**Please note that Arelli does not sell or buy cleaning contracts and is NOT affiliated with any companies or agents that do. We will do our best to be objective and be observant in areas that may represent a conflict of interest.
Over the years and as a commercial cleaning service provider in many communities across Ontario , we have encountered numerous clients and cleaners who have told us their stories. While this article may not cover all scenarios for buying and selling cleaning contracts, we thought it would be beneficial for janitorial service clients and professional cleaners to know what we know about this practice.
“Anything is for sale for the right price” goes the adage – and cleaning contracts are not an exception.
Right off the bat - let’s clarify that we are NOT talking about buying or selling a cleaning business in this article.
There are many entrepreneurial professional cleaners who work very hard to create legitimate commercial cleaning businesses. Over time, these individuals develop very close relationships with a group of customers and cleaning crews while gaining extensive knowledge over their customers’ businesses. At some point of time, these commercial cleaning entrepreneurs may end up selling their business when it’s time form them to retire or change industries.
The value of these businesses can vary anywhere from 1.5 to over 5 times the gross revenue of the business. Read more about cleaning business valuation here.
Unquestionably legitimate.
So, what are we talking about then?
Every market has a seller and buyer. Let’s start talking a bit about each first.
Who “Sells” Cleaning Contracts?
Sellers of cleaning contracts are predominantly marketing firms with a few customers who act as references, yet are cloaked as a fully functional and operating commercial cleaning business.
We will be calling these companies the “Cleaning Contract Middlemen” in the rest of this article.
Often times ranking high on search engines and boasting of having several hundreds of customers and cleaners, the cleaning contract middleman usually knows everything about commercial cleaning industry inside out.
The documentation is solid and the price just below the other quotes a client receives.
Who “Buys” Cleaning contracts?
The buyers of cleaning contracts vary quite a lot. Whether it’s a company that’s struggling with sales or individual cleaners who want more work, the buyers are quite diverse.
What happens when a Cleaning Contract is Bought and Sold?
When the cleaning contract middleman wins a contract, one of the following scenarios are most likely to take place:
1- Outright Sales of a Cleaning Contract: In this scenario, the cleaning contract middleman will sell the right to service a cleaning facility to either an individual or another cleaning company that needs more work. This is a one time fee.
The cleaning contract middleman and his/her company walk or becomes an arms-length entity, and the client is left dealing with the third party.
2- Sales and Monthly Commission for a Cleaning Contract: This scenario is similar to an outright sale – except the cleaning contract middleman will take a lesser fee upfront, but charge a recurring monthly fee to the buyer.
Just like the first scenario, the client will then have to deal with a new legal entity, but the cleaning contract middleman will still stick around.
The telltale sign of a purchase and sale for a customer is an email, fax, or contact stating that the company represented by the cleaning contract middleman has “merged” or “partnered” with this entity which the customer has never engaged with.
The dynamics of the relationships between the buyers and sellers vary from one-time engagements to long term relationships.
Other than what may seem to be as a shady business practice by many – this business model can be beneficial as the cleaning crews or companies who have paid for the business end up trying harder to perform their work and keeping service levels higher.
The downsides could be a lack of structure, process, training, availability of back up crews and knowing who to hold accountable when things go wrong.
Having said the above, there are few things that clients should watch out for:
1- Service levels may differ depending on the capabilities of the third-party company who takes on your contract.
2- The pricing of your contract may not be sufficient for the third-party service provider to deliver as the cleaning contract middleman is more interested in closing the deal than ensuring there is enough funding to deliver on expectations. This is specifically true for scenario 1 above.
3- You may be on the hook for damages or be commercially labile if you don’t sign a contract with the new third party service provider and validate their commercial insurance coverage or WSIB documentation.
If you’re a client looking for office or commercial cleaning service, there are a few signs to look out for.
Before Signing a Contract
Check to see if you are dealing with one person or a company that actually has an organization structure. One step is to check the contact phone number on the and see if it’s just a cell phone or forwarded to the representative you’re dealing with.
Watch for sudden and proactive contacts from a couple of other cleaning companies soon after you engage the main company. This could seem as a stroke of good luck as you are doing your due diligence – but there’s a high chance that these middlemen companies are working together. Doesn’t matter who wins – they just divvy up the work after.
After Signing a Contract
After you sign up with a company, you receive a “merge” letter stating that for the purpose of your project the company you signed up has merged with another company. You are provided new contacts and billing information.
When Service Level Drops or You are About to Cancel Services
Once service level starts dropping and remedial actions are slow and far and few in between, or you threaten to cancel, you are suddenly and proactively contacted by a few other cleaning companies for cleaning services.
The cleaning contract middleman has the contacts, knows so many people in the business, and exactly how to recycle the same customer to another partner entity when they are about to lose it.
Scary, eh?
Every business has an underground force and the office cleaning business is no different.
As a professional commercial cleaning company, we believe that business has to be earned and conducted in a transparent way that’s fair to clients and service providers alike.
I’m a Client. What Should I do if my Cleaning Contract has been sold*?
If you receive a merge letter or are advised that the cleaning service will be provided by a different entity, at the least make sure you ask for the following:
1- Request business registration documentation of the new entity. Don’t settle for contact information and a name only.
2- If you intend to continue, have a contract signed with the new legal entity. Presence of merge letters are an unnecessary level of legal complexity in the business relationship.
3- Get a certification of commercial liability insurance with your business’ name from the new legal entity.
4- Ensure you receive the WSIB clearance certificate issued to the new third party,
I’m a Cleaner or own Cleaning Company. Should I buy a Cleaning Contract*?
Good question. Based on what we have learned from our cleaning crews who have purchased cleaning contracts before working with us here are some things to watch for:
1- Establish written agreement with the cleaning contract middleman for exact deliverables from both parties.
2- Request cleaning scope and a site visit before paying for the contract to ensure validity.
3- The start date provided by the cleaning contract middleman may not be accurate. Be prepared for delays in starting the job.
4- The contract may be underpriced. Remember, the cleaning contract middleman can underprice projects to win the contract.
5- Many commercial entities have payment terms of up to 60 days. Make sure you have sufficient cash flow to sustain your business.
Arelli Cleaning engages with clients and cleaning crews directly. We never sell contracts to cleaning crews or purchase them from others.
*Arelli does not offer any legal advice. Consult with your lawyer at all times for any legal direction or when you feel risks are involved.
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