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Too Much of a Good Thing: How Owner Dependence Hurts Your Trucking Business

July 6, 2012 By Sozo Staff

As an entrepreneur, your business is your greatest asset. However, you shouldn’t necessarily strive to be the greatest asset of your business. Many well-meaning entrepreneurs fall into the owner dependency trap, handling so much of their company’s operations that the business simply can’t survive independently. Whether you’re seeking financing or planning to put your trucking company for sale, taking steps to ensure your company can thrive in your absence may be the best business decision you ever make.

Unclear Value

Owner dependence makes it difficult to accurately value a transportation business because it’s impossible to determine if profits are dependent on the business or its owner. When the owner of a company possesses special skills or a personality that drives the business, value may not easily translate into a company helmed by a different person. Though it may sound counter-intuitive, a trucking business with less owner involvement may be worth more in the long run.

Limited Potential

While a business can survive when dependent on an owner, it rarely thrives. When a business leader is constantly putting out fires because he or she is the main point of contact for customers, drivers, and suppliers, the business may never move forward. Important value-enhancing reinvestments and opportunities for growth may be missed because an owner is tied down with day-to-day tasks. A successful business owner has the ability to look beyond the daily routine and toward the horizon.

Difficult Transitions

Let’s say there are two trucking companies identical in nearly every way. Both businesses focus on providing superior customer service, but the first emphasizes its brand while the second plays up the personality of its charismatic leader. If owners put the trucking companies for sale, customers of the first business may not even realize a transition has occurred. However, customers of the second company will note the absence of the owner immediately and may question whether they want to continue doing business with an unfamiliar face. In order to develop a valuable company, it’s essential that your services – not just your unique personality traits – are what keep customers coming back.

Reducing Dependence

It’s in every seller’s best interest that the buyer of their business is successful. When the potential for a smooth transition is high, buyers enjoy a reduced risk – and may be able to offer a correspondingly higher price. Meanwhile, sellers can comfortably provide owner financing without significant risk of default. Reducing owner dependence is just one way to increase value prior to putting your trucking business for sale. Even if you don’t plan to sell your company in the near future, approaching a sale proactively can put you in a better position to maximize returns if your plans change. Experienced truck business brokers such as members of The Tenney Group can help transportation business owners understand and make the most of business value, increasing performance and, as a result, sale price.

Filed Under: Transportation

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