Transportation

If you planned ahead by including an exit strategy in your business plan, you deserve a pat on the back for being thorough. At the same time, your original plan may no longer be relevant. As your personal life changes, business priorities shift, and new industry-wide regulations come into play, your plan will need to change as well. Keeping your exit plan updated is important whether you’re planning to put your transportation business for sale next year or decades down the road. By making sure you keep your pre-sale goals in view, you’ll be more likely to achieve them and then to be prepared to have a highly profitable and smooth sale.

Several types of changes can contribute to your need to revise your business plans: business value, potential successor, and personal circumstances are some of the most significant.

Business Value

How has your business changed since you first purchased or began it? Perhaps you provide fewer or more diverse services or have expanded through acquisitions. Perhaps the economy has forced you to downsize your fleet or sell off certain assets. Your transportation business’s value will be significant to a prospective buyer, so changes that impact your business’s finances mean you need to reevaluate your exit strategy in order to reach the goals you have before putting your transportation business on the market.

Potential Successor

At one point, maybe you dreamed your daughter or nephew would take over the family business or your business partner would want to buy you out. When those assumptions are proven false, you need to make appropriate changes. An exit strategy geared toward an outside buyer will need to include more detailed documentation and organizational prowess. If your plans are to hand the business over to someone within your company, make sure to keep your finger on the pulse of that person’s changing needs and desires. Open communication can go a long way toward making sure you don’t fail to prepare for a different sale scenario, making sure you’re poised to receive a decent sale price.

Personal Circumstances

Your successor isn’t the only one whose personal goals and circumstances are subject to change: So are yours. Perhaps your marital status has changed or descendants have increased. Maybe your health or a loved one’s health has deteriorated. Your passion for expanding your business may be driving you into new levels of success, but in a few years, you may become even more passionate about volunteerism or other pursuits. Your exit strategy should reflect all of that.

Keeping your exit strategy current can help make sure you’re able to follow your ideal timeline and make sure your transportation business is ready to attain a good sale price when that time comes.

Photo credits: Top © RJ Lerich / Fotolia. Bottom © Geza Farkas / Fotolia

If you own a transportation business, you know that determining how to acquire your fleet is a huge decision. New equipment can certainly help you edge ahead of your competition, and the basic options of buying and leasing have fairly clear general pros and cons. Cost is often a major determining factor in transportation business owners’ decisions in this area—and understandably so. When it comes to taxes, though, the implications can greatly affect the long-term costs associated with how you choose to acquire or improve your fleet.

Purchasing Your Fleet With or Without a Loan

When you purchase vehicles, you can treat them as assets. If you take out a loan for them, the loan payments are considered liabilities. You can enter any equipment that you purchase on the balance sheet right away, which can be helpful when tax time comes. Depending on the structure of your company, you may be able to deduct most of the cost of large non-passenger trucks in the year of purchase. (See Section 179 for details.)

Leasing Your Fleet with a Capital Lease

If you lease your fleet with a capital lease, you’ll have a long-term lease agreement. At the end of the lease term, you’ll be given the chance to purchase the equipment at a highly discounted price. This scenario allows you as a business owner to treat leased equipment as assets, allowing them to be depreciated on the books. Since the lease counts as a debt, the interest payments are deductible.

Leasing Your Fleet with an Operating Lease

With an operating lease, you’ll deal with a shorter term commitment. The brief time frame allows business owners to avoid assuming risks associated with owning the equipment; at the same time, they don’t get to enjoy associated benefits, either. Often, this kind of lease is used for equipment expected to become irrelevant or outdated in a short amount of time. Operating lease payments are deductible, but since the equipment is not able to be treated as an asset, depreciation is not.

Of course, tax issues aren’t the only considerations when you’re looking at buying or leasing your fleet. While purchasing vehicles reduces taxable income, it also requires you to give up valuable business cash flow. Leases let you avoid much of an initial investment, but the monthly costs can be hard to swallow. Purchasing an entire fleet through acquiring an existing transportation business for sale may be the way for you to go.

In order to reduce your risks while increasing the potential rewards, you’ll want to weigh your options very carefully. If you need guidance in making this or other important decisions regarding your transportation business, you can discuss your options with a transportation industry business broker at The Tenney Group.

Someday, perhaps we’ll no longer need hard copies of official documents for legal purposes, but for now, you still have a lot of paperwork to get in order before you put your transportation business up for sale. The following documents are the most important ones you’ll need to secure in order to ensure a successful business sale.

Offering Memorandum

Also called a selling memorandum or a COM (confidential offering memorandum), this document works to inform potential investors about your transportation business without specifically identifying you or your company. This document aims to intrigue buyers while giving them enough information to give them an idea of the kind of situation your business is in. The goal is to leave them wanting more, in which case a non-disclosure or confidentiality agreement will be key.

Non-Disclosure Agreement

This is key to protecting your company’s anonymity as you communicate with prospective buyers. It’s important because if your intention to sell your business leaks to your employees or customers prematurely, it could negatively impact your business’s stability and value. A leak to competitors could prove devastating, as well, if sensitive details become known. A non-disclosure agreement can be signed as part of a screening process to ensure that only serious, qualified prospective buyers gain access to your company’s specific information.

Financial Records

Potential buyers will want to see the data behind your transportation business valuation. Financials include tax returns, balance sheets, audit statements, and P&L statements. At least three years’ worth of relevant documentation should be organized and accessible, preferably by an accountant that specializes in transaction preparation. Such an accountant should be proficient in recasting your financials in order to add discretionary income back into the picture, in order to demonstrate a more accurate picture of what a buyer stands to inherit.

Contracts

Sometimes, buyers are strategically interested in various benefits offered by your existing customer base or experienced staff. You’ll need to be ready to provide access to all standing contracts with employees, customers, and suppliers.

Purchase Agreement

When the time comes for a sale, you’ll want to have a purchase agreement drafted to include the particular assets that will be transferred from you to the new transportation business owner. Other details of the transfer will be included in this document as well, providing a sort of detailed receipt for the business sale.

As you draft and collect the above-listed documents in preparation for your transportation business sale, the transportation business brokers at The Tenney Group (link to website) can help guide you through each step toward a sale. Our experience within the transportation industry can help give you a unique edge on the competition and target your ideal buyer, making sure all your paperwork is in order before contact is made.