Trucking-industry-big-rig

While improving the top and bottom lines will always be front of mind for trucking company owners, growing the value of the business is just as critical. Stronger valuations can garner more lucrative offers for companies looking to sell and deliver a better return for those focused on succession planning.

To give you tips on growing the value of your trucking company, we spoke with a pair of experts on the matter:

Q: Where is the low-hanging fruit when it comes to a trucking company growing its value?

Roush: Hands down, the biggest opportunity for a trucking company to increase its value is by improving its margins through the active management of the company's revenue model or freight network. Carriers tend to be cost-control focused as those efforts are tangible and relatively straight forward.

Investing in freight network engineering has helped our clients improve their rate per total mile by .05 to .10 in the first year. This translates to a significant reduction in operating ratio (OR) for a carrier with a 95 OR. When you apply a purchase multiple to this profit improvement, the value is almost incalculable.

Q: How does equipment upkeep and purchasing factor into a company's value, and how should a company address it?

Manchir: Take a balanced approach toward investing in capital equipment. If you invest too little in upkeep and purchasing, you'll limit the growth potential of your business, leaving you unable to capitalize on customer demand and new sales opportunities. Conversely, it is possible to over-invest during a period of reduced customer demand. Owners that have a typical annual investment level in equipment purchases would be wise to reassess their investment levels on a quarterly - or even a monthly - basis.

Q: Should companies consider acquisition as a way to grow value?

Manchir: Growing your business through acquisition offers great return potential, but owners should proceed with caution — especially if they are inexperienced in completing these kinds of transactions. Even if the right price is paid for an acquisition, a business owner and his advisors will have to invest time and expense to execute on the plan. Owners should consider how much time and attention they can shift away from their core business operations to help shepherd the acquisition through during an integration period.

Q: Does the economic climate factor into the steps a company owner should take to grow value?

Roush: What is possible is constrained by the economic climate at any given time. For instance, rate increases have been difficult during the past two years, and many carriers have focused on recapitalizing their fleets and driving down operating costs. The analysts and pundits agree that capacity and demand will be more closely aligned and price increases will be possible as we move into the second half of 2017. We recommend that carriers strive for strategic, rather than tactical or opportunistic, increases.

Manchir: The economic climate will go through cycles — but the proper approaches to take when operating your business will remain constant. Even if an owner focuses on making a single improvement at a time, their efforts can be rewarded. That reward might be immediate (with improved profitability) or long term (with greater preparedness for sale). I encourage owners to continue to work on their business to seek out these areas for improvement.

This article is provided for informational purposes only and is not intended to constitute an offer or solicitation to sell the products or services of the providers identified. City National Bank makes no recommendation of the products or services offered by the providers mentioned in this article. The opinions expressed are those of the persons quoted and not necessarily the opinions of City National Bank.