If you are considering selling your limousine or bus company, there are a few things you must know before you close a deal. Those selling a limousine business or bus company are often less experienced than the buyers, and this experience gap can lead to you sellers being taken advantage of. So before you sell, consider these six things:
It is important that you trust the person you are selling to. As the deal moves closer to closing and the appeal of finally having money in your bank account grows stronger, you may choose to overlook warning signs of an untrustworthy buyer. As in most situations, however, it is best to trust your instincts. No matter how appealing the money seems, if you care about your business, you shouldn’t sell to a buyer that you don’t trust. An untrustworthy buyer may make promises in the deal negotiation stages and then break these promises weeks later. They could, for example, quickly fire all of your current employees and neglect to pay millions of dollars in liabilities. And even if these were stipulations in your deal contract, in order to prosecute the buyer for breaking their promises, you’ll probably have to take them to court, which is an extremely stressful and expensive undertaking. So if you feel uneasy about the buyer for any reason, walk away from the deal.
You need to realize that because you have a strong attachment to your company, your asking price may not be realistic. You may be basing your valuation off of what your company was worth when you purchased it, or you may be listening to a competitor who claims to have gotten a certain price. Unfortunately, your company is probably not worth what it was at the peak of the economy, so it’s a good idea to avoid wasting time and money by listing your company at an unrealistic price. Instead, get a professional third party company valuation that will factor in assets, revenue streams, cash flow, history, and business potential. The professional will offer you an accurate valuation of what your company is worth in the current market, and if you are unable to accept that valuation, which is honest and unbiased, then you may not want to sell at all. If you are looking for a better valuation price, you need to realize that it might never come and that the longer you wait, the more potential your business has to lower in value.
Although you may have a buyer’s first offer, this does not guarantee that you will actually get this price. In fact, there are often minoir events that occur during the sales process that change the buyer’s offer for better or worse. The buyer’s first offering price is usually not the price that is decided upon in the final deal. The final price is usually lower for a number of reasons: For example, the price could change because you did not allow the buyer to look at confidential data prior to signing a Letter of Intent. A LOI allows the buyer to see information such as customer names, important meetings with clients and employees, pricing, flaws in the system, or pending legalities, all of which could be potential business risks. Once the LOI is signed, the buyer may become aware of some negative aspect that may change his price. So don’t expect to receive the first offer because over the course of the deal, eye-opening details may change this price significantly.
Most of those selling a transportation business have the misconception that after their liabilities are paid off, their company will be worth the combined value of the market value of their assets and any future cash potential of their company. In reality, after your assets are paid off, your company is worth only one of these two, whichever is higher. Traditionally, transportation companies would be worth their future cash flow. However, with the current, recessed market, valuations are more likely to be based off of the market value of the company’s assets. Therefore, it is best not to confuse your asset liquidation values with the value of your company.
You may also be considering “stock transaction.” This occurs when you sell your stock or assets of your company for cash. However, you should be aware that in many cases, stock transaction taxes are greater than if you sell the company. Because of the many pitfalls of assessing value and the potentially disastrous mistakes that can be made, it is usually best to consult an experienced business broker.
Including experienced certified public accountants (CPA) and attorneys in your deal will help alleviate some of your stress. They are knowledgeable about the tax implications and legalities of a sales transaction in the transportation industry. However, choose your professionals carefully. Although you may feel comfortable hiring a local attorney with whom you have previously done business, you may want to consider their level of experience in the transportation industry. They may know more about the subject then you and sound more competent, but in reality,they may only have experience with one sales transaction like yours. Ask them to refer you to at least five of their previous clients for whom they have closed deals. Be sure to request information on their own personal clients, not their firm’s or partner’s clients. If they can’t name at least five, it would be in your best interest to find someone more experienced. Also, hiring an experienced third party intermediary or transportation business broker, who has extensive knowledge of potential buyers can increase your chances of a sale. They can also help in the valuation and negotiation process. To increase your chances of a successful business sale, surround your deal with experienced professionals.
Many owners of transportation businesses continue to work for the company after it has been sold. You may be planning on selling the company but still wish to remain an employee, but don’t be surprised if you are not a happy employee. The new owners may implement changes that you feel refute the procedures you worked so hard to establish. You may have successfully managed your business for years and feel offended by the new owner’s changes. You may also find that, after being an owner for years, it is difficult to return to the lower status of a regular employee. While some owners may happily continue on as an employee, the great majority do not. Therefore, don’t structure your selling price on the idea that you will remain an employee there.
While this list does cover several possible road-blocks in the selling process, there are still many more that could occur. It is best to surround yourself with professionals who have experience in the transportation industry and with the sales process. The Tenney Group offers a free initial consultation and will use their 37 years of experience to anticipate and react to common complications that arise.