5 Tips: How to Sell a Freight Hauling Business in California
If you are a freight hauling business owner looking to sell your California privately held company for the highest price, here are five valuable tips to get you started.
1. Have an Exit Plan Before Selling Your Freight Hauling Business
While there are many reasons why most business owners in California may have difficulties finding qualified buyers for their businesses, the main reason is the lack of an exit plan.
An exit plan is basically a strategy that outlines how you will sell your transportation company to potential qualified buyers. This plan mainly involves outlining the range of your asking price so you make a profit when you sell your trucking company.
Let’s take a look at the reasons why you should consider having an exit strategy before selling your freight hauling business.
Give Your Transportation Business a Sense of Direction
Among the main reasons why most transportation business owners have a business exit strategy is because it gives them a sense of direction, allowing them to groom their trucking company accordingly. For instance, if you plan on selling your transportation and logistics business, you will aim to increase its value to attract top-notch qualified buyers.
Helps During Unexpected Events
A business exit strategy can be beneficial in case something unexpected happens, such as a severe accident or a serious illness that will prevent you from actively running your trucking and freight hauling company.
With a business exit strategy, you can move quickly to sell your transportation and logistics venture before it begins to lose its value.
Attract Strategic and Qualified Transportation Business Buyers
One thing that will determine whether or not buyers will want to acquire your trucking or freight hauling business is a business exit strategy.
But why do qualified buyers ask about an exit plan?
For starters, having an exit strategy shows how committed you are to your business. Most importantly, it shows how flexible you are if any unforeseen circumstances require you to sell your freight hauling business.
Understand the Value of Your Freight Hauling Business
With an exit plan, you will know how much your trucking company is currently worth and the strategies to take to increase its market value.
2. Establish Ways to Increase the Value of Your Transportation Business
Understanding the current value of your trucking business isn’t enough. Establishing ways to increase its market value makes owning the business worthwhile and more attractive to future buyers.
Here are some valuable tips on how to increase the value of your trucking company.
Boost Your Fright Hauling Business Profits
Profitability is no doubt the key selling point of any type of business. There are many ways to boost the profits of your trucking company. For example, expanding your market gives you a diverse customer base, resulting in more sales which could lead to higher cash flow.
You also need to manage your company’s costs. Try and find ways to reduce your expenses. However, it is important to make sure that you are not reducing costs at the expense of the quality of your freight hauling services.
Ensure a Positive Cash Flow
Cash flow is just as important as profits when it comes to determining the overall performance and market value of your hauling business. Having a positive cash flow gives any potential investor assurance that you have the means to grow your trucking company.
However, it is important not to equate your profits with your cash flow. Your logistics company might be making good profits but still, have a negative cash flow.
3. Identify the Ideal Business Valuation Calculation Method for Your Transportation Company
Regardless of how valuable your transportation and freight hauling company is, it will only be worth what a buyer is willing to pay for it. That is why it is important to understand how to calculate its exact value.
Fortunately, there are many business valuation calculation methods you can use to determine your trucking company’s value. These methods mainly focus on a business’s financial performance, assets and liabilities, and other external factors to determine its economic worth.
As expected, this process can be pretty intricate, so it is recommendable to seek help from a professional business intermediary. The experts know all the factors to consider when calculating the value of your transportation business.
Here are the most common valuation calculation methods for a trucking company.
EBITDA (earnings before interest taxes, depreciation, and amortization) is the most common business valuation calculation method used to determine a logistics company’s market value. This method excludes expenses such as tax and debts to portray a raw picture of a transportation company’s earnings, therefore, demonstrating its economic worth.
Typically, EBITDA multiples has two formulas to calculate a company’s market value:
- EBITDA= operating profit + depreciation + amortization
- EBITDA= net income + interest + taxes + depreciation + amortization
DCF Business Valuation Method
Also known as the discounted cash flow business valuation method, DCF is used to determine the approximate value of a trucking company’s investment based on its future cash flow. In simple terms, this method estimates the value of a business’s current investment, such as stock shares, based on the amount of money it will generate in the future.
Market Capitalization Method
This is one of the simplest business valuation calculation methods. Market capitalization is calculated by multiplying a business’s share market price by the total outstanding shares. For instance, if a trucking business sells its shares at $100 each and has already sold 10,000 shares, its estimated market value will be $1,000,000.
4. Understand the Steps to Sell Your Freight Hauling Business
Most California business owners in the transportation industry can attest that selling a transportation company can be quite a challenging venture. That is why it is essential to seek help from a professional transportation broker who will take you through the right path to successfully selling your trucking business.
Here are four simple steps to selling your freight hauling business.
Step One: Prepare Your Business for Sale
We all know that there comes a time when selling your logistics and transportation company might be the best option. That is why it is vital to ensure that your business is well prepared for sale right from the beginning.
There are tons of ways to prepare your trucking company for sale that include increasing your customer base, maximizing your profits, and ensuring that you have a positive cash flow. These strategies will get you a fair price for your company and keep the business running smoothly even after you have exited.
Step Two: Find Your Company’s Market Value
We cannot emphasize enough how important it is to determine the correct value of your business. Consulting a professional broker in California is essential as it will help you develop a realistic estimate of your logistics business’s value. This will bring credibility to your asking price and serve as a measure for your listing price.
Step Three: Prepare the Documents
Before listing your freight hauling business for sale, ensure all your documents, such as your tax returns and financial statements, are in order. You can also put together all the documents related to sale transactions. Having all your relevant documents together will show potential buyers how committed you are to your transportation business.
Step Four: Find the Right Qualified Buyer for Your Trucking Business
Finding the buyer for your transportation business doesn’t only entail finding an investor who will offer you the right price, but also finding one that will be a good partner during the process of transition of ownership.
So it is important to first assess your options to ensure that you will end up with the perfect buyer for your company. Seeking assistance from professionals such as business brokers can connect you with promising buyers.
5. Seek Help From a Transportation Business Broker
As we mentioned earlier, the process of selling a trucking business can be a complex one and may take a long time. Hiring a California business broker or intermediary helps you focus on operating your company and increasing its value rather than marketing it.
Let’s look at why you should consider hiring a certified business intermediary in California to help you sell your trucking company.
California Business Broker Bring in Potential Qualified Buyer
A broker usually comes with an extensive network of qualified buyers. What’s more, their knowledge of the transportation industry enables them to establish a marketing strategy that will attract even more buyers.
Intermediaries or Business Brokers Helps You Overcome Obstacles During the Selling Process
There are many obstacles that business owners may encounter when trying to sell their trucking businesses. These include mistakes made during the negotiation process and pending legislation delays. A broker can help you identify these obstacles and find ways to overcome them for a smooth selling process.
A Business Broker Helps You Negotiate for a Better Price
Understanding the exact value of your business may not be enough to negotiate the ideal price for your company. A business intermediary studies your trucking business from all angles and helps you develop the perfect negotiating plan to get the right price for your business.
Understanding the Process of Selling a Freight Hauling Business
Selling a freight hauling business can be challenging – from finding buyers to negotiating for a great price, there is a lot involved. Plus, before deciding to sell your business, you have to prepare it for sale to get the price you deserve.
Hiring a transportation and logistics brokerage firm can go a long way in helping you create an extensive market for your company. A California-based business broker also provides you with all the information you need, including how much taxes you have to pay during the sell-side process.
Find a California business brokerage firm today to ensure you sell your freight hauling business at the highest price.
Go to the next article: Part of tips to sell a trucking company in California series ->