FedEx Route Consultant | FedEx Route Due Diligence | Buying FedEx Routes
Support provides numerous support services to FedEx Route or Linehaul Run Buyers including due diligence support. We've analyzed hundreds of routes over the years and our experience is unparalleled to
others. Over 3,060 visitors visited our site in 2018.
Our #1 Advice to Anyone Considering Buying FedEx Routes: Many
components of FedEx Routes and Linehaul Runs are deceivingly more
complex to evaluate and perform due diligence on then even the savviest
business entrepreneur may think to review.
Engaging an investment grade FedEx Route Consultant is critical to understand the complexities, contractual aspects, and financials. MyGround® Support's due diligence staff are former FedEx Ground contracting investors, top school MBA graduates, and recognized experts on FedEx Ground route matters. We perform bookkeeping & payroll services for numerous FedEx Contractors, we know the financials better than anyone else.
Some of our services include:
It is also a critical time to make sure you are making a rational purchase and paying an appropriate price given Amazon's launch of 20,000 contractor vans in 2019. (Amazon Orders 20,000 Vans for New Delivery Service in 2019) Such a number of Amazon contractor vans will definitely impact FedEx Ground's approximate 60,000 contractor vans.
To engage MyGround® Support to learn more about financial and non-financial aspects as well as due diligence support visit our services pages.
MyGround® Support can also be reached at 240-490-2895 or firstname.lastname@example.org to learn more about consulting services offered to investment Buyers of FedEx Routes and Linehaul Runs.
An excellent video for all those considering buying FedEx Ground Routes
MyGround® Support provides the following free information regarding the top high level questions we get asked by Buyers:
Q: What should I watch out for when reviewing routes or linehaul runs when the seller has provided me tax returns and everything?
Q: I see ads showing FedEx Routes or Linehaul Runs make a 30% or more margin, is it too good to be true?
A: Yes, it is too good to be true. Routes and Linehaul Runs make a pre-depreciation margin significantly less than 30%. Sellers of Routes and Brokers get very creative to purport 30% or more margins using terms like Cash Flow, "Normalized" Cash Flow, and Add-backs. If someone is purporting any margin over 25% you may want to seriously question their credibility. The only way it is possible is if the Owner is driving and not paying themselves a market wage reflected in the payroll numbers. In this case you're just buying a job.
Some purport future revenue growth but do not increase required costs to support the additional revenue. The Cash Flow or "Normalized" Cash Flow some Sellers or Brokers calculate are actually calculated using non-generally accepted accounting principles (i.e. incorrect or made up financial terminology). One of the most comical statements made by some Brokers or Sellers is that 25% or more of the entity's profit is made in just the 4 weeks around Christmas. This is typically stated to unsuspecting Buyers who are looking at routes before November. While revenues do increase during this period, costs do as well and such statements of profitability are laughable.
Bottom line however, some of the margins can be pretty good, but they vary by many factors and some margins are a pre-depreciation return and you must factor in future capital costs for vehicle replacement. FedEx Routes can be a good purchase decision, but do not buy them assuming they hold 30% margins (or anything close) and obviously do not make a purchase based on those exaggerated margins. Engaging a FedEx Route Consultant to get the right due diligence info is critical to ascertain what the likely Operating Cash Flow and the Free Cash Flow (Operating Cash Flow less Capital Replenishment) margins are and what the non-financial things are to review. Only then can you make an offer based on true financial returns and risks associated with the contract rather than 30% + margins based on made up financial terminology or marketing tactics.
Q: Why do FedEx Route or Linehaul Run owners sell their routes? Who in the world would want to sell something that makes 30% margins?
- The Seller is becoming concerned about the future competition and declining revenue potential, specifically Amazon. Just in Sept of 2018, Amazon Ordered 20,000 vehicles for its contractor model for launch in 2019! These vans will be leased to new independent Amazon contractors. Obviously Amazon will begin to take more packages off FedEx contractor trucks and put them on Amazon contractor trucks.
- The Seller has an aged fleet and it is going to cost a massive amount of funds to replace the fleet. Never overpay for routes with an aged fleet as you will be investing a large sum of money to replace the fleet
- The Seller's contractual standing with FedEx Ground is in jeopardy to the point where routes are going to be lost or their entire contract is going to be lost. This could be due to staffing issues, high turnover, poor operations, or any number of factors. It is absolutely critical for Buyers to understand all non-financial aspects of route ownership and contractual requirements. Sellers may have also lost their exclusive rights to renegotiation of their contract.
- The Seller is being affected by a change in FedEx Ground contracting requirements. This could be caused by ISP overlap requirements, new equipment standards, new vehicle technology standards, work accident discontinuance (owner's must have worker's comp), ISP rates that were negotiated poorly / don't cover the costs, and numerous other factors in both linehaul runs and P&D routes.
- The Seller is a fairly new owner of the routes ( less than 3 years ) and has realized the routes are not as profitable as they thought when they purchased. It is likely they didn't engage a FedEx Route Consultant in their initial purchase and now have a full understanding of the true margins and are trying to exit quickly.
- The Seller is retiring and no longer wishes to run the business. These routes typically have higher published returns, but the key factor here is the Seller was running the day to day operations so remember not to "buy a job". The Seller's salary is not an acceptable add back in this situation and a market wage for the Owner's efforts must be in the payroll number or adjusted with a market wage.
Q: What are the first few things, above all else should I ask for and obtain first in due diligence?
Q: Can FedEx P&D Routes be run absentee or semi-absentee?, what about Linehaul Runs?
A: We will boldly say anyone claiming FedEx P&D Routes or Linehaul Runs can be run completely absentee knows nothing about the industry or is looking at the Buyer as a fool. A Buyer could be making a very poor assumption assuming FedEx P&D Routes or Linehaul Runs could be run fully absentee. Depending on the level of involvement and margin erosion that will occur, some P&D Routes and some linehaul can be run semi-absentee. Linehaul is likely to have more of a chance being run semi-absentee given the operations, but again do not assume it is possible at all. Margins at semi-absentee involvement are obviously lower than those where the owner runs the day to day operations.
Q: What expenses do I have running P&D Routes or Linehaul Runs, seems pretty straight forward?
A true sampling, non-inclusive list would include Fuel, DEF, Payroll, Employer Payroll Taxes, Tolls (P&D only), Parking (P&D only), Parking Tickets (P&D only), Worker's Compensation Premiums, Scanners (P&D only), Tires, Repairs & Maintenance, Capitalized Equipment Repairs, Annual Vehicle Inspection Fees, Rental Trucks/Rental Road Tractors, Heavy Use Tax (Linehaul Only), ELD Service (Linehaul Only), Vehicle Registration/ Vehicle Plate Fees based on GVW, Annual Business Personal Property Taxes, Vehicle Camera Systems, Driver Training Schools (P&D), Employee Timekeeping System/Software, Route Optimization professional fees (P&D only), Accounting/CPA Fees, Payroll Service Provider, Lawyer/Attorney Fees, Recruiting/Advertising Fees, Driver Uniforms, Small Equipment (dollies, carts, etc), Vehicle Washing Vendor, Vehicle Decals, DOT Physicals for Drivers, Annual State Corporation Filing Fees, Mobile Phone reimbursement to drivers,....the list goes on and on. Engaging a FedEx Route Consultant is critical to ascertain what expenses apply and whether they are within range of what should be expected. Interest Expense & Depreciation is actually very important in this industry as well and cannot be ignored completely.