What is a freight brokerage worth?

A freight brokerage arranges loads between shippers and carriers and keeps the spread between what the shipper pays and what the carrier is paid. It owns few trucks and little equipment, so there may be little to appraise. What a buyer is paying for may be mostly intangible: shipper accounts, a network of carriers that can be trusted with freight, and the staff and systems that connect the two. This guide explains what drives the price of a brokerage, what gets discounted, how earnings are recast and why two brokerages with similar revenue can be priced differently. It describes mechanisms only. It does not value any business and gives no figures, because a number from one brokerage says nothing reliable about another.

Ask what is still there after closing

With no fleet to count, a useful test is what would still be there the first Monday after the sale. Candidates are the shipper accounts and their payment terms, a carrier list with current insurance and safety records on file, the transportation management system and its history of loads and margins, and the people who handle both sides of each load. The Canada Small Business Financing Program guidelines give client lists as one example of the assets a purchaser carries on the business with in a going-concern sale, and list goodwill among intangible assets when it is part of a going concern purchase.

Owner dependence is a discount to look for

BDC says an owner will not get full value for a business that carries customer concentration risk, and that buyers may insist on a reduced price if the seller cuts all ties. In a brokerage the question is concrete. If a shipper’s logistics manager calls the owner first, and carriers answer only the owner’s phone, the relationships may not follow the business to a new owner. Ask who else at the brokerage holds each large shipper and each core carrier, how long they have held it and whether they are staying. A brokerage where the account work is already spread across a team is a different asset from one where the owner is the network. The answer on what to check before buying a trucking company covers the carrier side of that question.

Concentration shows up in the spread, not the revenue

BDC’s advice to sellers includes addressing supplier or customer concentration. A brokerage may report revenue as freight billed or as the spread kept, so ask which. Ask for the spread by shipper and by lane, not only the total. If one lane or one shipper supplies most of it, ask whether that shipper could contract carriers directly. The same question applies on the carrier side: a book that depends on a few carriers is exposed if one of them leaves or loses its standing.

How earnings get recast

BDC notes that a valuator chooses a method, or a combination, depending on the type of business and the information available. For a brokerage, ask whether the recast separates gross freight billings from the spread kept. Ask whether the owner’s pay covers work that someone else would have to be hired to do, such as sales, dispatch or carrier onboarding, and whether aged shipper receivables or carrier payables point to cash strain. Sales agents deserve a question too. The Canada Revenue Agency says an employee generally works under the direction and control of the person or business that hired them, and that a self-employed worker is not under the direction or control of the payer. If agents are treated as contractors, ask the accountant whether that treatment fits how they actually work.

The carrier record is part of the value

Ontario publishes carrier safety ratings, and says an Unsatisfactory rating will cause operating privileges to be suspended or cancelled throughout Canada. A network that includes carriers on that list is a quality question to put to the seller. Ask whether the brokerage checks carriers before it uses them, and keeps the record.

• Share of the kept spread that comes from shippers who book repeatedly, compared with one-off loads
• Whether the carrier data and load history sit in a system the buyer will own and can export
• Whether the staff who hold the key accounts are staying, and on what terms
• Whether margins hold across many lanes or depend on a few
• How long the seller is willing to stay on, and what that does to the price

Read the list as questions to put to the seller. Put the same questions to every brokerage you compare, and write down where the seller cannot answer them.