LOI Template for Acquiring a Commercial Cleaning Business

Purchase Price and Valuation Basis

States the proposed purchase price, the valuation methodology used to arrive at it, and what financial metrics the price is based on. For commercial cleaning businesses, price is typically expressed as a multiple of trailing twelve-month SDE or EBITDA, adjusted for customer concentration and contract quality. Multiples generally range from 2.5x to 4.5x EBITDA depending on contract tenure, churn history, and management depth.

💡 Sellers of established cleaning businesses with multi-year contracts and documented low churn will push toward the top of the 3.5x–4.5x range. Buyers should anchor to the lower end of the range when any single client represents more than 20% of revenue or when contracts are month-to-month without auto-renewal clauses. Always define whether the price is based on SDE or EBITDA upfront — owner-operators frequently add back personal expenses that sophisticated buyers will scrutinize. Request three years of tax returns and P&Ls before finalizing the offer price in the LOI.

Deal Structure and Financing Contingency

Describes how the purchase price will be funded — whether through SBA 7(a) financing, seller financing, cash, or a combination — and makes the transaction contingent on financing approval. For commercial cleaning acquisitions under $5M in revenue, SBA 7(a) loans are the most common financing vehicle, typically requiring 10–15% buyer equity injection and allowing seller notes of up to 10% to be applied toward the equity requirement under certain conditions.

💡 Sellers are often unfamiliar with SBA timelines and may push back on a 45-day financing contingency, fearing it creates an extended window of uncertainty. Educate the seller that SBA 7(a) approvals for cleaning businesses with clean financials typically close in 60–90 days total from LOI execution. If the seller insists on a shorter contingency window, negotiate a parallel 30-day exclusivity period with an option to extend by 15 days upon proof of lender engagement. Seller notes subordinated to the SBA loan will require lender approval — confirm this structure with your lender before presenting the LOI.

Earnout Tied to Customer Retention

Defines any contingent consideration payable to the seller based on post-closing performance, typically tied to the retention of existing customer contracts. Earnouts are particularly common in commercial cleaning deals where a significant portion of the business value depends on the seller's personal relationships with key accounts. A well-structured earnout protects the buyer from overpaying if major clients cancel within the first year post-closing.

💡 Sellers will push hard to limit earnout risk by arguing that post-closing customer losses are outside their control. Counter by offering a robust transition period — 60 to 90 days of seller involvement is standard in cleaning deals — and by drafting the earnout exclusion clause carefully to only protect against buyer-caused cancellations. Avoid tying earnouts to net income or EBITDA post-closing, as sellers will distrust buyer-controlled expense reporting. MRR retention is the cleanest metric because it is directly verifiable against contract records you reviewed during diligence.

Due Diligence Period and Access

Specifies the length of the due diligence period, the scope of information the seller must provide, and the buyer's right to access facilities, employees, and records. Commercial cleaning due diligence should specifically address contract documentation, payroll and labor classification records, insurance history, and equipment condition — all of which require organized seller cooperation to complete efficiently.

💡 Forty-five days is appropriate for most commercial cleaning businesses in the $1M–$3M revenue range. Larger operations with multiple service lines, vehicles, or specialized capabilities such as medical facility cleaning may require 60 days. Push for access to customer contracts early — contract review is the single most time-consuming element of cleaning due diligence and often surfaces issues such as 30-day cancellation clauses masquerading as long-term agreements. If the seller resists providing payroll records citing employee privacy, request summary-level workforce data with names redacted as an interim step.

Exclusivity Period

Grants the buyer an exclusive negotiating window during which the seller agrees not to solicit, entertain, or accept offers from other buyers. Exclusivity is essential for buyers investing significant time and legal fees into due diligence on a cleaning business, and it prevents sellers from using the LOI as leverage to shop a higher offer.

💡 Sixty days is the market standard for lower middle market cleaning acquisitions when SBA financing is involved. Sellers who have had previous deals fall apart may resist long exclusivity periods — in those cases, offer a 45-day initial period with a 15-day extension tied to demonstrated lender engagement. Be specific about what constitutes a breach of exclusivity; vague language creates disputes if the seller later claims a conversation with another buyer was merely exploratory. Some sellers will request a breakup fee payable by the buyer if the deal falls through without cause — $10,000–$25,000 is typical at this deal size.

Transition and Training Commitment

Defines the seller's obligation to remain available post-closing to support operational continuity, transfer customer relationships, and train the buyer or new management team. In commercial cleaning, where client relationships and crew supervision are often concentrated in the owner, this section directly protects the value of the customer base and reduces post-closing attrition risk.

💡 Sellers approaching retirement often underestimate how much institutional knowledge they carry about client preferences, crew assignments, and informal agreements with building managers. Negotiate for at least 60 days of full-time transition support — 30 days is rarely sufficient for a cleaning business with more than 20 accounts. If the seller is resistant to a long transition commitment, structure part of the earnout around their active participation in key customer introductions during the first 90 days. Document what 'introduction' means in practice — accompanying the buyer on site visits to top accounts is far more valuable than a brief phone introduction.

Non-Compete and Non-Solicitation

Restricts the seller from starting or joining a competing cleaning business or soliciting existing customers and employees after closing. Non-competes are particularly important in commercial cleaning because the seller's relationships with building managers, property management companies, and facility directors are the core asset — without this protection, the seller could rebuild a competing operation using the same relationships within months.

💡 Four years and a 50-mile radius is appropriate for most regional commercial cleaning businesses. SBA lenders typically require a non-compete of at least two years as a condition of loan approval — confirm your lender's minimum requirements before negotiating below that floor. Sellers will sometimes push back on the geographic radius if they have family members operating cleaning businesses in adjacent markets — address this explicitly by carving out specific named entities or geographic areas rather than weakening the core restriction. Non-solicitation of employees is equally important given the chronic labor challenges in commercial cleaning; losing trained crew supervisors to a seller-backed competitor post-closing can be devastating.

Conditions to Closing

Lists the specific conditions that must be satisfied before the transaction can close, protecting both buyer and seller from being obligated to complete a deal if material issues arise. For commercial cleaning acquisitions, conditions should specifically address contract assignments, insurance continuity, and workforce status.

💡 The customer consent threshold — requiring written assignment consents from customers representing 80% of MRR — is the most negotiated condition in cleaning acquisitions. Sellers will argue that approaching customers for consent will trigger cancellations and destabilize the business before closing. A reasonable compromise is to require consent from the top 10–15 accounts by revenue while using a 'deemed consent' provision for smaller accounts unless they affirmatively object within a notice period. The material adverse change clause should specifically capture contract cancellations and workforce loss — not just financial metric deterioration — to address the unique risks of a service business dependent on recurring contracts and trained crews.