Commercial Cleaning Company
This analysis follows the BAM Analysis Framework, evaluating Earnings Quality, Capital Structure Sustainability, Operational Risk Exposure, and Upside Potential.
Deal Snapshot
Industry: Commercial Cleaning
Revenue: $980,000
Seller’s Discretionary Earnings (SDE): $250,000
Asking Price: $625,000
Location: Midwest U.S.
Valuation Analysis
$625,000 ÷ $250,000 = 2.5x SDE
This falls on the lower end of typical service business multiples (2.5x–3.5x), potentially reflecting contract risk or client concentration.
SBA Loan Scenario (10% Down)
Down Payment: $62,500
Loan Amount: $562,500
Estimated Annual Loan Payment: ~$85,000
Projected Owner Income After Debt:
$250,000 – $85,000 ≈ $165,000
Debt Service Coverage Ratio (DSCR)
$250,000 ÷ $85,000 ≈ 2.94x
This indicates strong debt coverage relative to lender minimum requirements.
Operational Risk Factors
• Client concentration risk
• Contract renewals
• Labor turnover
• Margin pressure from wage increases
Upside Potential
• Expansion of recurring contract base
• Add-on specialty cleaning services
• Route density optimization to improve margins
• Cross-selling to existing commercial clients
Downside Stress Scenario (15% Revenue Decline)
If revenue declines 15%, projected revenue would decrease to approximately $833,000.
Assuming proportional margin compression, adjusted SDE may decline to approximately $212,500.
Revised DSCR:
$212,500 ÷ $85,000 ≈ 2.50x
Even under moderate revenue pressure, debt coverage remains above lender minimum thresholds, indicating financial stability.
Capital Structure Assessment
At 2.5x SDE with DSCR approaching 3.0x, the proposed capital structure appears conservative under current earnings levels.
Long-term performance is dependent on contract retention and labor stability.
BAM Risk Profile
Earnings Stability: Moderate
Capital Structure Strength: Low
Operational Exposure: Elevated
Revenue Volatility Sensitivity: Moderate
Overall Risk Tier: Moderate
(Operational exposure elevated due to labor & contract risk.)
Investment Thesis
This opportunity presents a stable, recurring-revenue profile with strong debt coverage.
However, client concentration and wage pressure should be closely evaluated during diligence.
Strengthen Your Acquisition Foundation
If you’re new to evaluating service businesses, start here:
• Can You Afford to Buy a Business?
• Understanding Revenue vs. SDE
• How SBA Loans Actually Work
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