Anyone planning on buying a tow business with expectations of making a profit should perform prerequisite research to evaluate the worth of the business at sell, and how lucrative the market looks like. To break even and get a substantial return on investment, you need to understand why the business is on offer and what reasons are making the wrecker business owner sell it.
Vehicle towing is a highly competitive yet lucrative business, and you need to ensure you look at all aspect of this business before committing to buying an existing one. As a guide, these are some of the issues you need to keep in mind.
- Study the Market it has been serving.
Evaluate the characteristics of the market served. Key features of towing businesses are private companies, individuals, enterprises and local government agencies. Ask questions on the market the company has been serving and do your maths to see if the offer at the table is lucrative. Look at all the agencies and market the business has been providing its services to and evaluate when you shall break even.
- Assets
When making a decision to buy an existing towing business, do an analysis of the value of total assets under sale, and the amount the seller is asking for. Ask questions whether a property is included in the deal. In some cases, the business is offered with the property, while in other cases the seller plans to keep real estate and rent the property to the respective buyer.
3. Business Valuation
There are basic rules of thumb to guide a seller and buyer reach an amicable agreement pertaining the assessment of the business under sale. A lot of factors can impact the value of a company in this industry within a short period. Look at aspects such as taxable capital gain, depreciation issues and other related factors, to value the business appropriately.
