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To Optimise Value, Destination Planning is Key

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Logistics firms and haulier operators, which might be thinking about possible sale at some point soon, must have a strategy and clear vision to avoid selling their business short. By optimising profits and minimising risk, they will be in a good position to attain a successful outcome when the time comes.

How far ahead should you be planning?

Transport and logistics businesses should plan at a minimum,  three years ahead, when forming an exit strategy. Having selected their destination, business owners have several potential routes to choose from. Using accurate business data to come up with a detailed plan, will help to mitigate any risks related with preparing the business for maximising profits and sales. 

How and when to make key decisions?

It’s important for businesses, in a sector used to low operating margins, to have a strong understanding of their strengths and weaknesses before making any big decisions. Though it may be tempting to pursue a sale, particularly if business owners are finding it hard to make good returns, it is key to take the time to deliberate potential risks and any bumps in the road ahead.  

Analysing and collecting data from across four key areas of the business resource management, sales and marketing, finance, and operations – can aid decision makers in planning the journey ahead. This allows business owners to evaluate the risks they may come across and contemplate mitigation tactics. A business can pursue a strategy to strengthen its market position by being aware of future pressures and the best way to navigate them, by forecasting future opportunities and how to optimise them.

When to consider your future aims and goals

Business owners should only consider their aims and goals for the future of the business once all weaknesses have been addressed and steps have been taken to strengthen the business model. Clearly articulating their future vision and ensuring it is on a par with business objectives is key. The business objectives should take the six core areas – ownership, systems and best practice, finance service and customers, and, people and management – into consideration.

Steering the business to its end goal can be much simpler by knowing where the business is currently, where it is heading, and the steps needed to be made to get it to the end goal. This can be accomplished by breaking them down into specific and manageable tasks, allocating responsibility to key members of the management team and having accountability through a regular review of progress.

This approach helps improve communications amongst the operations, sales personnel and finance, which encourages each department to work together with aligned objectives. As everyone has a part to play in shaping the future of the business, this joined-up method also supports a high level of employee interaction. Each step is as important as the next and keeping to the plan is key to maximising its saleable value.

Looking for a way out of your owner-managed business?

Trade sale

For owner-managed businesses looking for a way out, one of the most profitable options could be a trade sale – a process that normally involves selling the business to a larger, sometimes international, trade buyer. This sort of sale gives the buyer the chance to drive value through economies of scale, which in a sector with tight operating margins could prove invaluable.

Substitute exit options

Some business owners may want to consider substitute exit options, such as selling off non-core activities or diversification, or even seeking private equity investment to facilitate its future growth plans whilst allowing key directors to exit. Though a lot can be learned from the exit journeys of other competitors, business owners must explore all their options and select a strategy that is in line with their personal and business objectives.

Management Buyout

An alternative exit strategy is a Management Buyout (MBO). Whilst quite common, this option does lack the efficiency gains related with trade sales and therefore the valuation of the business may be a bit lower. Although, MBOs can bring benefits in multiple methods. For example, a deal that revolves around selling the business to the management team could be easier and faster to negotiate, this could then mean lower transaction charges. Doing business with the existing management team could also aid to ease some of the pressure on the business owner as the assets are being traded to individuals who are recognised to have the interests of the business and its stakeholders at heart.

For any business, managing an exit strategy efficiently can help to guarantee its profitability and success for plenty of years to come. In a market that is facing significant consolidation, it will be possible for some businesses to reach a strong market valuation and where appropriate, it makes sense to be fully prepared. Supported by a clear vision and an informative destination plan, business owners will be ready to enhance their operating efficiency, capitalize on business value and grasp any potential opportunities.

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Sophie Said - ACA

Director

Sophie Said is an Audit Director with specialisms in Transport and Logistics, Audit and Accountancy Compliance and International SME advisory.