Valuation is always a topic of great interest to transportation company owners. Companies today have made the difficult decisions necessary to operate successfully through the Great Recession. While demand has increased in recent years, challenges persist due to regulation, driver demand and fluctuating fuel costs. How has the company’s value been impacted by the challenges faced during the Great Recession? And most importantly to business owners: how to build a higher value for my business?
Here's why you should care about an accurate valuation of your business, along with three specific methods for measuring it:
- Mergers and Acquisitions
- Succession Planning
- Growth and Development
Buyers and sellers of trucking companies must consider a long list of factors when determining value. Some of these factors take into account the financial condition of the company – think of these as the "quantitative" factors. But several important factors that affect value (such as driver quality, customer relationships and management experience) cannot easily be measured.
These "qualitative" factors often separate the most valuable companies from the pack.
The trucking industry for example in the U.S. comprises both local and long-distance freight transportation. Long distance trucking makes up approximately 85% of the industry, while local trucking encompasses the remaining 15%.
We are taking the U.S. as an example of trucking industry.
Trucking companies suffered declining revenues during the recent recession due to decreased consumer demand and increasing costs. Between 2008 and 2013, long-distance revenues declined an average of 1.5% annually, local trucking revenues declined even more sharply, at 2.7%.
This decline is expected to turn around as the economy recovers, with analysts predicting long-distance trucking revenue increases of 1.3% in 2013.
The U.S. trucking industry is highly fragmented and includes almost 230,000 for-hire carriers and more than 280,000 private carriers, with the top 50 companies generating approximately 40% of total industry revenue.