Valuing a Courier and Local Delivery Service Company
Courier and local delivery service companies have exploded as of late! According to IBISWorld, this industry expects to grow at an annual rate of 5% per year for the next 5 years. COVID-19 accelerated the growth of the courier and local delivery service industry. As more people stayed indoors, they did more online shopping. As people did more online shopping, shipping needs increased. This led to higher demand for different couriers and local delivery companies. The two largest companies in this industry are FedEx and the United Parcel Service. (UPS) As measured by market share, these two companies make up 76.60% of the market. The other 23.4% of the market consists of smaller companies. As the industry continues to change, it is important to understand how an expert is valuing a courier and local delivery service company.
Valuing a Courier and Local Delivery Company
Knowing the fair market value is key to selling or buying a delivery service company. Peak Business Valuation, business appraiser Utah, is here to help you understand how to value a courier and local delivery service business!
There are many internal and external factors that impact the value of a courier and local delivery service company. As a certified business appraiser, Peak Business Valuation helps many individuals who are looking to buy or sell a business. We work with many people looking to buy or sell a courier or local delivery service company. The first step to buying or selling a business is to obtain a business valuation. A business valuation engagement discusses key metrics used in valuing courier and local delivery service companies. The factors below are only guidelines. Individual circumstances will result in different multiples. These may stray from the “average company” multiples we outline below. For more information about valuing a courier and local delivery service company, schedule your free consultation call with Peak Business Valuation, business appraiser Utah.
Market Multiples for a Courier and Local Delivery Service Company
- EBITDA Multiple Average: 3.48x – 4.05x
- SDE Multiple Average: 2.76x – 3.32x
- REV Multiple Average: 0.57x – 0.88x
** Disclaimer: These multiples are for educational purposes only. Multiples are based on companies with revenues between $1-$10 million. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.
Richard Branson, a famous English entrepreneur, author, investor, and Shark on Shark Tank, said, “Never take your eyes off the cash flow because it’s the lifeblood of business.” This saying holds true when valuing courier and local delivery service companies. The higher the cash flow margins a company has, generally the higher the company’s value. This industry seems to transact on cash flow multiples such as EBITDA and SDE, rather than a revenue multiple.
However, many companies in the courier and local delivery service industry have remarkably competitive cost structures. As such, a revenue multiple is becoming more applicable. As always, speak with a professional, like Peak Business Valuation, to see what multiples are most applicable to your business.
The key to increasing the value of a delivery service is to first increase understanding. Once you understand how to value a courier and local delivery service company, you can begin taking steps to increase its value. If you are searching for an in-depth business valuation for a courier and local delivery service company, schedule a free consultation with Peak Business Valuation, business appraiser Utah.
Key Success Factors
A business is not valued based purely on a multiple such as an EBITDA, SDE, or REV multiple. Instead, there are various approaches a valuation expert uses to determine the value of a business. There are many qualitative and quantitative factors a professional appraiser considers. Some of these aspects include what Peak Business Valuation refers to as “Key Success Factors.” A key success factor is a metric that significantly impacts the value of a business. Below we mention some of the key success factors that impact the value of a local delivery service company. For additional success factors see “Value Drivers for a Courier or Delivery Company.”
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. This can seriously affect the value of the business. As certified appraisers, Peak Business Valuation provides machinery and equipment appraisals for trucks and equipment. If you are interested in understanding more about machinery and equipment appraisals, reach out to Peak Business Valuation, business appraiser Utah, to learn more!
Employees and Drivers
Last, 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. A courier or local delivery service company lacking employees will cause the performance and value of the business to suffer. Most couriers and local delivery service companies have a hard time retaining their employees. This is especially true around the holidays. This is often due to the demanding nature of the job. A company that has high employee retention will help increase the value of your courier and local delivery service company.
Within every industry, there are certain factors that impact the value of a business. An individual can gain an idea of what their business is worth by using multiples. However, there are many other considerations when valuing a courier or local delivery service company. If you are looking to buy, sell, or grow a business, you have come to the right place. Let Peak Business Valuation, business appraiser Utah, help you to understand the value of a courier or local delivery service company.
Peak Business Valuation values courier and local delivery service companies across the country. We would like to answer any questions you may have about how to value a courier and local delivery service company. You can reach out to us at any time by scheduling your free consultation call below. We look forward to hearing from you!
For more information, check out “Value Drivers for a Courier or Delivery Service Company.” As well as, “Valuation Multiples for Couriers and Local Delivery Service Companies.”
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