The vast majority of limousine business owners who approach The Tenney Group about a possible sale are going through the process for the first time. Successful limousine business sales begin with education. As limousine business owners become more educated about their future business sale, they increase their chances of a successful outcome exponentially. The following bullet points address some of the basics of what The Tenney Group likes to call “Selling a Limousine Business 101.” Part 1 of 4.
1. Valuation Rules of Thumb
Limousine business owners commonly seek out a quick “rule of thumb” to understand the value of their own business. Unfortunately, rules of thumb rarely apply to this industry. Relying on rules of thumb can be very misleading and very destructive if major financial decisions are based upon them. Depending on the size, profitability, location, and buyer of your business, a variety of valuation methods may be used to calculate the “fair market value” for your business. Most likely, a combination of valuation methods will be applied and weighted accordingly to calculate the fair market value of your limousine business. When using an earnings valuation method, Seller’s Discretionary Earnings (SDE) and Earnings Before Interest Taxes Depreciation & Amortization (EBITDA) are the most common formulas applied.
2. What is goodwill?
Goodwill is seen as an intangible asset on the balance sheet because it is not a physical asset such as a vehicle or a building. Goodwill typically reflects the value of intangible assets such as a strong brand name, quality customer relations, low employee turnover, and patents or proprietary technology. In a business sale, goodwill makes up the portion of the sale price that is not attributed to tangible assets.
3. Market Research & Web Listings.
It is common for business owners who are thinking about selling their limousine businesses to go to the internet and research similar sized limousine companies for sale to determine the “possible” value of their business. Here is the problem with that. Many general business brokers across the country have no idea what they are doing when they attempt to sell limousine businesses. The Tenney Group knows this because we often co-broker with them once they discover we can help them. In addition to unintentionally doing a disservice to their clients, they also mislead the entire limousine business owner community. Though we are industry specialists, you should also be careful when viewing The Tenney Group’s website. We are only providing a general description of the business for sale. Without telling you the whole story of the business or the terms that may be available, it is impossible to determine at a glance how the asking price for the business is calculated and justified. There is nothing wrong with observing. However, what you observe may have little to no application to the value of your unique limousine business.
4. The right time to sell
The Tenney Group is not in the business of motivating business owners to sell. We are passionate about delivering a superior service when the time to sell is right for our clients. If you don’t make an effort to educate yourself about your future sale, you will never know when it is “your time.” The sale price for your business is only one factor that will determine whether or not your business sale will be a success. Business owners need to educate themselves on the range of offers their business may attract while understanding what will actually go into their pockets at the closing table. The factors that could influence the “net” result of your business sale could include: the health of your balance sheet, current and future tax implications, effects of national healthcare, increased regulation in the transportation industry, industry and technology developments, future capital expenditures, the deal structure of your business sale, etc. Get the facts surrounding your sale so you can make intelligent decisions for your future and be in position to identify “your time” and “your price.”