Freight Trucking Company Valuation Multiples
The freight trucking industry supports the most important distribution pipelines of our economy. As such, trucking businesses are extremely valuable. If you want to buy, grow, or sell a freight trucking company, understanding its worth on today’s market is critical. Valuation multiples are pivotal tools for determining a business’s value. These financial ratios provide a value estimate based on the company’s financial standing and recent market trends. However, freight trucking company valuation multiples have many limitations. For the most accurate results, it is best to obtain a professional business valuation.
In this article, we discuss the most frequently used freight trucking company valuation multiples. Keep in mind that while multiples offer helpful estimates, they do not account for the specific conditions of every business. If you need a credible and precise business valuation, consider connecting with a certified business appraiser.
Peak Business Valuation is a reputable business appraiser that works with freight trucking companies throughout the country. We can help you with a timely and accurate freight trucking company valuation! In addition, we are available to discuss any questions you may have about the valuation process. Get started by scheduling your free consultation below!
What Are Freight Trucking Company Valuation Multiples?
Valuation multiples are financial ratios used to estimate the fair market value of a business. They represent the price a buyer might pay for a freight trucking company in relation to specific financial performance indicators. Business appraisers determine appropriate multiples by analyzing recent transactions of similar freight trucking companies. For additional information, check out Valuation Multiples for a Freight Trucking Company.
Common Freight Trucking Company Valuation Multiples
At Peak Business Valuation, our valuation experts typically use SDE, EBITDA, and revenue multiples when conducting freight trucking company valuations. Each multiple offers a different perspective on the business’s value. To ensure an accurate appraisal, we may use a combination of these multiples. Below, we break down each multiple and highlight the range typically seen in the freight trucking industry.
SDE Multiples for a Freight Trucking Company
Seller’s Discretionary Earnings (SDE) represent the total financial benefit available to a single business owner. To determine SDE, valuation experts add certain expenses back to the company’s net income. Common addbacks include owner compensation, one-time costs, and discretionary spending. SDE multiples are most appropriate for small to mid-sized freight trucking businesses.
Formula: Business Value = SDE × Multiple
Range: Freight trucking companies often sell in the range of 2.44x to 3.45x SDE.
EBITDA Multiples for a Freight Trucking Company
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) measure income generated solely from trucking operations. This metric is especially helpful for comparing profitability across similar freight trucking businesses. EBITDA multiples are generally used for larger or more established freight trucking companies.
Formula: Business Value = EBITDA × Multiple
Range: EBITDA multiples for freight trucking companies generally fall between 3.10x and 3.93x EBITDA.
Revenue Multiples for a Freight Trucking Company
Revenue refers to the gross income generated from freight services over a 12-month period. Since revenue multiples do not account for profitability, they are primarily used when financial data is limited or in industries with slim margins. In most cases, business appraisers prioritize cash flow-based multiples like SDE and EBITDA.
Formula: Business Value = Revenue × Multiple
Range: Revenue multiples for freight trucking companies can range from 0.26x and 0.76x revenue.
At Peak Business Valuation, we regularly apply these multiples when valuing freight trucking businesses. If you have questions about freight trucking company valuation multiples or need a comprehensive valuation, we are happy to help! You can schedule a free consultation by clicking the link below.
How to Value a Freight Trucking Company Using Multiples
Valuing a freight trucking company using multiples often includes additional analyses of qualitative and operational factors. Some key considerations include service area stability, fleet utilization, fuel cost exposure, and customer concentration, etc… Business appraisers may also apply weighted averages to account for financial irregularities. See How to Value a Trucking Company to learn more about the valuation process.
Rules of Thumb for Freight Trucking Companies
Rule-of-thumb valuation methods like SDE, EBITDA, and revenue multiples provide quick and easy valuations. However, using these simplified methods may not provide accurate results since every business is unique. For a reliable business valuation it is best to consult a qualified business appraiser. Reach out to Peak Business Valuation with any questions you may have!
Factors Affecting Freight Trucking Company Valuation Multiples
Many factors can influence the valuation multiples used to value a freight trucking company. Understanding these variables can help business owners take strategic actions to increase the business’s value. Here are a few important elements to consider:
- Fuel Efficiency and Management: Freight companies that monitor and optimize fuel usage can enhance profit margins and operational efficiency. This supports stronger performance and higher valuation multiples.
- Driver Retention: High employee turnover is a common challenge in the freight trucking industry. Companies that maintain strong driver relationships and low turnover rates are generally more valuable.
- Regulatory Compliance: Companies with a strong track record of safety, DOT compliance, and up-to-date certifications reduce risk. This is an appealing attribute to buyers and investors.
- Fleet Age and Maintenance: Acquiring and maintaining a high-quality, modern fleet can reduce repair costs and improve reliability. This promotes favorable valuation multiples.
For additional insights, read Value Drivers for a Freight Trucking Company.
Conclusion
If you need a quick estimate of a freight trucking company’s fair market value, valuation multiples are a helpful guide. However, these tools can not account for the unique details of every business. As such, freight trucking company valuation multiples may provide unreliable value estimates. The most effective way to determine a trucking business’s true value is to obtain a professional business valuation. Valuation experts can assess the company’s financial performance, strengths, weaknesses, risks, opportunities, and more. These insights enable informed decision-making whether you are buying, expanding, or selling a freight trucking business.
As a business appraiser, Peak Business Valuation values freight trucking companies throughout the United States. We can help you understand your business’s fair market value and answer any questions you may have. Start today by scheduling a free consultation with Peak Business Valuation below!
Read Trucking Company Valuations and Valuing a Freight Trucking Company for more information.
