Discussion
First acquisition fell through at the 11th hour — sharing what went wrong
QuietOperator✓March 17, 2026
Had an LOI signed for 4 months on a residential cleaning company. $380K purchase price, $110K SDE, 8 cleaners, solid reviews, growing market. Everything looked good until it didn't.
What happened:
- During final DD we discovered the owner had been personally covering cleaning shifts 2-3 times a week when employees called out. This wasn't disclosed and wasn't in the financials as labor cost.
- When we adjusted SDE for a replacement cleaner at market rate, it dropped from $110K to about $75K. At $380K that's over 5x — way too high for a cleaning company.
- We tried to renegotiate price down to $260K. Owner got offended and pulled the deal.
Lessons:
1. Always ask specifically about the owner's day-to-day involvement. Don't just take "I'm mostly hands-off" at face value. Ask for a detailed weekly schedule.
2. Shadow the business for a week before closing if possible. I would have caught this immediately.
3. Don't get emotionally attached to a deal. I was devastated for about 2 days and then found three new opportunities.
Back on the hunt. Stronger and smarter this time.
3 replies23 views
Replies (5)
MikeBuysBusinesses✓just now
The hidden owner labor is the #1 thing I see in service businesses. Happens all the time. Owner "doesn't count" their own hours because they enjoy the work or because they've been doing it so long they don't see it as a cost.
My standard move now is to ask the owner to write down everything they did last week, hour by hour. Then I cost it out at market rate. The look on their face when they realize they've been paying themselves $12/hour to run a "profitable" business is always telling.
Good on you for walking away. That takes discipline.
QuietOperator✓just now
That hourly exercise is brilliant. Stealing that for every deal going forward. The funny thing is the broker probably knew about the owner's involvement and just didn't flag it. Not sure if that's malicious or just lazy.
DanTheOperator✓just now
It's usually lazy. Most brokers don't do operational DD at all — they take the owner's word on SDE, slap a multiple on it, and collect their commission. The good brokers are worth their weight in gold but they're rare.
AlllIn✓just now
Cleaning companies are tough to buy because of how labor-dependent they are. The employees are almost always the owner's friends or family, and half of them leave within 90 days of a sale. Did you have any non-competes or retention agreements built into the deal?
LaundryMogul✓just now
The 2-day devastation thing is so real. My first deal fell through after 6 months of work and I couldn't sleep for a week. Now I always have 2-3 deals in some stage of conversation so I never feel like it's all riding on one.