James Maxwell·June 14, 2022

Search Success in a Small City: $500k SDE, 95% Recurring

James Maxwell, a Marine Corps and Navy veteran with an MBA, partnered with fellow ex-marine Jordan Inman to self-fund the acquisition of a 22-year-old commercial janitorial company in a small Pacific Northwest city of ~100,000 people, closing in November 2021. They paid $1.8m (roughly 3x SDE) for a business generating ~$1.55m in revenue and $500-600k in SDE, using an SBA loan in an 80/10 structure. The business had 95% recurring contract revenue, immaculate books, and 35+ employees — hallmarks of a well-run lower-market company. In the first six months, Maxwell and Inman installed a GM and office manager to handle day-to-day operations, raised prices on neglected accounts, and grew revenue to a ~$2m run rate with SDE climbing to ~$700k. The hardest challenge was replacing the seller's 22 years of institutional knowledge and navigating a cultural trust gap: a key bilingual employee initially did not want to work for male military veterans after years with a relatable female founder. Maxwell is candid about needing to soften his direct military communication style and sees labor turnover and quality control as the industry's permanent challenges. Long-term, the pair view the business as a platform to become a one-stop shop for local property management firms, adding adjacent services like window cleaning and floor care.

Deal facts

purchase price: $1.8m
multiple: ~3x SDE
sde ebitda: SDE $500k-$600k at acquisition; ~$700k post-acquisition
revenue: $1.55m at acquisition; ~$2m projected year-one
financing structure: SBA loan (80/10 structure, ~90% leveraged) + seller financing; ~$200k/year debt service
notes: 22-year-old company; 95% recurring contract-based revenue; 35+ employees at acquisition; partner search with Jordan Inman; 90-day seller transition period

Why this business

Maxwell wanted to replicate the experience of leading small teams from his military career in a civilian context, and saw ETA as the most immediate way to do that. He was geographically committed to a specific small city (~100k population) where he wanted to raise his family, which ruled out a traditional search fund. The janitorial business had 22 years of history, spotless books, 95% recurring revenue, and was COVID-resilient — all highly attractive to a self-funded searcher wanting a long-term hold.

What's working

95% recurring contract-based revenue with long-standing commercial cleaning accounts, many of the top property managers in town
Seller maintained immaculate books and records, making due diligence clean and transition smooth
Seller remained highly engaged post-close — answering calls six months later — enabling effective knowledge transfer
Hired a well-networked general manager (found through personal network) at $100k salary plus equity vesting, freeing founders from day-to-day operations
Price increases on accounts that hadn't been raised since 2015 added ~$60k in annual revenue almost immediately
Revenue grew ~30% in the first year, from $1.55m to ~$2m; SDE increased from ~$500-600k to ~$700k
Business grew through COVID — enhanced disinfection services offset reduced cleaning frequency
Low employee turnover relative to the industry average (~200% annually); hired 15 people and lost only 4-5 in first six months
Partnership with Jordan Inman provided complementary analytical skills and a sounding board, reducing blind spots

What's hard

Replacing 22 years of the seller's institutional knowledge with two hires (GM and office manager) proved harder than expected
Culture and trust challenges: key bilingual employee broke down in tears when she learned the business was sold to male military veterans, having worked for a female founder who came up as a cleaner herself
Maxwell's direct, blunt military communication style does not translate well to civilian workforce management, requiring ongoing self-correction
Labor market pressure — wages rising faster than price increases can offset, squeezing margins even as revenue grows
Quality control at scale is difficult — with ~250 accounts, the company can't visit every site weekly, putting reputational risk on autonomous team members
Janitorial is tough to scale meaningfully in a small market due to quality-control constraints
Inflation is an ongoing unknown threat to margins

Notable quotes

Entrepreneurship through acquisition is in my mind the most immediate way to replicate that and you know go from leading small teams in the military to leading a small team in the civilian world was just the perfect fit.

You cannot replace 22 years of resident knowledge as easily as you think and this goes back to the transferability of small business is something that everybody needs to really reflect on before they get serious about buying a company.

She said well you know I don't know if I want to work for a man — she had been working for the seller who had come up as a cleaner herself, was very relatable to these team members, and so when you bring in a couple of military veterans there's a huge difference there.

There are so many businesses even in a town of 100,000 and nearly all of them are for sale for the right price.