Valuing a Towing Company
There are over 10,000 towing companies in the United States. According to IBIS World, less than 1 percent of these companies are major players. As such, the automobile towing industry is extremely fragmented. In recent years, the towing industry was able to generate $9.5 billion dollars in revenue. Moving forward, revenue is expected to grow to $10.1 billion dollars. Whether you are buying, expanding, or selling a towing business, the industry presents a high revenue growth opportunity. To succeed in the towing industry, it is crucial to understand the principles of valuing a towing company.
There are various factors that impact the value of a towing company. Receiving a business valuation for a towing company is the best way to learn more about these principles. Peak Business Valuation, business appraiser, provides business valuations for towing companies often. If you are looking to buy or sell an automobile towing company, we are happy to help you succeed!
Below, we discuss some key factors a business appraiser uses when valuing a towing company. Understand that these principles are only a guide. For further guidance about how to value a towing company, schedule a free consultation with Peak Business Valuation, business appraiser.
Market Multiples for a Towing Company
Below are average valuation multiples for a towing company. Valuation multiples help experts understand how your business compares to industry averages. Peak Business Valuation, business appraiser, uses multiples to value an automobile towing company.
- SDE Multiple Average Range: 2.32x – 3.18x
- EBITDA Multiple Average Range: 3.01x – 4.30x
- Revenue Multiple Average Range: 0.83x – 1.09x
**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.
How to Value a Towing Company
There are a variety of methods experts use to value a towing company. Often, cash flow multiples – SDE and EBITDA are most applicable. However, business appraisers receive extensive training to determine what methods and multiples are best for your automobile towing company.
Whether you are buying or selling a towing company, it is important to understand the value of your automobile towing company. The first step is to receive a business valuation. The following paragraphs highlight a few success factors an expert considers when valuing a towing company. See also, Value Drivers for Automobile Towing Companies, How to Value a Towing Company, and Valuation Multiples for a Towing Company. For more specific information on the value of a towing company, schedule a free consultation with Peak Business Valuation, business appraiser.
Key Success Factors
Peak Business Valuation, business appraiser, values automobile towing companies on a regular basis. With our guidance, you can understand the importance of the following success factors. These can help you maximize the value of a towing company.
Strategic Location
First, securing a strategic location is crucial for an automobile towing company. Towing companies should locate near areas with large vehicle counts. These locations have a higher rate of vehicle accidents, breakdowns, and parking infractions. As such, there is high demand for towing services in these areas. Additionally, being in these locations allows your automobile towing company to expedite services. This has a significant impact on the value of a towing company. Typically, these areas are found in dense populations such as major cities. When valuing a towing company, Peak Business Valuation, business appraiser, considers its location.
Towing Contracts
Next, entering into towing contracts is an effective way to increase sales revenue and profitability. The main towing contracts that automobile towing companies can pursue are:
Municipal Towing Contracts
- A municipal towing contract is an agreement between a towing company and a local or state government. Local and state governments have an ongoing need for towing services. By entering into a municipal contract, these parties will use your towing company to take care of any towing needs.
Private Industry Towing Contracts
- Private industry towing contracts include agreements with shopping malls, educational institutions, hotels, and other private entities. These entities typically enter into towing contracts to help enforce parking regulations.
Entering into towing contracts promotes steady cash flow at your towing company. Peak Business Valuation, business appraiser, may review towing contracts when discussing how to value a towing company.
Effective Marketing
Moreover, effective marketing is one of the most important success factors for an automobile towing company. Towing services are generally an urgent need. Consumers will not waste time when searching for a quality towing company. With proper marketing, your automobile towing company can be at the top of the charts. SEO can help you do this.
SEO is a marketing strategy that strengthens your automobile towing company’s online authority. This in turn increases the visibility of your towing company. In addition, you can create a Google My Business page. Doing so allows clients to leave reviews and ratings on your towing services. Positive reviews can lead to an increase in sales revenue. Peak may assess your marketing efforts as they determine the value of a towing company. Schedule a free consultation with Peak Business Valuation, business appraiser, today!
Multiple Revenue Streams
Finally, it is beneficial for a towing company to have multiple revenue streams. Many automobile towing companies struggle to become profitable. This is partly due to the towing industry’s lack of service variety. However, there are various ways to diversify revenue streams at a towing company. Below are a few options:
- Roadside assistance services
- Storage services
- Specialized towing services
- Partner with auto repair shops
Having multiple revenue streams is a profitable way to operate a towing company. Doing so allows you to cater to a larger market which in turn increases sales revenue. When valuing a towing company, Peak Business Valuation considers its revenue streams.
Summary
The above success factors can help increase the value of a towing company. However, there are many other factors to consider when valuing a towing company. Whether you are buying, expanding, or selling, it is crucial to understand how to value a towing company. The first step is to obtain a business valuation for an automobile towing company. As part of a valuation, experts help you understand the fair market value of an automobile towing company. With this information, you can grow and maximize the value of a towing company.
As a business appraiser, Peak Business Valuation provides business appraisals for automobile towing companies across the country. We are happy to answer any questions you have about valuing a towing company. Start today by scheduling a free consultation with Peak.
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