Cleaning Business Due Diligence Checklist for Australian Buyers

Buying a cleaning business in Australia requires a due diligence process that goes well beyond the standard financial and legal checklist. The specific risks in cleaning — subcontractor classification, month-to-month client relationships, equipment condition, and compliance obligations for specialist work — don't appear in a generic guide. This checklist covers every material check you need to run before exchanging contracts on a cleaning business.

This is the companion resource to the due diligence when buying a cleaning business in Australia article, which explains the reasoning behind each area in detail. For a broader view on whether the industry suits you, read Is a cleaning business a good investment first.

This checklist is part of Module 5 of the Playbook — the due diligence and verification stage. If you want a valuation-focused tool once you've confirmed the business is sound, the Cleaning Business Valuation Checklist covers that ground.

Why cleaning businesses need their own checklist

Most due diligence guides treat all small businesses the same. They'll tell you to check the financials, review the contracts, and confirm the licences. That's fine as far as it goes. But cleaning businesses have a few specific issues that catch buyers off guard.

The workforce structure is one. A broker showed me a cleaning business last year that looked profitable on paper. The EBITDA was reasonable, the client list was solid, and the equipment was in decent condition. What nobody had flagged was that the entire workforce was structured as subcontractors — sole traders with ABNs — who had never worked for any other business. The ATO's view of that arrangement was, diplomatically, different from the seller's (and the buyer who missed it ended up negotiating a significant indemnity before settlement, which is better than discovering it afterwards).

The client relationship structure is another. Revenue looks stable until you realise that 70% of the commercial cleaning contracts are verbal agreements tied to the owner's personal relationships with building managers. Not illegal, not unusual — but worth knowing before you pay goodwill for it.

Three things to check before you do anything else:

Get the client list sorted by annual revenue with the contract status for each — signed agreement or verbal arrangement.
Ask the seller to describe the employment status of every worker: employee, subcontractor, or casual. Then verify it yourself.
Pull the last three years of BAS statements and reconcile total GST-inclusive revenue to bank deposits. Unexplained gaps are cash revenue that may not be real.

The full checklist below covers all of this systematically, from initial screening through to pre-settlement verification.

The Complete Cleaning Business Due Diligence Checklist

Work through this checklist in order. Each phase builds on the last — don't skip ahead to legal review before you've confirmed the financial picture is genuine.

Phase 1: Initial Screening (Before Signing the NDA)

These are the quick checks you can do from publicly available information before investing significant time.

Search the business name and any trading names on ASIC Connect — confirm the entity is active and correctly registered
Search the owner's name on ASIC for any adverse director history, banned director status, or involvement in failed companies
Check the PPSR (Personal Property Securities Register) for any security interests registered against the business assets — these must be discharged before or at settlement
Run a Google search for the business name, trading name, and owner name — check reviews on Google Maps, ProductReview, and any industry directories
Verify the business address on Google Street View — is there an actual commercial premises, or does the business operate from a residential address with no commercial space?
Check whether the business holds an active ABN and is registered for GST (ATO's ABN Lookup at abn.business.gov.au)

Phase 2: Financial Due Diligence

Request these documents in writing. The Information Memorandum is not a substitute for source documents.

Tax returns and financials:

Three years of signed business tax returns (company, trust, or sole trader)
Three years of profit and loss statements, prepared by the accountant
Current year management accounts (at minimum, a YTD P&L to the most recent month)
Three years of business bank statements — all accounts used for business income or expenses
Three years of BAS statements — reconcile total GST-inclusive revenue to bank deposits to identify unexplained gaps

Revenue verification:

Reconcile total invoiced revenue (from accounting software) to BAS-reported revenue for each quarter
Check whether the business invoices all revenue through the accounting system or whether some clients are billed manually or by cash receipt
For residential clients, confirm whether revenue is fully invoiced or partially collected as unreported cash
Identify any seasonal revenue patterns — cleaning businesses often see dips in December/January and July (end of financial year surge)

EBITDA normalisation:

List every add-back the vendor or broker is claiming, with documentation for each
Confirm the owner's salary in the accounts and whether it reflects market-rate replacement cost
Identify any personal expenses run through the business (vehicles, phone, travel, meals)
Identify any one-off income items (grants, insurance proceeds, non-recurring commercial contracts)
Identify any one-off expense items (capital expenditure, legal costs, abnormal repairs)
Calculate normalised EBITDA after verified add-backs only

Working capital:

Identify the average accounts receivable balance (debtors aged 0-30 days, 30-60 days, over 60 days)
Identify whether any debtor balances are genuinely collectible or should be treated as bad debts
Confirm whether the working capital included in the sale price is typical for the business or has been manipulated ahead of sale

Phase 3: Client Contracts and Revenue Quality

This phase is often the most important in a cleaning business acquisition.

Client list review:

Obtain the full client list sorted by annual revenue — at minimum the top 80% of revenue by client
For each material client, confirm whether there is a signed contract or a verbal arrangement
For each signed contract, confirm: start date, expiry date, automatic renewal terms, exit notice period, and scope of services
Check whether any contracts are due for renewal or tender within 12 months of your settlement date
Check for any clients who have already given notice, reduced scope, or raised complaints

Concentration risk:

Calculate the revenue percentage of the top 1, 3, and 5 clients
Flag any client representing more than 20% of total revenue as a concentration risk requiring specific inquiry
For commercial cleaning, check whether any anchor clients are in sectors likely to undergo structural change (retail consolidation, office-to-residential conversions, government spending reviews)

Contract quality:

Confirm whether contracts include CPI or fixed escalation clauses — contracts without escalation erode margin over time
Identify any contracts that can be terminated by the client without cause on short notice (under 30 days)
Check whether the contracts include assignment clauses — some require client consent to transfer on change of ownership
For government or large commercial clients, confirm whether the contract includes a "key person" clause tied to the current owner

Client transition risk:

Ask the seller directly which clients know the business is for sale
Ask for two or three client references you can contact independently
Plan for a vendor introduction to material clients as a settlement condition

Phase 4: Staff and Workforce Structure

Do not skip this phase. The worker classification issue is the most common source of post-settlement surprises in cleaning businesses.

Employee records:

List all employees with their employment status (full-time, part-time, casual), start date, and current rate
Confirm all employees are on Fair Work compliant contracts and being paid correctly under the relevant Modern Award (Social, Community, Home Care and Disability Services Industry Award, or Cleaning Services Award)
Review payslips for the last three months for a sample of employees — confirm correct award rates, super, and leave accruals
Obtain the current leave liability schedule — this is often excluded from the purchase price but still your cost post-settlement
Confirm any employees on fixed-term contracts and the expiry dates

Subcontractor review:

List all subcontractors used in the last 12 months with their ABNs, total payments, and nature of work
For each material subcontractor, ask: do they work for other businesses? What percentage of their income comes from this business?
Check whether subcontractor agreements exist and whether they contain direction and control language inconsistent with genuine contracting
Confirm whether superannuation guarantee contributions have been paid for any subcontractors who may be deemed employees under the extended SGC rules
Check the ATO's contractor vs employee decision tool against the arrangements in place

Key person risk:

Identify any workers — employees or subcontractors — who hold material client relationships personally
Identify any workers with specialist skills (specialist equipment operation, security clearances, NDIS worker screening) and assess the risk of their departure

Phase 5: Equipment and Assets

Asset list and condition:

Obtain a complete asset list with purchase date, original cost, current book value, and physical condition
Physically inspect all major equipment — floor polishers, pressure washers, extraction machines, vehicles
For equipment older than five years, obtain an independent condition and valuation report
Check whether any equipment is leased (operating lease vs finance lease) and confirm what happens to the lease on change of ownership
Confirm whether vehicles are owned by the business or personally owned by the operator

Maintenance records:

Request servicing and maintenance logs for all major equipment
Check whether the business uses an equipment tracking or servicing schedule, or operates reactively
Identify any equipment that will require replacement within 24 months and estimate the replacement cost

Consumables and chemicals:

Identify whether the business holds cleaning chemical stock and whether it's included in the sale
Check SDS (Safety Data Sheet) compliance — all cleaning chemicals used must have current SDS documentation on site or readily accessible

Phase 6: Licences, Compliance, and Industry-Specific Checks

General licences:

Confirm the business holds a valid ABN and is registered for GST
Check whether the business advertises or performs any work requiring specific licences: asbestos removal (Class A or B from state authority), high-risk work (working at heights, confined spaces, etc.)
For any licensed work, confirm the licence is current, held by an individual (not the entity), and that the licence holder intends to remain with the business

NDIS and aged care:

If the business provides cleaning under NDIS plans, check whether it's registered with the NDIS Quality and Safeguards Commission and confirm registration is current
Confirm all workers delivering NDIS-funded services have current NDIS Worker Screening clearances
Check whether the business holds an Aged Care Quality Standards-compliant policy if providing cleaning in residential aged care settings

Security clearances and commercial contracts:

For commercial clients requiring worker police checks or security clearances, confirm all current workers have valid clearances
Identify which clients require clearances as a contractual condition — and understand the process and cost of clearing new workers if you bring on new staff post-settlement

WHS compliance:

Request the current WHS policy and Safe Work Method Statements (SWMS) for high-risk tasks
Check whether the business has had any workers compensation claims in the last three years
Obtain the current workers compensation insurance certificate and confirm the premium history
Check whether any workplace incidents have been reported to SafeWork or the relevant state authority

Franchise-specific checks (if applicable):

Obtain the current Franchise Disclosure Document (FDD) from the franchisor
Confirm the franchisor's right of approval over transfer and any conditions they impose
Check whether the franchisor has a right of first refusal over the sale
Review the franchise agreement transfer provisions, including any transfer fee
Confirm the franchise term remaining — a franchise with under two years remaining is a material risk

Phase 7: Legal Due Diligence

Contracts and agreements:

Review all material client contracts — look for assignment clauses, key person clauses, and termination provisions
Review all supplier and subcontractor agreements
Confirm whether the business has any ongoing legal disputes or threatened claims
Check whether any restraint of trade clauses already bind the seller from a prior business sale

Intellectual property:

Confirm ownership of the trading name and any domain names (register.com.au, auDA WHOIS)
Confirm the business name is registered with ASIC and that it transfers on sale
Identify whether the business has a website and confirm the hosting and domain are transferable

Structure and sale type:

Confirm whether this is an asset sale or a share sale
For an asset sale, confirm which assets are included and excluded in writing
For a share sale, confirm whether a tax clearance or warranty and indemnity position has been obtained for historical tax liabilities
Confirm the GST treatment — does the sale qualify as a going concern?

Phase 8: Pre-Settlement Final Checks

Run these checks in the week before settlement.

Confirm all conditions precedent in the contract have been satisfied
Conduct a final physical inspection of the premises and equipment
Confirm all staff will transfer on the settlement date and that no key workers have resigned
Confirm all material client contracts are still active and no notices of termination have been received
Confirm the PPSR has been re-searched — no new security interests have been registered since your initial search
Confirm the business's insurance policies (public liability, workers compensation) are transferable or that replacement policies are in place from settlement date
Confirm the bank account, merchant facilities, and payment systems are ready to transfer
Confirm the vendor will provide all login credentials for accounting software, job management systems, and client portals on or before settlement
Conduct the pre-settlement stocktake if cleaning consumables are included in the purchase price

What to do with this checklist

Work through it in the order above. The phases are sequenced deliberately — you want to confirm the financial picture before investing time in legal review, and you want to confirm the legal structure before spending money on specialist reports.

Flag anything incomplete or unverifiable, and raise it with the vendor in writing before you proceed. Items that can't be verified are risks — and unverified risks should either be reflected in the purchase price or secured through indemnity clauses in the Sale and Purchase Agreement.

For the full due diligence process including broader financial and operational checks, see the comprehensive due diligence checklist. For help thinking through the valuation once you've completed your checks, see how to value a cleaning business.

Cleaning Business Due Diligence Checklist for Australian Buyers

Why cleaning businesses need their own checklist

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