Cleaning Company Valuation Multiples
If you plan to buy, grow, or sell a cleaning company, determining the business’s fair market value is a critical step. This information provides a strong foundation for navigating vital business decisions. A quick way to estimate a cleaning company’s fair market value is to apply cleaning company valuation multiples. These tools provide broad valuation insights that help with early-stage planning. However, valuation multiples should be used with caution when it comes to making final decisions.
In this article, we outline common valuation multiples for a cleaning company. We also explain how multiples are applied and what to be aware of when using them. Please note that the ranges provided in this article reflect market averages and may not reflect the precise value of your business. If you need an accurate cleaning company valuation, it is best to consult a certified valuation expert.
As a professional business appraiser, Peak Business Valuation works with cleaning companies nationwide. We are happy to help you with a quick and accurate cleaning company valuation or provide insights on how to value a cleaning company using multiples. Get started today by scheduling your free consultation below!
What are Cleaning Company Valuation Multiples?
Valuation multiples are financial ratios that measure the value of a business using financial metrics such as earnings or revenue. These multiples are derived by analyzing recent sales of comparable cleaning companies in the marketplace. After identifying the appropriate multiples, they can be applied to your company’s financial data to estimate its fair market value. For more details on using multiples, see Valuation Multiples for a Cleaning Company.
Common Cleaning Company Valuation Multiples
When deciding how to value a cleaning company, valuation experts at Peak Business Valuation typically consider SDE, EBITDA, and revenue multiples. Each multiple assesses a different aspect of the business’s worth. To provide a more accurate cleaning company valuation, business appraisers often use various valuation multiples. Below, we detail the most common valuation multiples for cleaning companies.
SDE Multiples for a Cleaning Business
Seller’s Discretionary Earnings (SDE) reflect the total financial benefit available to a single owner of a cleaning company. This metric is most applicable to smaller, owner-operated cleaning businesses. To calculate SDE, valuation experts add back the owner’s compensation, discretionary expenses, and any one-time costs to net income.
Formula: Value = SDE × Multiple
Range: Cleaning company SDE multiples typically range from 2.47x to 3.03x SDE.
EBITDA Multiples for a Cleaning Business
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) measure a cleaning company’s profitability before non-operational expenses. EBITDA multiples are particularly useful when assessing larger, more complex cleaning operations.
Formula: Value = EBITDA × Multiple
Range: Cleaning company EBITDA multiples commonly fall between 3.41x and 4.11x EBITDA.
Revenue Multiples for a Cleaning Business
Revenue refers to a cleaning company’s total sales over a 12-month period. Since revenue multiples do not account for profitability, they are often less reliable. However, these multiples can be helpful when analyzed alongside SDE and EBITDA multiples.
Formula: Value = Revenue × Multiple
Range: Cleaning companies often trade within a revenue multiple range of 0.57x to 1.01x.
As a business appraiser, Peak Business Valuation integrates cleaning company valuation multiples when performing a professional valuation. In addition, we analyze the company’s risks, competitive advantages, and market conditions to deliver the most accurate cleaning company valuation. If you are in need of a defensible business valuation for a cleaning company, we are here to assist! Schedule your free consultation by clicking the link below.
How to Value a Cleaning Business Using Multiples
Using cleaning company valuation multiples accurately requires more than simple formulas. As part of the valuation process, experts consider factors such as operational risks, growth opportunities, market positioning, and more. Moreover, weighted averages may also be applied to remove unusual or non-recurring items. This process ensures a well-rounded conclusion of value. Check out How to Value a Cleaning Company for further insights.
Rules of Thumb for Cleaning Companies
Valuation multiples are known as rules of thumb for estimating the worth of a cleaning company. However, these methods often overlook critical aspects that significantly impact a cleaning business’s value. As such, valuation multiples should be used with caution, especially when making major financial decisions. If you need a defensible cleaning company valuation, it is important to connect with a certified business appraiser. Reach out to Peak Business Valuation today if you have any questions.
Factors Affecting Cleaning Company Valuation Multiples
Several key factors influence whether a cleaning company receives higher or lower valuation multiples. Understanding these value drivers can help owners strengthen performance and increase the cleaning company’s overall value. Some key variables in this industry include:
- Skilled Labor Force: Employing a well-trained staff ensures consistent high-quality cleaning services, boosting client satisfaction and loyalty. This has a strong influence on a cleaning company’s competitive edge and overall value.
- Service Specialization: Cleaning companies that demonstrate expertise in niche areas, such as medical facilities, can command stronger multiples due to reduced competition.
- Operational Efficiency: Implementing streamlined cleaning and scheduling processes helps reduce waste and enhance profitability. This indicates strong management, promoting higher cleaning company valuation multiples.
- Positive Word-of-Mouth: Cleaning companies that generate word-of-mouth referrals often see steady client acquisition and stable financials. This has a major impact on a cleaning business’s perceived value.
- Customer Relations: Building strong client relationships fosters repeat business and referrals. As such, focusing on customer relations can help reduce revenue volatility and secure higher multiples.
To learn more about boosting your business’s value, see Value Drivers for a Cleaning Service Company.
Conclusion
Cleaning company valuation multiples are a helpful starting point when assessing your business’s value. However, valuation multiples are based on market averages and do not account for the specific strengths and weaknesses of each business. As such, these tools often yield misleading results. If you need precise insights, it is best to obtain a professional cleaning business valuation. During the valuation process, certified valuation experts thoroughly analyze unique variables that influence your cleaning company’s value.
Peak Business Valuation, trusted business appraiser, frequently helps individuals who are buying, growing, or selling cleaning companies. We are here to assist you with a business valuation. In addition, we can address any questions you may have on valuing a cleaning company. Start by scheduling a free consultation with Peak Business Valuation below!
To learn more, you can read Cleaning Business Valuations or Valuing a Cleaning Company.
