Example · Red Flag Report

Sunrise Commercial Cleaning Co.

Cleaning / facilities · Asking price $450,000 · 3x SDE (typical 2x–2.8x)

Red Flag Score

55/100

Caution advised

Triggered flags

High client concentration (55%)

-15 pts

Your top 2 clients generate 55% of revenue. If either leaves, the business could lose a large share of income overnight.

Revenue is stable

Revenue moved from $780,000 to $825,000 — essentially flat.

Asking price is above typical range (3.0x SDE)

-10 pts

For cleaning / facilities, buyers typically pay 2.0x–2.8x SDE. This deal implies 3.0x — about 7% above the top of the range.

Client contracts are mostly month-to-month

-10 pts

Most client relationships have no contractual commitment. Revenue can churn quickly, especially during an ownership transition.

Business depends heavily on the current owner

-10 pts

The owner personally handles most client relationships and there's no management layer. When they leave, key relationships and know-how can walk with them.

Ask the seller

Questions to bring to your next conversation

01
What happens to revenue if your two largest clients leave within 12 months — are they under multi-year contract, and can I see the agreements?
02
Would you consider a lower price, or accept a partial seller-financing note to bridge the gap between asking price and typical market range?
03
Which clients would agree to sign a 12- or 24-month agreement before or at closing? Can we make signed agreements a condition of the deal?
04
Will you agree to a 6–12 month transition consulting arrangement, and are you willing to make personal introductions to every key client and supplier?

OpenBook gives an informational starting point for evaluating a potential acquisition. It is not legal, financial, tax, or investment advice, and does not replace due diligence by a qualified accountant or attorney before any purchase.