How in the world do you put a value on your brokerage? Customers? Relationships? Processes? It can be confusing. That's why we reached out to Stephen Bramlett at Molliter Advisory for his expert opinion on valuing a brokerage.
The trucking business values hard assets but, when you are a freight broker, it is your service that holds the key to selling the business that reflects your personal investment. Buyers will be cautious that they aren’t buying a basket of relationships and expertise that walk out the door when the deal closes.
All businesses are valued based on the cash that can be expected to be generated in the future. This value is supported by assets, employees, contracts, systems and management. If you want to sell your company later, you need to begin building the transferability of those assets now.
The primary assets that support a freight brokerage value are:
- Trucking Company Relationships and Contracts
- Use a Contact Relationship Management system.
- Make sure that your contracts can be easily assigned to a buyer.
- Shippers Relationship and Contracts.
- Same as above, only more important!
- Information Technology
- Make sure you own the information you put into your systems; you don’t want to find out that it can’t be transferred to the buyer.
- Check to see if larger companies routinely use the same software as you.
- Trained and Knowledgeable Workforce
- Employees can make or break a deal. Speak with an attorney about the best way to secure that one or more employees can’t hold your sale hostage with demands on you or your buyer.
- Always keep an organization chart current along with the written skills for each job.
- Invest in formal training that shows your employees have been part of your investment.
- Dedicated Management Team
- Don’t be a cult of personality; make sure your managers are empowered to lead.
- Buyers will need to determine what roles they will modify, make sure your managers are secure in their roles and demonstrate that they have the most value when they work together.
Potential buyers will look at your earnings track record and determine the quality of these "soft" items in developing a bid. Perhaps one of the most difficult decisions is trying to find the right people to consult with when it’s time to create an exit strategy. You can count on many of those you ask to readily proclaim this is their field. At best, most will be exaggerating. Be careful, ask questions and check references. This is a field where you can pay a great deal only to get poor results.
Stephen Bramlett is President of Molliter Advisory, LLC. a small firm that works with small-to-medium sized companies to value, market, negotiate and bring to close the transactions of their clients. Their experience is mostly in trucking, their deal sizes range from $500K to $20 million.