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PAGE 16/ NATIONAL CLOTHESLINE /JANUARY, 2021

THE ROUTE PRO

BY JAMES PEUSTER

Buying a pickup and delivery route

ne of the most common many feel a route is worth or Covid numbers. want to dive deeper. Then ings from the business are
calls I’m fielding today even if it is worth being inter- Second of all, what is the you must do the following. based on your personal in-
Ois about buying a route ested in. There are more and volume base on number of Value it with EBITDA. come taxes, it is best to value
out. As the saying goes, “if more bobtail routes starting trucks on the road. With that EBITDA is essentially net in- the company in a way that

you can’t beat ‘em, buy ‘em!” and everyone is getting a van being said, here is a simple come with interest, taxes, de- removes personal tax inputs.
A competitor is already and promoting their delivery formula to look at. preciation, and amortization This is especially true for
acutely aware of how your service. So, as best as I can 1. 0-50K: 20-25 cents on the added back to it, and can be businesses formed as a sole
business works, and may be convey in an article, here’s dollar. used to analyze and compare proprietorship. EBITDA does
willing to pay a premium what you must think about. 2. 50-100K: 25-35 cents on profitability between compa- have some “curb appeal,”
over another bidder if given First of all, do your re- the dollar. nies and industries because it though, in that it is often
the opportunity to reduce search. Here is your initial 3. 100-150K: 35-40 cents on eliminates the effects of fi- higher than true, after-tax net
local competition. Other in- checklist. the dollar. nancing and accounting deci- income.

tangible data points like mar- 1. Must look at tax record. 4. 150-200K: 40-45 cents on sions. Use intangibles as an ad-
ket share and mind share 2. Dollars vs Data....per- the dollar. Earnings before interest, vantage. Intangibles can be

have more value to a com- centage of route vs number of 5. 200-250K+: 45-55 cents taxes, depreciation, and just as important as bottom

petitor than to a new business customers. on the dollar. amortization is the most line profits. A business that is
owner. 3. Manifest and activity. Keep in mind there is a lot common way to value a well-known in the commu-
It’s interesting to see what 4. 2019 dollars versus more going on to that. If you small business. As your earn- nity with a long list of cus-
tomers naturally carries more
value than a newly-estab-
lished business with the
same earnings. Cite the
amount of time in business,
as well as the diversity of
your customers and a realis-
tic look at local competitors.
Businesses with long track
records and limited competi-
tion obviously earn values
toward the higher end of the
spectrum.
Separate assets as needed.
Some businesses are capital

intensive, from storefronts to
company car fleets. Capital
intensive businesses are at-
tractive only to people who
have strong financials to pur-
chase both the assets in the
business, as well as the fu-
ture income stream of a busi-
ness. Attracting the most
bidders requires that they
have something for every-
one. Consider offering the
business with and without
major assets like real estate.
Selling the business free of
large capital investments like
real estate makes the deal
more digestible for buyers on
the lower end while earning
you a stream of future lease
income. Alternatively, com-
mercial real estate brokers
are usually very interested in
purchasing commercial prop-
erty with long-term leases in
place.
Finally, keep this in mind,
you must have a great driver
in place. You will lose cus-

tomers due to the fact of the
change. You also may win
back more. No matter what,
plan on losing 25% of the vol-
ume if you don’t handle the
transaction and transition
correctly. Good luck in 2021.
It’s going to still be a bumpy
ride.
James Peuster is a consultant
who specializes in route devel-
opment, management and main-
tenance. He offers onsite
consulting as well as ongoing
coaching across the country. He
also has cost groups to monitor
route efficiency. For informa-
tion, call (816) 739-2066 or visit
www.theroutepro.com.
To learn more, visit www.nationalclothesline.com/ads