If a transportation business owner makes the decision to place his company for sale, researching the appropriate value is an important and smart business move. Often times, an owner will set a price that is unrealistic for his company. He will then be very disappointed when he doesn’t receive any offers. He may blame it on the current economic situations and decide to continue holding that price until he gets a buyer. However, this decision can cost the seller time and money.
In order to arrive at a proper figure for the transportation company, a number of factors must be assessed, including the company’s sales and earnings. Their performance and outlook in the current market are also important. Their number of personnel and net book value will also be a factor. While financial aspects will be evaluated, the company’s reputation and standing in the community will also be a factor.
Many sellers may research their company’s market value. By looking at what similar businesses in their area are going for, the seller can set the market value based on that. However, this method can often be difficult for specialty companies, such as a transportation business. This is because it may be hard to find a company that offers similar services.
There can be a number of other methods to reach an appropriate value of your transportation company. In the balance sheet value, either an adjusted book value, book value, or liquidation value methods could be used.
Some sellers may choose to look at a balance sheet value. There are a number of methods that make up a balance sheet value. The first one being an adjusted book value. In this method, the seller would research how much it would cost to replace all of his assets in their present condition. He would then revise the asset’s book value to reflect these figures. By using an adjusted book value method, the seller must counterbalance the total value against the liabilities.
There is also the book value method, which will look at figures from the company’s financial past, as devalued at the time of the sale. However, this method shouldn’t be used for sellers that have depreciated the company’s assets too much to gain any type of tax benefits.
Sellers could also look to the liquidation value method. This method determines a figure based on if all assets were to be sold individually. Since this figure will not factor in the company’s intrinsic value, it can often be lower.
Another way to reach a value would be by an income approach. This approach, considering several different factors, uses a multiplier, and capitalization and discount rate to consider the company’s earnings. There are a number of income approach methods to use. In each method, a value is reached by using the level of earnings with a conversion factor that will interpret the earnings into a company’s worth.
With this method, the seller must select the appropriate value of earnings. By using after-tax or before tax, and cash flow or discretionary options, the seller must determine how to match it with the correct conversion factors. Within these factors, the discount rate, multiplier, or cap rate can be crucial to ensure an appropriate value is reached.
Whatever approach the seller decides to take, it would be wise to hire an expert in that industry to help with the valuation of the business. There are many different methods and options available to reach the appropriate value. This expert would be available to answer any types of questions the seller may have pertaining to the sales process and the valuation of the company. Choosing a professional that has years of expertise in your particular industry will be the best way to go. By just having a general expert, they may not realize the full potential of your business.
Some sellers look to the internet to reach a value. By visiting websites that offer a general valuation of a business, a seller may reach a value, but it will probably not be the correct one. It will most likely be a general idea of what could be a possible value.
While a transportation business seller may look at several different methods to arrive at a final valuation of his company, it is important to get the professional opinion of an industry expert. Often times the sales process goes a lot smoother, quicker, and more fairly when a third party expert is involved.