Been running a small commercial cleaning company for 18 years. Thinking about selling. I keep hearing that the big national franchises are the obvious buyers, but honestly, the guy who owns the competing cleaning company three blocks over knows my market, my clients, and my headaches. Is it totally insane to approach a local competitor first before listing with a broker? Anyone done this successfully?
Local Exit
Why my local competitors might be my best buyers
Not insane. We bought a competitor's client list last year. He approached us directly. Was way simpler than dealing with a broker who wanted 10% to put us in touch with people who didn't know the area.
I tried this. My competitor laughed at me and then tried to poach my best guy two weeks later. Just be careful how much you show them before you have an NDA and a letter of intent.
Competitors are the best buyers because they're the only ones who value the *market share* rather than just the assets. Everyone else just wants the trucks and the mops.
That's exactly what I was thinking. The trucks are old and the mops are cheap, but the contracts and the reputation in this town are the actual value, though.
18 years is a long run. If you go to the competitor, you got to be ready to walk away if they lowball you. They know you're tired. They might smell blood in the water.
Why would I buy my competitor when I can just wait for for him to retire and pick up his clients when he closes the doors? That's the harsh reality of why they might say no.
MidnightPosture makes a fair point. Unless you have long-term contracts that are transferable, the competitor might just wait you out.
But waiting is also a risk for them. They might lose the bids to someone else in the meantime. Buying you out is paying for certainty.
Just don't do what my old boss did. He told the competitor he was retiring 'next year', and then the competitor immediately started badmouthing him to all the property managers. Killed the business value overnight.
You need a broker to run the auction, even if it's a private one. Letting the competitor know you're selling gives them leverage. You want *multiple* local competitors bidding against each other.
The multiple bidder angle is interesting. I only really have two serious competitors in town. Might be enough for a mini-auction if I handle it right.
Two is enough. If they hate each other, you're golden. If they're secretly friendly, you're toast.
Whatever you do,get the NDA signed before you hand over your client list. I've seen too many 'friendly' local handshakes turn into a free client list.
Also, don't assume they have cash. A competitor might be 'rich' in equipment but broke in the bank. Make sure they can actually close the deal.