What is a customs brokerage worth?

A customs brokerage sells compliance work, not freight. The Canada Border Services Agency’s guide to importing commercial goods lays out the steps an importer works through: finding the tariff classification and value for duty, calculating duties and taxes, making a formal declaration so goods are released, accounting and paying, and making corrections afterwards. A brokerage earns its fees by doing that work well for other businesses. So ask what a buyer would actually be paying for. If the firm owns few trucks or warehouses, the price rests on the likelihood that the same clients keep sending the same work to the same firm after the sale, and that the firm is still allowed to do it.

Start with the client book

Start with who the clients are and how they buy. Ask which importers bring work on a continuing basis and which came for a single clearance. Ask how long each has stayed, which commodities they move, and whether the brokerage holds the relationship or only one individual does. The same revenue figure can describe a book of steady importers or one of occasional shippers, so ask for the composition and not only the total. Ask a buyer which version of the book it believes it is looking at, and be ready with records that show it.

The people behind the authority to operate

Ask what licence or accreditation the firm needs to do its work, who personally holds it, and what happens to the firm’s ability to operate if that person leaves. Confirm with the Canada Border Services Agency what its requirements say about a change in ownership or control, because the answer shapes both price and structure. If the firm depends on one or two people for its authority to operate, ask whether a buyer would price in that risk, and whether several qualified people and a written plan for who covers what would reduce it. Owner dependence of that kind is explored in how to reduce owner dependence.

Recasting the earnings

Reported profit can be adjusted to show what the business might earn under a new owner. One starting point is add-backs: owner pay above or below what a replacement would cost, personal expenses run through the company and one-off items. For a brokerage, add two questions. How often did the firm correct filings, and who bore the cost of errors, penalties or delays? A firm that quietly absorbed those costs shows lower earnings than one that passed them on, and a buyer may want to know which it is before relying on any average.

Why similar brokerages price differently

• Client concentration. Ask how much of the fees come from a few importers and what the loss of one would do; see customer concentration.
• Depth of expertise. Ask what kinds of goods the firm handles and how easily clients could hand that work to a competitor.
• System integration. Ask how tightly the firm’s software is connected to its clients’ systems and what it would cost a client to switch.
• Compliance record. Ask about open reviews, penalty notices or unresolved corrections and how a buyer would treat each.

What gets discounted

Ask what a buyer may treat as grounds for a lower price, especially anything it could not control after closing. Ask whether any of these applies: a client list held in one person’s head, a book dominated by a few importers, a compliance record with open questions, or fees that clients are already asking to lower. A seller may be able to reduce them before going to market by documenting procedures, introducing clients to a second contact and clearing outstanding corrections. Ask any buyer which of these it is discounting and why, so you can tell a fair adjustment from an opening bargaining position.

Goodwill and what it tells you

Check how much of the asking price is goodwill and a client list rather than equipment. BDC’s business purchase loan describes extra financing for intellectual property, goodwill and a client list, and the Canada Small Business Financing Program guidelines list goodwill as eligible when it is part of a going concern purchase. That a lender will fund goodwill does not make it worth the asking price. It means the question to answer is whether the client relationships will actually move with the business, so ask for specific evidence: how long clients have stayed, whether any are on written terms and how they responded when staff changed in the past. BDC also notes that buyers may insist on a reduced price if the seller cuts all ties, so ask what transition period a buyer will expect.