You’ve spent years building and growing a successful propane business with a strong local legacy. You and your employees have worked tirelessly to build loyalty and trust with customers and community. And now you’re ready to retire or reap the rewards for all your hard work.
The financial aspect of an acquisition is only one of many factors you’ll want to consider when deciding to sell your propane business, along with your legacy, your employees, your customers and more.
Before you start discussing the sale of your propane company or making any decisions, you will want to prepare for the process by improving aspects of the current business and increasing the attention to detail in operational activities.
Whether you’re thinking about retiring, looking for a valuation, or completely ready to sell, here are 5 things you need to know when selling your propane business:
Whether you plan on selling your business in 6 months or 6 years, serious buyers buy sustainability. One bad year won’t usually hurt your propane business’s value – especially if it wasn’t a trend or can be easily explained – but one great year won’t necessarily get you more for your business either.
Sure, there are many factors that go into every deal, but buyers tend to focus on trends, and sustainability is key. Margin and profitability trends are key to building value in your business.
If your propane business is not sustainable going forward, it’ll be tough for any buyer to properly value the business and you may not get what you believe it’s worth. Work on improving the trends of your company and you will be well positioned when it comes time to sell your propane business.
From financial records to operational documents to employee, safety, and customer records, focusing on good record-keeping is extremely important when selling your propane business. Frankly, buyers won’t pay you for what they can’t see.
If you’re considering selling your propane business within the next 12 months, good record-keeping is even more essential. Short selling windows might make it difficult to change profitability, but having good records available for due diligence can mean the difference between a great deal and no deal at all.
Though every deal is slightly different, propane companies are typically valued, bought and sold based on its profitability. Valuation is typically derived by applying a multiple to your EBITDA – which is defined as:
Earnings Before Interest, Income Tax, Depreciation and Amortization
Simply put, profitability is paramount when it comes to proper valuation and to ensure you make the most money you can in an acquisition. Focus on acquiring new customers as best as possible and increasing other income with current customers where available, such as longer-term contracts for customer-owned propane tanks or charging tank “rent” to the customers who lease a tank from you. (And make sure you have a signed customer lease on file for every propane tank in the field – which will also help record-keeping as it confirms who owns the tank).
Stop selling tanks to customers! Potential buyers prefer propane businesses with high company tank ownership as it increases customer retention, helps control the gallons delivered and maintain safety standards, and shelters income for the buyer, as they can restart the depreciation schedule on acquired assets.
As the saying goes, it’s all about “safety first”. For prospective buyers, easily understanding your safety standards – and knowing that your staff is properly trained on them – is about control, consistency, and documentation. A few ways to ensure that a deal doesn’t stall due to proper safety documentation are:
Your employees matter a whole lot to you, and they should. A great staff can make or break your business. Similarly, awesome employees are key differentiators to any prospective deal when considering selling your propane business.
You can help their professional success and the likelihood of a potential sale by ensuring the quality of your staff is to the highest standard possible. Ask yourself these questions regarding your employees:
The very best employees are like a family. And buyers aren’t there to break up happy homes, but rather help your current staff grow, get better and go forward. Providing for them post-sale may weigh heavy on your mind as you want your best employees to be well taken care of or be able to advance career-wise after you sell, but by focusing on their success now, you can rest assured that their future will be bright as well.
When looking for a company to acquire your propane business, you will want to do your due diligence before making any decision. You’ve worked hard to build a successful propane business and you want to make sure you choose a reputable company that shares your value and your vision.
A good partner will pay you what your business is worth, but a great partner will work hard to honor your legacy, protect your employees and continue to provide the excellent service and safety standards your customers have grown to expect.
Beyond the financial aspects of any deal, here are some important questions to ask yourself when considering selling your propane business.
Selling your propane business is an important undertaking and there’s a lot to think about. From profitability to sales sustainability, record-keeping to high standards for safety and staff, and the intangibles that are important to you, taking a good look at your operations and making improvements in any areas of weakness are the primary things you need to know when selling your propane business.
Whether you want to sell in a matter of months or way down the road, by taking time to ready your propane business and prepare in advance, you will be able to optimize the value of your business today while maximizing the value in the future.
Platform Fuels has successfully acquired many local propane businesses just like yours. Beyond providing complete transparency and competitive valuation, we are dedicated to continuing the local legacy, entrepreneurial spirit and long-term success of independent propane owners like you.
Our team is happy to answer all your questions simply, honestly, and confidentially to help determine what you will need if you are thinking of selling your propane business either now or in the future.