Why Buy a Towing Company

Towing business

How much weight do you put on last years numbers? How important are the current numbers?  How much are you buying the business for the future numbers?  Past, present, and future all matter.

But buying a business is buying the future. I am currently working with a Florida based Towing company that is interested in selling his business.  We are selling this Towing company for $1,400,000. It is easy to imagine a towing company to be no more than the guy that hooks up your car at the side of the road and tows it in for repairs and that is the extent of the business.  This Towing business for sale is much more than that.  I attempt to view businesses for sale from this perspective: “would I buy this business, and why or why not?”

The following is a short analysis of this business opportunity and issues related to the consideration of such an acquisition.

This Towing business for sale will be a solid business investment for someone and I’d like to highlight reasons why someone will buy this business:

1. Multiple Income Streams

Yes they do tow cars, but the business model is so much more than that.  They derive revenue from towing, also vehicles towed in very often pay a daily storage fee, sometimes for vehicles in accidents vehicle require “sealing the car with stretch wrap” to eliminate additional damage from weather, some vehicle owners elect to get vehicle serviced at the towing companies service shop, so there are service fees, some vehicles get towed in and never get claimed.(more than you would think).  These vehicles get fixed and resold, sold for parts, or sold for scrap. So Income comes from: a. Towing,  b. Storage, c. Securing, d. Storage, e. Service work, f. Resale, g. Disposal

2. Significant Assets are included in purchase Price

Land, multiple buildings, multiple trucks, equipment collectively total over $1,000,000. I have never been a fan of buying a business because of the assets. Usually cash flow is main area of interest.  But owning the property that your business operates on and paying “yourself the rent,” allows you both control and the ability to enjoy appreciation of this asset as you grow your business.  Also, securing money for your business is easier with assets on your balance sheet.

3. Good Cash Flow

This Towing business generate about $160,000 a year in cash flow.  With Revenues of about $600,000 this is a respectable cash flow. Cash flow has been fairly steady and consistent over a several year period.

4. A Towing Business is a Recession Resistant Business

There may be a business that is “Recession Proof”, but I am not so sure what that business may be. The economic downturn that began in 2008 has been both extended and far reaching.  Outside of insurance companies, most businesses I know of have felt the effects of this downturn by significant reduction in revenues.  The towing business is a service that is neither a “luxury item” nor discretionary expense. A towing company provides a service that is needed regardless of the economy. This business did realize a 12% reduction in revenues, but compared to the 20%, 30%, and 40%+ reductions in revenues by many of the businesses that I have been working with, this dip in revenue is minimal.

5. Future Prospects

Business has opportunity to add an on-site used car auto division.(both the land and building exist and the towing nature of the business results in vehicles potential for resale.)  Service department has considerable room for growth, and unlike many auto service companies that may wonder where their next customer may come from, the towing operations bring customers in!  As with the auto resale operation, most of the infra structure is in place,  incremental revenue could result in substantial incremental cash flow.

Yes , I have a vested interest in the sale of this towing company.  I stand to gain financially as this business sells.  I also attain personal satisfaction helping a long term business owner work through this process of transition.  Finding the right buyer and getting the right price and terms for this business are the goals we set.  Towing Business For Sale

I believe this Towing business for sale will be of benefit to the right buyer.

Image by emrank.