Is Now the Time to Sell Your Business?

The March 2023 Logistics Managers Index (LMI) has recently been released, and it paints a rather complex picture of the current logistics landscape. This post aims to help you better understand the state of the industry, and whether now might be a good time to consider selling your business.

The LMI, which serves as a critical indicator for the logistics industry, has experienced a decline in several key areas. The overall LMI reading in March 2023 was 51.1, down 3.6 from February’s 54.7, making it the lowest reading in the LMI’s 6.5-year history. This can be largely attributed to drops in warehousing utilization (-5.3 points), transportation prices (-5.0 points), and transportation utilization (sitting at 50.0 with no upward movement).

The silver lining is that there are some areas of growth. Warehousing and transportation capacity readings have increased to 58.2 (+1.6) and 71.4 (+1.0) respectively and inventory costs have decreased to 66.0 (-4.8), the first time they’ve been below 70.0 since September 2020.

The U.S. economy is currently facing uncertainty, with high interest rates and inflation affecting the nation’s money supply. While the LMI indicates slow growth rates, it still points to growth. However, transportation utilization has been impacted by decreased consumer demand, leading to freight consolidations and job losses in the logistics sector.

In light of these mixed signals, here are some factors to consider when deciding whether to sell your business:

  1. Assess your current position: Look at your company’s financial performance, customer base, and competitive landscape. If your business is relatively stable and has the potential to grow, it might be very attractive to a buyer! You have heard the saying, “strike while the iron is hot” most certainly applies to selling a business.

  2. Monitor the market: Keep an eye on market trends and economic indicators. If the market shows signs of improvement, you might want to embark on the process as it takes time to plan if you are going to maximize your net profits. At the same time, if the market continues to decline, selling sooner rather than later might be the best decision.  Each decision is unique, depending on your time horizon.

  3. Explore consolidation opportunities for growth: Given the ongoing trend of consolidation in the transportation sector, it might be worth considering expanding your business through acquisitions, especially if your time horizon is three years or longer. Acquisitions can bolster your position in the industry, and with the rise of artificial intelligence (AI), implementing efficiencies can lead to a more substantial bottom line. Consequently, this will enhance your company’s valuation.

  4. Evaluate your personal goals: Your decision to sell should also take into account your personal and financial goals. If you’re nearing retirement or have other opportunities on the horizon, selling now might make sense.

  5. Know your valuation: Understand the current value of your business, based on factors such as revenue, growth potential, and industry trends. Research the sale prices of comparable businesses in your sector and consider how these valuations may impact the multiples at which your business could be sold. Accurate valuation is essential for negotiating a fair price and making informed decisions about selling your company.

In conclusion, the decision to sell your logistics business in the current market is highly dependent on your individual circumstances, goals, and the state of your business. While the LMI signals a mixed bag of indicators, it’s crucial to assess your position and monitor the market to make an informed decision. Stay vigilant, adaptable, and prepared for the challenges that lie ahead.

At Plethora Businesses, we’ve conducted hundreds of transactions in the logistics sector and have the expertise to help you navigate this complex landscape. If you’re interested in a confidential consultation and a complimentary valuation of your business, please don’t hesitate to reach out to us. We’re here to provide the guidance and support you need to make the best decision for your future.

George Lanza