5 Steps on How to Sell a Trucking Company in California
Considering how to sell a trucking company in California? If you are thinking to yourself, “I wonder how to sell my trucking business for the best profit,” this article is for you.
It takes a lot of time and hard work for these sales to happen where both buyer and seller are pleased.
If you own a main street transportation business in California and are looking to sell your trucking and transportation business for a good profit, there are a few things you might want to take into consideration. Below, we have identified five main steps.
Step One: Find the Value of Your Business
Potential strategic buyers looking for a transportation and trucking company for sale will want an accurate representation of a business’s future earnings. In this section, we will discuss how to value a trucking company.
When thinking about selling your logistics and transportation company, there are many factors to incorporate into the valuation of your business. Some factors, like the financial health of your trucking enterprise, are easy to measure, while others, such as managerial experience, are less easily definable.
You can use one of three methods to value your business. The income method looks at your company’s past profits to create a potential earnings forecast. The market method involves using the stock market as a guide.
This method can be tricky for valuating smaller or privately-owned companies. Lastly, the asset method subtracts the liabilities of your business from the value of your owned assets. This total is referred to as the “adjusted book value.”
You can use online calculators for EBITDA multiples for trucking companies to calculate a helpful valuation for your business. EBITDA stands for earnings before interest, taxes, depreciation, and amortization. EBITDA multiples for logistics companies can be a confusing topic if you are unfamiliar. A business broker can help with this part (see step five).
Step Two: Add Value of Your Trucking Company
Positive cash flow, or high profitability, is key to increasing your business’s value. If your trucking & transportation company is driving high value, it will be much easier to sell and exit the business.
Focus on adding recurring revenue sources to increase your cash flow.
Of course, having a profitable logistics company is not the only important factor. Ensuring the fleet of trucks themselves (tangible assets) are in good running condition can significantly add value to your transportation enterprise in California.
Additionally, you will want to consider things like training, your current professional business network, and repeat customers. All this adds to the bottom line.
Diversifying your portfolio of clients is a good way to look more attractive to potential transportation and logistics business buyers.
Having multiple sources of income decreases the risk factor a buyer might feel when thinking about purchasing or acquiring your trucking business.
Minimize your company’s debt. If your potential buyer has to pay back loans on the company’s behalf, they will be less likely to want to purchase and acquire your California business. Also, make sure your books are updated for a new owner to jump right into the assessment and consideration process.
Lastly, be unique! Try to find a way to stand out from the crowd. See more on this below.
Step Three: Build a Sellable Business
Whether you are starting from the ground up or already have a profitable trucking business, building a transportation & logistics company with selling in mind is always beneficial. If you build a business that someone else wants to buy, you will be successful whether you decide to sell it or not!
Create Business and Revenue Structure
Ask yourself the hard questions. Am I relying on a few clients to succeed? Is my supply of trucking fleet sustainable?
Making sure you have a strong base structure for your trucking business will allow it to grow.
Offer Something Very Unique
Transportation logistics companies are plentiful, and the transportation industry is flooded with small businesses in California. What makes your services more than just a trucking business? Be a brand, not just a name. Be memorable.
Create a Niche Transportation Sector
Do you transport anything you can get your hands on, or do you specialize in fresh fruit products? Does every grocery store from Southern California to Sacramento use your trucking services, or are you happy to be hired by a Los Angelos neighborhood down the road to move their furniture?
If you have a target market, you will stand out.
Perhaps above all, excellent customer service will take you far. We are all human, and we all want to be treated with respect. That includes your customers and will reflect positively on your potential buyer(s) in California.
Step Four: Ready to Sell My Growing Trucking Company
So, you have built a trucking company with massive potential for growth, but you think it might be time to move on. Maybe you want to spend more time with your grandchildren who have interests of their own. Perhaps you want to retire and move on.
Whatever the reason, here is how to prepare your transportation company to say goodbye to you and hello to someone new to take over the legacy.
Whoever is going to acquire your business is not searching “trucking company for sale near me.” You will need to do the legwork to find a qualified buyer.
Research potential buyers that might be looking for trucking companies for sale in California. What type of companies might be interested in purchasing your enterprise?
Look at your competitors, companies with similar but not the same services, and even businesses that could just use portions of your business (i.e., employees or trucks).
You might even keep an eye out for another transportation business for sale, logistics business for sale, or trucking company for sale by the owner.
You can use them as examples for what to do and what not to do and see if they have any buyers you can tap into. Consider striking up professional relationships with these types of firms to gain inside knowledge. Remember, this is a slow game.
Create a list of these companies or individuals with pros and cons. Be realistic here. What would they think of your business as an outsider looking in? Try to take emotions out of the equation here. This is where a business broker or intermediaries can be helpful. More on that in step five.
Get to know the companies and people on your list. Is there a way that you can interact with these firms on a professional scale before trying to conduct the sale of your trucking company? Could you become their client? Could they become yours?
Remember your valuation in step one. Be prepared with how much you would like to sell for so you are not caught off guard! It can be intimidating to answer the question of “How much?” if you do not have a specific valuation range already in mind.
Finally, keep a list of people you want to notify if you do get an offer. Basically, you want to be able to tell all other qualified buyers that you might go off the market soon, in case they want to make you a better offer.
Step Five: Consider a Mergers and Acquisitions Broker
Now, this is the fifth step on how to sell a trucking business. A transportation and logistics business intermediary will hold your hand through the entire process, from valuation to executing the sale of your trucking business. Business brokers alike work with the sell-side processes. In other words, their expertise is “how to sell a business for the highest value.”
Buying a business in the transportation, trucking, and logistics industry happens all the time. The difference between a transport advisor and a business broker for logistics mergers and acquisitions relies on the size of your business. Brokers work with private businesses valued between $500k and $1m. Professional mergers and acquisitions intermediaries work with large-scale companies or complicated mergers, and even overseas businesses.
At Rogerson Business Services, we handle business acquisitions and sales in two business categories:
- Main Stree Privately Owned Business in California Valued Between $500k to $1m.
- Lower Middle Market Business in California Valued Between $1.1m to $50m.
Because they have the incentive to help you sell, good transportation and logistics business brokers will:
- Provide you with helpful advice before, during, and after the sale of your trucking and transportation business.
- Help you value your trucking and logistics business.
- Help to grow your transportation company prior to preparing for its sale.
- Find qualified buyers for your enterprise and communicate with them on your behalf.
- Create or edit a sound exit plan and timeline.
Timing is Everything When Selling a Company
Selling your transportation company specialized in trucking is no easy task, especially for a private small business owner. Take your time with the above tips first to build a growing business that you are proud of for maximum success.
Starting with these five steps for increasing your transportation and trucking company’s value is an excellent way to kick off positioning your logistics business for a profitable acquisition.