annually, so any given crew is temporary. What they're buying is the right to collect recurring revenue from a portfolio of clients who have agreed to keep paying for a defined service.
The quality, duration, and transferability of those agreements determine whether your business sells for 2.0x SDE or 4.0x SDE. That range, applied to even a modest $150K in SDE, represents a $300,000 difference in sale price.
The core valuation insight
Every dollar of monthly recurring contract revenue in a commercial cleaning business is worth approximately 8 to 14 months of that revenue in a sale, but only if the contracts are documented, transferable, and backed by verifiable payment history. Undocumented verbal agreements, regardless of how long the client has been paying, are worth close to zero in a buyer's eyes.
Contract Valuation Matrix
Not all contracts contribute equally to your valuation. This matrix shows how contract type, term, and client quality interact to affect what buyers will pay.
| Contract Type | Typical Term | Value Impact | Why Buyers Care |
|---|---|---|---|
Multi-Year Recurring Healthcare, government, large commercial | 2 - 5 years | Highest Value | Locked-in revenue for years. Hard to lose, barriers to competitive displacement. |
Annual Recurring Office buildings, retail, property managers | 12 months, auto-renew | High Value | Predictable annual revenue. Auto-renew clause means revenue persists unless actively cancelled. |
Monthly Recurring Small offices, restaurants, month-to-month | Month-to-month | Moderate Value | Revenue is recurring but can be cancelled anytime. Long client history (2+ years) adds stability. |
Project / One-Time Post-construction, deep cleans, move-out | Per-job | Low Value | No guarantee of repeat business. Revenue depends entirely on continued sales activity. |
Verbal / Handshake No written agreement, informal arrangements | None | Minimal Value | Unenforceable and untransferable. Buyers treat this revenue as essentially at-risk. |
Building a Sellable Contract Portfolio
If you plan to sell in the next 12 to 24 months, these steps will directly increase what a buyer pays. Start at the top and work down.
Formalize Every Client Relationship
Go through your client list tonight. Any client paying you without a signed service agreement needs one. It doesn't have to be a 20-page legal document. A clear 2-page agreement specifying scope of service, frequency, monthly rate, payment terms, and a 30-day cancellation clause is sufficient. The goal is a signed, transferable document for every dollar of recurring revenue. A buyer will literally calculate what percentage of your revenue is "contracted" versus "informal" and adjust their offer accordingly.
Diversify Your Client Base
Client concentration is a valuation killer. If your largest client represents more than 15-20% of revenue, start actively marketing to new prospects. The ideal portfolio has 30+ clients with no single client exceeding 10% of total revenue. This takes time (expect 12 to 18 months of focused business development), but the multiple improvement alone can add $100K+ to your sale price on a business doing $150K in SDE.
Move Clients to Longer Terms
Gradually transition your month-to-month clients to annual contracts. Offer a 3-5% discount on the monthly rate for a 12-month commitment. For your best clients (the ones who have been with you for years), propose a 2-year agreement with a fixed rate guarantee. Every month-to-month contract you convert to an annual agreement adds direct value to your business. Do this 12+ months before listing so you have renewal history to show.
Pass the Supervisor Test
If you're personally supervising cleaning crews every night, your business is worth less. The "supervisor test" asks: can the business operate for 30 days without the owner showing up? Hire and train a site supervisor or operations manager who handles scheduling, quality control, and client communication. A business that runs independently of the owner commands a higher multiple because the buyer is purchasing a system, not buying themselves a job.
Document Everything
Buyers want to see a binder (physical or digital) with every signed contract, a client payment history showing 12-24 months of consistent revenue per account, your standard operating procedures for each service type, employee training checklists, and insurance certificates. The more organized your documentation, the faster due diligence goes, and the more confident a buyer feels paying a premium multiple. Disorganized records signal risk, and risk costs you money.
Red Flags Buyers Watch For
These are the issues that cause deals to fall apart or multiples to drop sharply during due diligence. Address them before you go to market.
Single Client Over 25% of Revenue
If that client leaves post-sale, the buyer's investment is immediately underwater. Every experienced buyer will either demand a significant price reduction, require the seller to guarantee the client stays, or walk away entirely. One deal I saw recently: a $600K revenue cleaning company where one property management firm accounted for $220K. The buyer discounted the offer by $150K to account for concentration risk.
Unverifiable Cash Revenue
Cash payments with no invoicing trail are a financing dealbreaker. SBA lenders will not count revenue they cannot verify, and most buyers won't either. If 30% of your revenue comes in as cash without corresponding invoices and bank deposits, that 30% effectively does not exist for valuation purposes. Transition to electronic invoicing and payment at least 18 months before a sale.
Owner Does the Cleaning
If the business owner is still on a crew or personally managing nightly operations, buyers see a job, not a business. The moment you leave, who ensures quality? Who handles call-outs and no-shows? Buyers either discount heavily for owner-dependency or require a long (12+ month) transition period that often kills deals because sellers want a clean break.
No Written Contracts
Verbal agreements are worth the paper they're printed on, which is nothing. A client who's been paying $3,000/month for 5 years with no written agreement can walk away the day after closing with zero legal consequence. This is not a theoretical risk; it happens in roughly 1 in 5 cleaning business sales. Formalize relationships now.
Non-Assignable Contracts
Some contracts include clauses that prohibit assignment to a new owner without the client's prior written consent, or worse, give the client the right to terminate upon change of ownership. Review every contract for assignment language. Contracts you can't transfer are contracts a buyer can't count on.
Declining Revenue Trend
A cleaning business with $400K in revenue that was at $500K two years ago tells a story no buyer wants to hear. Even if the decline is explainable (a major client relocated, COVID disruption), the trend gives the buyer room to push your multiple down. If you have lost contracts recently, replace them before listing. Buyers pay multiples on current and projected revenue, not past peaks.
Market Context for Commercial Cleaning Valuations
The commercial cleaning industry generates over $90 billion annually in the US alone, yet it remains deeply fragmented. Most cleaning companies operate at the local level with revenues under $2 million, which creates an active acquisition market for buyers looking to build scale through consolidation.
Post-COVID demand has reshaped the market. Healthcare, education, and government facilities increased cleaning frequency and budgets significantly, and most of those increases have persisted. Companies with specialization in medical-grade cleaning, infection control protocols, or LEED-certified green cleaning command premium multiples because their expertise creates switching costs that protect recurring revenue.
Typical commercial cleaning deals close in the $100K to $1.5M range. The standard financing vehicle is an SBA 7(a) loan for deals under $5M, with the buyer putting 10-20% down. Clean financials and documented contracts make the loan approval process dramatically smoother, which in turn makes your business easier to sell and worth more.
Quick Stats
SDE Multiple
2.0x - 4.0x
Avg: 3.0x
Typical Deal Size
$100K - $1.5M
Time to Sell
5 - 10 months
Client Retention (at transition)
80 - 90%
For well-managed sales
Concentration Threshold
< 20% per client
Above this, buyers discount
Most Valuable Contracts
Healthcare
Multi-year, high compliance barrier
Common Questions About Selling a Cleaning Business
Answers based on patterns from commercial cleaning transactions across the Northeast and beyond.
What's Your Cleaning Business Worth?
Contract portfolio quality, client diversification, revenue documentation, and operational independence all feed into the answer. Get a valuation that accounts for the full picture.
Most cleaning business owners are surprised (sometimes pleasantly, sometimes not) by their number. Either way, knowing it puts you in control.
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