Every business – and every business buyer – is different. Unfortunately, this makes setting a budget for your trucking business acquisition quite the challenge. You may have your eye on a particular price range, but what you will get for your money can vary wildly.
A trucking business for sale priced at the low end of your budget may require more long-run reinvestment than you can afford. Contrarily, a high-priced company may offer unique benefits that will maximize the return on your investment. When you’re thinking of buying a business, it’s crucial to consider how much you need, how much you can offer, and whether financing can make a seemingly implausible purchase possible.
Is the business priced properly?
Trucking business owners may have plenty of experience pricing transportation services, but most have never priced a transportation business. Never assume that the asking price for a company is fair. Often times, sellers will base their price on a similar trucking business for sale. But while the companies may share some characteristics – such as size – they probably have a different location, history, and customer concentration. Price must be based on value – and value varies depending on the unique assets and characteristics of each company. An experienced truck business broker can assess the accuracy of a trucking company valuation and help seller and buyer come to agreement on true value.
How much will you need to earn?
Regardless of how you’ll pay for your business, you need to first ensure the business you buy will pay you. This is especially important when the company will be your sole source of income. How stable is cash flow? Can you survive on the company’s projected earnings? Do you have enough cash reserves to stay afloat if you have a shaky first year or end up pouring more money into reinvestments than you anticipated? A business may have great long-range potential, but that potential won’t do you much good if you can’t afford to stick around long enough to tap into it.
How is financing structured?
In most cases, the majority of funding for a trucking business purchase will need to come out of the buyer’s pocket. Because buyers rarely have that much in their bank accounts, taking on debt to buy a business is common. Buying an existing freight brokerage company may increase your ability to secure financing from a traditional lender, as a successfully-operating company is less of an investment risk than a startup. When traditional loans and SBA goodwill financing won’t cover the cost of your purchase, owner financing is another option. The seller may agree to carry a note for part of the price in order to get the deal done. With the right deal structure, you can dramatically increase your chances of completing a transaction with your ideal acquisition target.