State of the Industry: Is Now a Good Time to Sell?
With an economic recession pending, many business owners in our industry are asking Charles Tenney & Associates, “Is now a good time to sell my business?”
Uncertainty paralyzes action and eliminates opportunities. I'd like to use this month's issue to share what we are seeing in the buy-sell segment of our industry, so that you may make educated decisions about your future.
First, if your business produces more than $5,000,000 sales annually, yes. Now could be a very good time to sell. Charles Tenney & Associates is working with a group of buyers who are, in some cases, prepared to pay cash and the highest multiple we have seen in this industry since 1999. If you fit this profile, we probably need to talk.
For small to mid-size businesses, we need to consider additional factors to answer that question.
1) Buying Interest/Activity in Chauffeured Transportation Over the past 3-12 months, Charles Tenney & Associates has seen a steady level of interest from investors outside of our industry. As the national economy fluctuates, chauffeured transportation continues to attract new entrepreneurs and business development talent from outside our industry. Further, existing operators often become more proactive buyers during slow economic seasons. An alternative to organic growth, acquisitions are often used by existing transportation businesses as a strategy to increase fleet utilization/efficiencies and profits.
2) The Quality of Offers for Chauffeured Transportation Businesses: The market is full of both existing operators and investors from outside our industry who are willing to pay “fair market value” for chauffeured transportation businesses. The more flexible you are in deal structuring, and the more clearly you can substantiate the financial performance of your business, the more lucrative an offer will likely be.
3) The Quality of the Product: This has nothing to do with the history of your business or the blood sweat and tears you have shed on its behalf. What state is your business in today? Your financials, staff, existing work flows/processes? How stable and diverse are your accounts? How are you getting your business (web/referral/repeat/etc.)? Does your business present a unique strategic advantage to an existing transportation company? Where are you located? These are just a few elements a buyer will consider when deciding how to value the quality of your business. If you feel confident in the quality of your product, this could be a good time to sell.
4) Expectations & Proper Motivation What is motivating you to sell your business and what will you do after your sale is complete? If you can not answer these questions, selling may be premature.
Many business owners can not answer these questions because they do not have clear expectations about exiting this industry. They do not know what their business is worth, so they can not formulate realistic expectations about proceeds from a business sale or how that might impact their future. A business valuation can help you decide if its time to get on with your life, or time to make adjustments so you can improve the outcome of a future business sale.
5) Conclusion History has demonstrated to our industry that recessions can certainly affect the value of chauffeured transportation businesses. Business owners affected most are those that do not prepare properly for serious economic challenges and do not respond accordingly when they arrive. But history has also demonstrated that recessions do not significantly affect the overall appetite for investing into the chauffeured transportation industry or the quality of offers from business buyers.
The current economic climate alone should not dictate when you sell your business. The quality of your business today (as a financial asset) and your passion and energy to improve that asset should tell you more about whether or not this is a good time to sell your business.
Find out what the value of your business is in the current market. Then evaluate your own heart and passion for this industry as well as your goals/values outside of chauffeured transportation? Follow those steps and answer those questions, and you should be able to make an educated decision about whether or not this is a good time to sell your business.
To speak to a CTA consultant confidentially about your considerations for selling, please submit the contact form below.
