Bob Brown of Accelerator CC recently sat down with Palmer Higgins of Chenmark Capital. Palmer discussed why the janitorial industry is attractive to investors and what their company values when deciding to invest in them. Palmer also discussed industry issues and how technology can improve janitorial business processes
About Bob Brown
CEO of Accelerator CC janitorial management software
About Palmer Higgins
Managing partner of Chenmark Capital Management
Why the cleaning industry?
The commercial janitorial space is very attractive for us, there is predictable recurring revenue and a market size that exceeds $50 billion dollars. Commercial facilities need clean buildings. Equally important to us, the market is fragmented. The top 50 companies account for close to 30% of that revenue. There’s significant opportunity to scale a business in these conditions.
Many of the companies in this space were started as a family business and grew. We understand that culture. The industry has many opportunities for us to apply our operational expertise and scale the companies we acquire.
On industry issues
We see similar patterns facing the commercial cleaning industry and the companies we have reviewed. Employee turnover is number 1 through 10! Low cost, low skilled labor is root cause. Depending on circumstances, it can cost between $1000 to $3000 for every FTE that needs replacement. A 5% decrease in turnover with a reduced cost to recruit can add significant revenue to the bottom line.
Executives need a strategy to keep a continuing pipeline of labor recruitment while executing a process for employee retention. We require these 2 processes be reported monthly. We need to know the number of potential employees available and what turnover looks like monthly. Is the pipeline growing and are we reducing turnover? Are our strategies working or do we need to change things up? In a labor-based business, it comes down to your employees performing. Training, incentive, and performance programs will pay large dividends for the industry. We always evaluate this process when we perform due diligence with a prospective acquisition.