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3 Decisions to Avoid When Planning the Sale of a Trucking Business

July 22, 2010 By Sozo Staff Leave a Comment

1) Neglecting “minor” issues.

When approaching a sale, it is time to proactively address some issues that business owners can rationalize putting off—sometimes indefinitely. Although, these issues can seem inconsequential, neglecting several minor issues can collectively determine whether or not a deal gets done with the best buyer for your business. An example could be settling any outstanding financial or legal disputes. No matter how small they are, open disputes spell uncertainty for buyers. And uncertainty is never helpful in any sale of a trucking business. If you are having a battle of wills with the telephone company over a bill from two years ago, resolve it immediately. Eliminate any issue like this that could potentially give a buyer an excuse to pause when evaluating the purchase of your trucking business.

Another example: Your business may be a well oiled machine, but your faded exterior paint on your facility or your disorganized office areas may give a buyer the wrong impression about how you have been taking care of the business. Giving the proper attention to these minor issues when planning a sale will eliminate distractions and accentuate a buyer’s level of interest in what matter’s most–the financial performance and customer base of your business.

2) Making assumptions about business value and deal structures.

Trucking business owners assess the value of their own businesses in many ways. Many business owners apply valuation formulas they have heard about from industry peers. Serious disconnects can take place during these exchanges of information. As a result, trucking business owners can make assumptions about their exit strategy that can lead them down a path of poor financial decision making leading up to a sale.

Once poor decisions are made, it can be very difficult to undo the negative effects they impose on the timing and net result of a trucking business sale. Don’t put yourself in that position. Depending on the size and financial performance of your trucking business, a variety of factors will influence the sale price, financing options, deal structure, participation of private equity, as well as the tax implications. Getting the facts about a sale early on will allow you to make confident financial decisions leading up to your business sale, enhance your overall result, and limit your tax exposure.

3) Putting plans to sell on hold without understanding the facts about your business sale.

The economy is one of many factors that should influence the timing of your trucking business sale. The buyer that is able to justify the highest offer for your business may be an existing trucking business in your region. When the market for new customers shrinks as a result of a struggling economy, the value of your established account base may be more valuable than ever to a strategic buyer. A strategic buyer can often replace lost sales through acquisitions much more cost effectively than through organic business development activities.

Waiting for the economy to improve may allow you to increase your bottom line. But when a strategic buyer acquires your business, they are less concerned about the bottom line. They will be changing the cash flow formula all together through eliminating overhead duplication, increasing fleet utilization and creating other efficiencies. In an improved economy, you may have greater sales to offer a buyer but with more sales comes more debt to your balance sheet. You may attract a higher sale price but end up with a weaker “net” result. You might also be subject to less favorable tax implications.

Putting plans to sell on hold may make the most sense for your trucking business at the present time. But resist making that conclusion until you clearly understand the facts surrounding your business sale—now or in the future.

Filed Under: Transportation

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