Value Drivers for a Courier or Delivery Company

Value Drivers for a Courier or Delivery Company

Courier and local delivery companies continue to sell at an extraordinary rate! The expected growth in this industry sector over the next five years is tremendous. With increased online shopping, e-commerce, and even grocery delivery, the demand for couriers and local delivery service companies is increasing. As the industry continues to change, it is important to understand how to value a courier and local delivery service company. More importantly, it is important to understand what drives the value of a courier and local delivery service company.

Are you thinking about buying or selling a courier or local delivery service company? If so, it is vital to understand the value drivers for this industry. Understanding these value drivers will help you to better evaluate the business. And, it will help you understand how a valuation expert determines its value.  For more information, schedule your free consultation!

Value Drivers for a Courier or Delivery Company

A valuation expert does not value a business purely on a multiple such as an EBITDA, SDE, or REV multiple. Additionally, not only is a cash flow calculation used. There are different approaches a valuation expert uses to determine the value of a business. There are many qualitative and quantitative factors a professional appraiser considers. These aspects include what Peak Business Valuation, business appraiser Utah, refers to as value drivers. A value driver is a metric that significantly impacts the value of a business. Below we mention some of the value drivers that impact the value of a local delivery service company. For more information, see ”Valuing a Courier and Local Delivery Service Company.” As well as, “Valuation Multiples for Couriers and Local Delivery Companies.”

Current Contracts

First, what are the current contract details? (More specifically for FedEx and UPS routes) The largest players in the delivery service industry are FedEx and UPS. We see individuals looking to purchase or sell a FedEx route almost weekly! As such Peak Business Valuation values FedEx routes regularly. One of the key components an expert considers in the valuation is contracts with FedEx. Each FedEx route will have a contract that determines the base rate for the number of stops on each route. If the flat rate is higher for one contract versus another, then that company will likely have higher revenue. There are other details to consider within contracts. But, the specifics can play a major role in determining the value of a courier or delivery service company.

Machinery and Equipment

Next, the courier and local delivery service industry is heavily dependent on machinery and equipment. This equipment usually is in the form of trucks. If the trucks are not in good working condition, then the company will be operating inefficiently. As such, this can affect the value of the business. As certified appraisers, Peak Business Valuation provides machinery and equipment appraisals for trucks and equipment. If you want to understand more about machinery and equipment appraisals, reach out to Peak Business Valuation, business appraiser Utah.

Employees and Drivers

One of the most important aspects of a courier and local delivery company is the company’s employees. A company’s employees are vital to its operational success. If a courier or local delivery service company lacks employees, then it will cause the performance and value of the business to suffer. Most couriers and local delivery service companies have a hard time retaining employees. This is especially true around the holidays. And, often due to the demanding nature of the job. A company that has high employee retention will help increase the value of a courier and local delivery service company.

Organizational Setup

A courier and local delivery service company is one of the most sought-after businesses. Many times, a buyer is looking to purchase a courier/local delivery service company because of the opportunity to run the company as an absentee, or semi-absentee owner. As such, a business that can operate without an active owner will demand a higher price. As such, this is a valuable way to increase the value of your business. If you can have the necessary procedures in place so that anyone can step in and own the business without actually having to work in the business, the value of your courier or local delivery service company will increase. For more information see, “Reducing Owner Dependence.”

Speed/Communication

Last, the courier and local delivery service industry is largely focused on speed. The speed at which your company can deliver different packages will help increase your value. Increasing the speed of deliveries helps increase the value of your courier or local delivery service company. But also increases the satisfaction of customers. A satisfied customer will share what they liked with others. Likewise, a poor experience will make a customer even more likely to share their bad experience with others. Delivering all products in a quick and timely manner will increase the value of your courier and local delivery service company. 

Summary 

If you are interested in entering the courier and local delivery service industry, you are not alone! There are many buyers looking to enter this industry. Peak Business Valuation, business appraiser Utah, works with individuals looking to buy or sell a courier and local delivery service company every week! The most popular businesses right now within this industry are FedEx routes. Peak Business Valuation would like to help you understand what drives the value for a courier or local delivery service company. 

For more information see Valuing a Courier or Local Delivery Service. And Valuation Multiples for Couriers and Local Delivery Companies.

Schedule your free consultation call to chat with a member of our team at Peak Business Valuation, business appraiser Utah. We would be more than happy to go over any questions you may have!

 

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