Determining the value of most investments is as simple as scanning a 401k statement or searching for stock quotes. For business owners, valuing what is likely their most important investment – their company – is not so clear-cut.
But for such a complex process, the purpose of a proper valuation is simple. Understanding the value of your emergency or non emergency medical transportation business will help you with every decision you make, from putting your ambulance business for sale to planning for its expansion.
The Importance of Value
If an investor made an offer on your transportation business tomorrow, how would you know if you should take it? Without realizing what your company is worth, it’s impossible to know whether you’re being pitched the deal of a lifetime or an offensively low bid.
While not every business owner garners an unsolicited offer, it’s safe to say that most owners will one day put their ambulance business for sale. A valuation is an essential tool for setting a price that will appeal to buyers, as well as for choosing reinvestments that are most likely to increase value – and price.
Valuing a Transportation Business
Business value is based on what motivated, qualified buyers will pay for your company in the current market. Many business owners believe they can easily determine value based on some multiple of earnings or on prices paid for like-sized companies within the same industry. But by applying generic formulas and estimations, they’re selling their company short.
Valuation is less of a science and more of an art. Since no two businesses are exactly alike, it’s impossible to accurately predict their values using the same method. While most formulas only take into account tangible forms of value such as assets and earnings, companies also hold value in the form of intangible goodwill.
A location with few competitors, an experienced management team, and a strong reputation all provide benefits to prospective investors, but the amount of benefit will vary by business and buyer. Even tangible assets such as vehicles or equipment may be more worth more or less depending on circumstances.
Finding the Best Buyer
It helps to think of value from a buyer’s point of view. We all know investors are interested in future earnings, but strategic buyers will often look beyond your balance sheet. Does your business have a diversified customer base? This could reduce the risk a buyer takes on when taking over your ambulance service for sale. Have you cornered your market? A competitor looking to expand into new regions may pay handsomely for your market share. A professional medical transportation business valuation can illuminate opportunities to develop untapped value and verify that value to interested buyers.