You know your trucking business has value. But if you’re expecting investors to be chomping at the bit when you put your business on the market, you may be in for a bitter disappointment. Many owners selling a trucking business are surprised to receive little to no initial interest. Often times this is not a reflection on the company, but on the seller’s own lack of foresight. Here are some of the most common reasons businesses fail to excite investors.
Focusing on the Wrong Buyers
Not all business buyers have the same goals. Private equity firms may be looking to make money by growing your business and selling it for a substantially increased sum. Others are simply interested in a steady source of personal income. Strategic buyers, on the other hand, may be more concerned with the potential of your assets or customer goodwill than they are with your bottom line. Let’s say your business has modest profits but a good location and large market share. If your business sale’s marketing effort is focused on financial buyers, you may be missing out on the opportunity to attract competitors, or other companies interested in entering the trucking industry, who may benefit from your position in the market. How do you identify the right buyer for your business? Many times, that depends on your company’s value.
Failure to Communicate Hidden Value
Obviously buyers are going to be interested in your earnings as defined by valuation methods such as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which is useful for measuring cash flow. But your financials are just pieces of paper; they don’t tell the whole story. For example, another trucking company may be less interested in the value of your fleet and more intrigued by your reputation and customers – a factor that doesn’t show up on your balance sheet. On the contrary, a different type of transportation business might want to expand services to their already existing customers by utilizing your trucks. By identifying and communicating hidden value, you can paint a picture for buyers that is far more engaging than numbers on a financial document. A willingness to offer benefits such as debt financing can also create value.
Potential Investors Don’t Understand Value
Of course, correctly valuing your business and identifying your best buyer still can’t guarantee a sale. This is because the typical investor simply does not understand value in the trucking industry. Challenges like rising fuel and insurance costs may obscure the potential for market share gains and other benefits. In situations like this, an intermediary specializing in the trucking business can come in handy. Experienced industry transaction advisors have the ability to identify and target buyers who already understand your business, as well as educate potential buyers who may benefit from entering the trucking industry.