Most business owners have a preference for how they’ll leave the market when they retire, whether they hope to transfer their business to a family member or cash out completely in a sale. Unfortunately, exit scenarios don’t always unfold the way owners would like them to.
All too often, retiring trucking business owners learn that buyers aren’t interested in their company or that an intended successor isn’t adequately prepared to take the reins. But by then, it’s too late. The owners may be forced to sell to a third party for less than they had hoped – or, worse, liquidate. By preparing a trucking company for sale or transfer well in advance, sellers can increase the odds that they’ll exit the market on their terms.
Transferring to a Successor
The majority of business owners dream of transferring their business to a successor, be it a son or daughter, business partner, or a trusted employee. Yet only a small minority of owners are able to fulfill this dream. While you may hope to see a child follow in your footsteps, they may not be interested in the industry like you are. You may discover you don’t want your income to depend on the actions of someone else. Even if the successor is passionate about the business, they may not be fit to run it. If you want to transfer to a successor, begin preparing the new owner several years in advance. It’s also smart to develop a Plan B, whether that means selling to a backup successor or an outside party.
Selling to a Third Party
While selling a trucking business to an investor may not be as emotionally rewarding as transferring it to a family member, it has the potential to be more financially rewarding. Unfortunately, it’s not the guarantee of money some owners believe it is. The price you receive will depend on your trucking company valuation and the current business climate. Again, the sooner you begin planning for your exit, the better the chance that it will unfold the way you’d hoped. When a business is well-groomed for a sale, its owner can often collect most – or all – of the asking price. It may be possible to increase your price by making strategic reinvestments and negotiating an appealing deal structure – for instance, by agreeing to finance a portion of the sale.
Sadly, many business owners end up leaving the market through the least attractive path: liquidation. When a successor or buyer isn’t willing or able to come through, owners have no choice but to sell their company piece by piece for far less than cost. Without the ability to negotiate terms or factor in intangible assets such as goodwill, owners may not receive enough to fund their retirement. If liquidation is your only option, you may want to consult a liquidation professional to maximize the return from your sale.
Of course, the best way to handle liquidation is to avoid it in the first place. Developing an exit strategy and updating it regularly will keep your options open. At The Tenney Group, our transportation business brokers help owners increase their business value – and the odds of experiencing their ideal sale.