Tuesday, March 25, 2014

6 Tips to Maximize Your Bottom Line When Selling Your Business

Buyers and sellers of limousine businesses often find themselves on different pages, or even in different worlds, when discussing a particular limousine business for sale. When sellers do not understand how buyers think about and approach transactions, this can contribute to the disconnect. Here, then, are six tips that will help future sellers begin to get on a path to a more rewarding limousine business sale.

1. The fact that your business is breaking even or losing money may not be a deterrent for the right buyer. If your limousine business is struggling financially, do not make assumptions about its ability to attract motivated buyers. To the right buyer, your bottom line may mean very little. A strategic buyer will likely absorb your accounts and eliminate duplicate overhead, thereby making your current financial performance secondary to what the combined operations can do together.

2. A buyer will often pay more if you can give him or her the ability to justify it. It is very common for buyers and sellers of limousine businesses to be miles apart when assessing the value of a particular limousine business. This gap often exists because the buyer doesn’t understand the complete financial impact associated with acquiring the limousine business. Of course, there is also a possibility that the seller does not completely understand fair market value for limousine businesses. Being able to effectively demonstrate the new monthly cash flow created from the deal, the increased value of the buyer’s existing transportation
business, and the time required for the buyer to pay for the entire transaction can greatly expand
the buyer’s appetite for getting the deal done.

3. A buyer has both long-term and short-term goals that will need to be addressed through the transaction. This can benefit the seller. A buyer wants to acquire your limousine business for the least amount of money possible. However, sellers need to understand that strategic buyers have short-term financial goals that can take precedence over the sale price of the transaction. When a deal is structured in a way that allows the buyer of your limousine business to address immediate cash flow needs, it is easier for buyers to accommodate and assist the seller in achieving his or her overall transaction goals.

For example, The Tenney Group was recently involved in a transaction with a chauffeured transportation business in the Southeast. The buyer of the business owned an existing chauffeured transportation business in a 30-mile radius that was experiencing severe cash flow issues. The buying company was considering closing their doors if they did not get an influx of at least $600,000 in new sales within a short period of time.

Because my client's business location and monthly revenue had the unique ability to address the buyer’s very specific problem, he was able to secure a much higher sale price than he likely would have under different circumstances. The buyer could justify the premium purchase price because it would stop their bleeding immediately, and it was much cheaper than the next best alternative—closing the doors and accepting a complete loss on what had they had already invested in the satellite operation.

4. Many buyers misunderstand or underestimate what the acquisition of your limousine business can do for them. Don’t assume another limousine or transportation-related business owner understands and can identify the value associated with acquiring your limousine business. If another limousine business owner has experience with strategic acquisitions, his experience may not apply, specifically, to acquiring your
limousine business. So relying solely on the buyer is a mistake. And do not assume that you are equipped
to effectively communicate the financial benefits of acquiring your limousine business.

This is not a knock on anybody. It is just a fact. Buyers are not likely to accept or trust a seller's estimation of his own company's value—no matter how compelling his case. Business value in the transportation industry is widely misunderstood. Without a credible third party intermediary providing financial
evidence and historical industry transaction data to support an acquisition, sellers limit what they can accomplish at the closing table.

5. A buyer for your limousine business may come from anywhere. In all of The Tenney Group’s completed deals over the past 36 months, the average distance between buyer and seller was 400 miles. This is the reality of the buying market. Sellers need to understand this so they can be properly positioned to attract the maximum exposure for their limousine businesses. Any transportation related business in America, for whatever reason, could have a strategic interest in buying your limousine business. Do not limit your options.

6. A buyer may not know he or she is a buyer yet.The best buyer for your limousine business could be an existing transportation business that may currently have no interest in buying your business, or any other limousine business for that matter. They may be scared to death of acquiring another business. However, with time, persistence, education, and coaching, they can be converted into confident buyers who can justify paying you the highest sale price. Make sure your sale effort proactively addresses buyers who do not currently identify themselves as buyers.

Reprinted from March 2013

Charles Tenney is Senior Managing Partner of  The Tenney Group, a firm that has specialized in
business sales and acquisitions 
exclusively in the
transportation industry for 40 years. 
Charles is also a former National Limousine Association President.
can contact The Tenney Group at 877.642.8033 
or stenney@thetenneygroup.com.


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