Valuing a Freight Trucking Company
The long-distance freight trucking industry, or line-haul trucking, is a $239 billion industry. Truckers buy routes and trucks to distribute goods across the country. The industry depends on manufacturing and retail/wholesale trade. Both of these are changing due to e-commerce. According to IBISWorld, total e-commerce revenue will grow 8.6% over the next five years to 2026. This is a positive sign for buyers looking to enter the industry. But, U.S. manufacturing is not growing as quickly due to increasing imports. Additionally, innovations in technology such as autonomous driving could change the industry structure. Labor shortages have increased the pay for many truck drivers, thinning profit margins.
These factors increase uncertainty in the industry. Some would argue that it is time to get out of the industry. Others would find it an excellent time to enter the industry. Whether you are looking to buy or sell a long-distance freight trucking business, it is important to understand the fair market value of a long-distance freight trucking company.
Many factors influence the value of a long-distance freight trucking company. At Peak Business Valuation, we work with many individuals looking to buy or sell a long-distance freight trucking company. Individuals begin by ordering a business valuation. During the valuation, we discuss key factors experts use to value a long-distance freight trucking company. Keep in mind that the factors discussed below are only a guide. For specific information about valuing a long-distance trucking company, schedule a free consultation with Peak Business Valuation, business appraiser.
Market Multiples for a Long-Distance Freight Trucking Company
The market multiples below represent Truckload and Less than Truckload long-distance freight trucking companies. Businesses that generated over $10.0 million in revenue were not used. The multiples selected include transactions from 2017 to 2021.
- SDE Multiple Average: 2.55x – 3.45x
- EBITDA Multiple Average: 3.55x – 4.01x
- REV Multiple Average: 0.52x – 0.95x
**Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation or its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.
Once you understand what your long-distance freight trucking company is worth, you can focus on increasing its value. It doesn’t matter whether you are growing, buying, or selling a long-distance freight trucking company. You will benefit from taking steps to increase the value of a long-distance freight trucking company. Below are a few ideas to help you get started. If you are looking for a more extensive valuation, schedule a free consultation with Peak Business Valuation, business appraiser.
Key Success Factors
Over many valuations, Peak Business Valuation, business appraiser, noticed several key success factors that boost the value of a long-distance freight trucking company. These factors will impact the value of a long-distance freight trucking company. For more ideas see Value Drivers for a Freight Trucking Company.
Have a High Profile
First, develop a high profile. Are you looking to increase sales and retention? Highly-concentrated sales decrease the value of a long-distance freight trucking company. As such, diversifying the clients of your long-distance freight trucking company is important. Having a strong brand presence will attract business from many sources.
Additionally, a recent struggle in the industry has been finding labor. Improve your brand presence by using social media and SEO. If you don’t have a website, build one. A strong brand presence attracts employees and clients. Doing so helps ensure your long-distance freight trucking company can operate efficiently.
Hire and Keep Great Drivers
In the current environment, even lousy truck drivers are hard to come by. According to an estimate from the American Trucking Associations, there is a shortage of over 80,000 truck drivers. The success of a long-distance freight trucking company depends on its drivers. As mentioned above, improving brand presence will help you hire more drivers. The following are a few ideas to help you keep drivers:
- Bonuses to accident-free drivers
- Retention bonuses
- Flexible scheduling
- Healthcare insurance
Currently, the cost of employing new truck drivers often exceeds the cost to keep drivers. Building a culture where drivers feel appreciated and well-compensated helps lower turnover rates. In the long run, this will decrease hiring costs.
Find your Niche
Picking a company’s niche can determine the type of trucks you buy, your location, and the type of products you haul. The main distinction in the industry is truckload freight (TL) and less-than-truckload freight (LTL). TL hauling accounts for any consignments weighing more than 10,000 pounds. According to IBISWorld, the breakdown of industry revenue is as follows:
- TL hauling – 64%
- LTL carriers – 33%
- Other Transportation Services – 3%
Other transportation services include logistic consultation services, warehousing, repacking, and other service offerings. This segment represents long-distance freight trucking companies’ creativity in finding a niche. Consider your long-distance freight trucking company’s strengths to determine potential niches. You may have unique opportunities that others do not. Picking a unique niche will increase a long-distance freight trucking company’s competitiveness.
There are many important factors to consider when valuing a long-distance freight trucking company. Whether you are looking to buy, sell, or grow a business, seek out a qualified business appraiser to provide you with a business valuation. Understanding the value of your long-distance freight trucking company can help you know how to increase it.
Peak Business Valuation values long-distance freight trucking companies across the country. We are happy to answer any questions you may have about the value of your long-distance freight trucking company. Reach out by scheduling your free consultation below.
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