Your accountant may be a whiz at balancing your books, but you might want to think twice before having your CPA value a trucking business. Sure, accountants are experts with numbers, but most have very limited training in the specific techniques for valuing a trucking business. From strategic opportunities to company goodwill, value includes many factors that cannot be easily measured with common math formulas. An accountant that misunderstands value is an accountant who may unwittingly lower the price you receive for your trucking business sale.
1. Failure to Consider Strategic Scenarios
Value is ultimately what an investor is willing to shell out for trucking companies for sale. Since not all investors are created equal, this means your value will vary depending on who is interested in your trucking business. When an accountant relies on company financials like cash flow to assign value, strategic scenarios are overlooked. As you’ll recall, there are two main types of buyers: financial and strategic. A financial buyer wants to know how buying your company will pay off today; therefore, this type of buyer will only pay for the value your company has on paper. A strategic buyer, however, is also interested in the long run. This investor may pay a premium for factors that could spur big returns, such as a prime location or room for growth – all things most accountants do not have the foresight to include.
2. Forgetting to Include CapEx Requirements
Capital expenditure requirements, or capex requirements, represent the amount that must be reinvested in a business to keep it operating effectively. Accountants often include operating expenses but fail to take into account necessary reinvestments. From purchasing land to renewing equipment, an investor may need to make capital expenditures shortly after purchasing a truck company for sale. If the previous owner has taken on the burden of updating equipment and facilities, however, a lower need for capex may be reflected in an increased value.
3. Misunderstanding How to Accurately Value Goodwill
Intangible value has always been difficult to define. But when a CPA attempts to determine the value of a trucking business without analyzing company goodwill, it does the trucking business a huge disservice. Maybe your company has a well-recognized advertising campaign, a strong brand, or an important patent. These things won’t be mentioned on your profit and loss statement, but they could significantly impact the potential rewards a buyer can reap from purchasing your company. It’s best to leave measuring the intangibles to experts who specialize in transportation business transactions, not just in preparing financials.
4. Use of General Valuation Formulas
General valuation formulas are good at achieving general values. The problem is that the trucking industry is not exactly a general business. Rules of thumb formulas may be able to provide a quick estimate, but they are simply too generic to consider the unique aspects of the freight brokerage business. An industry-specific appraisal is the most reliable way to value your company, no matter what industry you are in. Remember, your business is your most significant financial asset. An experienced industry broker can show you how to value a trucking business fairly and accurately so that you don’t sell your company – and yourself – short.