What is a courier company worth?

The question in pricing a courier company is what deliveries it can keep making after the owner steps back. That turns on the account book, the drivers who serve it and the dispatch records that show both. Ask whether revenue runs on standing pickup schedules with business customers or on whatever calls come in that week, and whether the driver pool can flex for same-day work. This guide sets out what to ask when pricing a courier company, what to test and how earnings are recast before anyone discusses a multiple. It gives no figures, because none can be given responsibly without the books.

The account book is the asset

Revenue that arrives on a standing schedule from a business customer is a different thing from revenue that arrives as one-off dispatch calls. A buyer can ask for the account list broken out by customer, with how each pickup is booked and how long the relationship has run, and can test those answers against invoices. Revenue concentrated in a few accounts is a risk to test, because each one could be brought in-house or moved to a competitor. The glossary entry on customer concentration explains the mechanism. Ask the seller which accounts would stay if the owner were not the person they phone. Ask, too, whether the company’s pricing to each account has changed over the period shown, since a book held together by discounts looks different from one that holds its rates. Ask for that history before accepting that today’s revenue will repeat.

Driver capacity and what it is worth

Rush and same-day capacity rests on drivers, so how they are engaged matters to the price. The Canada Revenue Agency says that, generally, an employee works under the direction and control of the individual or business who hired them, that a self-employed worker is not under the direction or control of the payer, and that all the facts, including the actual terms and conditions, decide status, not just the parties’ intention. If a buyer thinks drivers labelled as contractors might be treated as employees, the cost of that change is something to raise when discussing the price.

Vehicles and the capital plan

Ask about aging vehicles with nothing set aside to replace them, because the next owner would inherit the spending. A buyer can ask for the fleet list with each vehicle’s age, condition and maintenance record, and can ask whether current earnings carry a realistic replacement cost. Ask, too, whether reported profit looks healthy only because maintenance was deferred. Which vehicles the company runs also matters for regulation. Transport Canada says provincial and territorial regulations govern the operation of the commercial bus and truck industry apart from the rules it sets for federally regulated extra-provincial carriers, and that the federal government only has authority over extra-provincial truck and bus carriers that carry goods or passengers across a provincial or international boundary, so confirm which regime the fleet falls under. Transport Canada also says the regulations governing commercial vehicles, drivers and motor carriers in Canada are based on the National Safety Code standards, a code of minimum performance standards with 16 standards.

How earnings are recast

BDC says a valuator chooses an appropriate method, or combination of methods, depending on the type of business and available information, and that its market-based methods calculate value from a multiple of metrics such as earnings before interest, taxes, depreciation and amortization. Ask how reported earnings were adjusted before any multiple was applied. For a courier company, the adjustments to look for are specific: the owner’s own pay set against what a replacement manager would cost, personal use of company vehicles, family members on the payroll and driver costs restated if their status changes. See add-backs for how these are documented. Back each adjustment with an invoice, payroll record or contract, and expect that any item may be tested against the underlying records.

What else to ask

Two couriers of similar size can differ on the factors above. Ask whether customers book through the company’s dispatch and tracking system or by phone, and what that says about how easily an account could move. Ask, too, what sort of buyer the price assumes and what that buyer would value.

• An account list by customer showing how each pickup is booked and how long the relationship has run
• A driver list showing how each driver is engaged and paid, with the contracts
• A fleet list with age, condition and maintenance records for each vehicle
• Several years of financial statements with every owner-related expense identified
• A description of the dispatch and tracking systems and which customers use them