Selling your transportation company is a multifaceted process requiring thorough preparation and planning. The process can be complex and lengthy, but a seller should understand and fully evaluate the unique industry factors that a prospective buyer will examine in advance of a transaction. This crucial step can minimize costly surprises and enhance the likelihood of a successful result.
Preparing your company for a sale includes highlighting desirable factors while discovering and addressing any issues, well ahead of your target exit date. A careful qualitative self-analysis is in order for prospective sellers.
The sell-side landscape is competitive, and buyers seek a well-functioning business they can step into, develop, and advance to the next level. As a seller, you should focus on the items that will be of interest to buyers:
Further, you will want to highlight the company’s market size, niche, and rank therein.
A transportation company sale has unique factors to be evaluated, including financial performance, and fixed assets, as well as employee and technology metrics. Look to the most meaningful key performance indicators (“KPIs”) to your operations. Understand the drivers of each measurement so you can determine where your company’s processes can be improved. Use them to set realistic goals for these metrics, and track results over time to optimize your company’s performance, which you can demonstrate to prospective buyers. Using industry benchmarks to compare your company with your competitors is integral in identifying strengths and areas for improvement.
Financial metrics include bench-marking your fleet by revenue, cost or load, as compared with a chosen target level of performance. By tracking financial KPIs to identify systematic processes which can be modified to decrease costs and increase revenue, your business will perform more profitably. In striving for better productivity, include the evaluation of such factors as:
Knowing the operational cost per mile is key to determining the rate that you should charge your customers. The number of days sales outstanding is the measure of cash flow critical to managing your company’s credit risk. Review the underlying reasons for any improvement in productivity, such as decreased fuel or insurance prices, increased customer pricing, fuel surcharges, decreased length of haul, or the addition of revenue-producing vehicles. Having this documented will support future forecasting.
Analyze the effectiveness and efficiency of your company’s processes. For example,
consider these factors:
Showing a trend of improvement in these metrics will be advantageous as a buyer appraises your operations.
Knowing customer metrics will help an owner determine the most suitable customers at the appropriate rate. These include factors such as:
By evaluating the company’s success using these metrics, an owner can determine which strategies have proven to be the most effective for bringing in new customers.
Fixed assets, tractors and trailers, are the lifeblood of your company. Having the metrics on these important assets will show the ability to maintain operations and provide growth opportunities. Metrics include:
Having the same-model equipment allows for efficient performance of routine maintenance and minimizes downtime. Prospective buyers will dig into your fixed asset plans as an integral part of their due diligence when evaluating the future revenue streams.
Employee metrics provide a business owner with an opportunity to examine the company’s culture, compensation and benefits. For example:
Given the highly competitive transportation employment market, compare both metrics to industry benchmarks to maintain a committed, stable workforce of qualified drivers and technicians.
Technology in all businesses is highly important today. Staying on top of what’s new and required is imperative to ensure your company is compliant and state of the art. Metrics include:
Buyers will gauge how current your technology is and whether an additional capital investment is required to be compliant. Getting out in front of the industry will allow for a better opportunity for your company.
Other key transportation company metrics that are specific to the sale of your company should be examined and compared with industry statistics where possible.
Generally, the state of the economy and the transportation industry should be major considerations when selling your company. Determine the near- and long-term prospects for freight shipping. Consider the following:
Your company’s safety record affects both insurance costs and legal liability. Buyers carefully examine occurrences, crash history and safety ratings because transportation is an industry where safety is actively measured. Regulatory requirements abound, and you want to prove your compliance and have your records well organized. Regarding expense, an owner must balance cost with acceptable risk. Larger fleets sometimes self-insure and carry large deductibles. Smaller fleets may increase per-truck deductibles by 20-50 percent, or can join “captive” insurance groups which share risk and cost across multiple carriers. The current trend is for carriers to accept greater risk in order to lower their insurance cost. While insurance pricing is usually based on vehicle miles traveled, it can be viewed as a fixed cost to a buyer.
As you begin to contemplate selling your transportation company, be sure to assess your company’s readiness for such a move by analyzing metrics pertinent to the industry and broader factors affecting any business. The assessment will allow you to come to the table as an educated negotiator, knowing the value of what your company has to offer. By discovering any shortfalls and resolving them, and highlighting your company’s strengths and advantages, you can add long-term value and improve your prospects for a successful sale.
Selling your transportation company is an important decision, and you should work with the best advisors you can find. Starting a conversation with the most experienced professionals can help you in this process.
To supplement this article, please refer to our Guide to Selling Your Business.
PCE has a team of credentialed investment bankers and valuation experts available to help you. Whatever you wish to accomplish, our team can define, analyze and present solutions that allow you to take the next step.