3 Pitfalls To Avoid When Determining a List Price

Pricing your transportation company by comparing it to apparently similar businesses for sale may seem to make sense. However, it can actually be counterproductive. The reason surface-level comparisons aren’t necessarily helpful is that easily quantifiable aspects of a business—things like cash flow, fleet size, and location—are not the only things that matter. In fact, the intangibles—things like reputation, history, and employee background—matter quite a bit, when it comes to valuation. Some buyers may be more interested in a company like yours than another one with very similar numbers.

If you do choose to play the comparison game, you really may lose out, partly based on the following three issues.

Issue #1: Raising Unrealistic Expectations

Selling a transportation business is quite different from selling a house, where you can pretty much trust comparable recent sales in pricing your own. When business owners make the mistake of using nearby transportation business sales as their only guide to creating a list price, they often end up disappointed with little to no interest in their listing.

While another company that recently sold may have appeared to be of similar size, it may have had more experienced employees, more reliable cash flow, or a better customer base. Owner preparation and professional consultation could have also played a part in ensuring optimal value and generating buyer interest.

When you take the time to gain a professional valuation from a transportation business broker, you’ll be in a much better position to determine a selling price and connect with prospective buyer. If your current valuation is disappointing, you can receive professional tips on how to increase your business’s value before putting it on the market.

Issue #2: Finding the Right Buyer

When transportation business owners become consumed with how their business compares to other seemingly similar businesses, they can lose sight of their business’s best characteristics. Those traits unique to your business are the ones that will set your listing apart from others and attract your ideal buyer.

It’s important to remember that each investor may be searching for different characteristics in a company they hope to buy. Some investors prioritize businesses poised for growth, while others are more concerned about reliable profit margins. Still others may already own a transportation business and are looking for ways to easily expand through acquisitions.

By determining your business’s unique characteristics, you’ll be closer to identifying your ideal buyer.

Issue #3: Closing the Deal

Potential buyers will want more than your word to convince them that your business is unique and worth the list price. You’ll need to have your documents in order and be able to show how they back up your projected business value. Such resources include tax documents, financial statements, employee records, customer contracts, and policies and procedures.

Instead of looking to other transportation businesses in order to guess at a target price for aspecial business, you can benefit from hiring a business broker, such as The Tenney Group, with transportation-industry experience and connections. These professionals can help you set realistic expectations of value, find your ideal buyer, and close the deal.