Thinking of selling? It pays to first know what you're
As a trucking business owner it's critically important to
know how much you're worth. Why? A few key reasons: you may
want to sell one day; or maybe just plan for retirement. Perhaps
you're planning your estate and/or succession; maybe you'd
like to take some chips off the table and sell to key employees or
another shareholder; or you may be involved in a court battle.
While different methods can be used and the process can be
complicated, business valuation essentially comes down to knowing
the value of the business's assets; ongoing cash flows; and the
going rate for comparable businesses. When it comes to determining
the fair market value of trucking companies specifically, business
valuators generally turn to three main approaches.
1. The Income Approach
This is generally the go-to valuation method when the business is
expected to remain profitable on an ongoing basis. In this
approach, typically a multiple is applied to the normalized
earnings of the business. How do you know what future profitability
will look like? Valuators start with historical earnings and then
make adjustments to expense items such as management salaries and
bonuses and removing non-recurring expenses in order to predict
profitability that a prospective purchaser is likely to
2. The Asset Approach
This is used in situations where the trucking company is not
earning a fair return on its capital (i.e., where the capital could
generate a higher rate of return elsewhere), or where there is no
commercial goodwill transferable to a prospective purchaser. An
asset approach values the assets and the liabilities of the company
at their fair market values.
3. The Market Approach
In this approach, business valuators look to the recent
sales/purchases of comparable trucking companies to determine the
implied multiples and also look to benchmarks of comparable public
companies. The chart above illustrates average multiples in Canada
and the United States based on actual transactions in the trucking
industry as well as trading multiples of public trucking companies.
Valuators assess the comparability of the company being valued to
the benchmark companies.
KEY VALUE DRIVERS:
How to Augment the Value of your Trucking
One of the most important value drivers is profitability. The chart
above presents average performance metrics of trucking companies in
Canada. These statistics can be used to determine whether or not
your company is outperforming the average trucking company.
Another important value driver is having contracts in place.
Customer contracts that are transferable will provide secured
revenue to a potential purchaser and can sometimes be the sole
reason a business is being acquired. Contracts with key employees
can also add value to the company because they will help ensure
business continues as usual after the acquisition.
Reputation in the trucking industry is also critical. Companies
with an established track record for reliability, in terms of goods
arriving on time and safely, will be more attractive to prospective
purchasers and will likely lead to higher purchase prices.
There are many other factors that can drive value such as
proprietary routing software, reciprocal arrangements with other
trucking companies, relationships in the industry, etc. Owners and
managers should be aware of these factors and use them to maximize
A Chartered Business Valuator (CBV) can assist you with
estimating the value of your business.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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