As the current economic climate produces more uncertainty than confidence, transportation business owners across Houston and the gulf region are exploring a variety of business development activities to protect their primary investment in the transportation industry. Diversifying within the transportation industry through acquisitions is a strategy that is becoming more and more common.
What is diversification? Diversification is the process of investing a portfolio across different asset classes in varying proportions depending on an investor’s time horizon, risk tolerance, and goals. For transportation business owners, diversifying often means spreading your risks exposure and financial upside across different transportation industry segments but where your professional experience and industry knowledge are still applicable
Example: A trucking business acquires a bus company in order to have a business that compliments his existing company that is not subject to the same challenges and risks of the trucking industry.
Why diversify within the transportation industry? Transportation business often live and die by the success of one financial asset—their transportation business. Unfortunately, when disaster strikes, 30 years of experience and hard work can be wiped out–leaving no recourse to recover financially. Diversifying, if nothing else, provides the means to help transportation business owners protect their primary investment and to live to fight another day.
3 more reasons for diversifying within the transportation.
1. Stick with what you know.
Though a freight hauling business and a passenger transportation business may seem to be very different, many of the management principles and work flows are very similar. Unlike investing in a completely different industry, transportation business owners that diversify within the transportation industry can accomplish everything they want through diversification with the shortest possible learning curve.
2. Reduce the effects of market volatility.
Various segments of the transportation industry are affected differently by market volatility. When a business owner’s risks are spread across different segment s, the overall risks in his investment portfolio are reduced. This approach is much more conducive to long term success.
3. Fluidity and greater control over an exit strategy.
Any transportation business owner who has been in the business over the last 20 years understands how an economic crisis can influence an exit strategy. After 9/11, The Tenney Group witnessed countless business owners on the verge of retirement forced to recommit themselves and their retirement funds to their business for another ten years. They had no other options. Diversifying allows business owners to minimize their overall risk exposure and to maximize control of their exit strategies.
For more information about diversifying within the transportation industry, contact The Tenney Group.