FedEx Route Consultant | FedEx Route Due Diligence
Support has been providing numerous support services to FedEx Route or
Linehaul Run Buyers including due diligence support since 2014. 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 alone. According to SBA statistics only 55.66% of SBA loans in the Trucking (Local) business are repaid, it is a high risk business! We cannot stress how important it is to engage a highly skilled unbiased consultant like ourselves.
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. CAPEX
impacts are one of most important factors, if not the most important
factor to consider. EBITDA & Owner's Cash Flow means nothing without
CAPEX impacts considered. Vehicles don't last in perpetuity and they cost a lot!
Our specific FedEx Route Buyer services include:
Support can be reached at 240-490-2895 or email@example.com to inquire about consulting services offered. Please
note we don't offer "free consults" via phone inquiries as we don't
create buyer pools and interest in routes as an unbiased consultant. We
do however provide some free Q&A later in this page that many have
found very valuable. In lieu of our services, we also provide a Consult via Clarity.
Buying FedEx Routes - Free Due Diligence Q&A:
MyGround® Support's staff aren't
"Route Guys" that do consulting on the side, but Fortune 100 Experienced
Consultants with significant expertise and knowledge in FedEx
Routes/Linehaul including personal ownership. We don’t “sell” great or
bad things about FedEx Routes/Linehaul to you, aren't trying to get you
interested in them (or not interested), and aren't trying to add your
name to a list of potential buyers for a route broker. We offer the
following free information from an unbiased perspective based on the top
questions we get asked.
Q: The #1 question we get, what are FedEx Routes worth?
The short answer is whatever the market (someone) will pay. That said, No more than the discounted cash flow valuation that is based on EBITDA + growth factor considerations (5 year outlook) that also considers a Fair Market Value of the vehicles included in the
sale - less any debt balances assumed using a Weighted Average Cost of Capital (WACC) of at least 12%. This assumes things are in order
contractually and operationally, otherwise calculations would have to be adjusted accordingly. Historical financials may not represent the future potential of routes so extreme caution must be used.
Routes can definitely be a good investment, but setting
a purchase price based on 3x, 4x of Cash Flow, x% of Revenue, etc could
lead to a very happy Broker/Seller when the transaction closes. As a
buyer you could be unhappy down the road when CAPEX
impacts come into play or you are impacted by FedEx Ground contracting
changes you didn't understand at the time of purchase. 3x, 4x of Cash Flow, x% of Revenue are all just Broker/Seller mumbo jumbo for uneducated buyers to be lured into.
Q: How can I go wrong with the "cash flow" generated by routes or linehaul runs?
A: We've found over 90% of the "cash flow" calculations by Sellers/Brokers and biased or financially novice route consultants are INCORRECT. They omit future capital expenditures or CAPEX. For example, let's say you have 10 P&D trucks producing $1,000,000 in annual revenue with an EBITDA of $200,000. Some biased or financially novice route consultants and sellers will say your cash flow is $200,000. This is completely incorrect according to general accounting principles
. Future capital expenditures must be in your cash flow calculations. Assuming you replace your trucks every 5-6 years (which is typical) and given the $60,000 price tag for new trucks in the P&D world, you would have $90,000 in annual cash outflows, or a true cash flow calculated with proper accounting principles of $110,000, or almost half. Don't fall for cash flow calculations that are generated by someone who doesn't know how to calculate, attempt to leave out key things, or assume vehicles last in perpetuity. If you're getting a loan your cash flow projections for the bank will need natural vehicle replacement in them so model as the bank does.
Q: Are FedEx Routes better than Amazon Delivery Service Provider (DSP 2.0) Routes?
We would love to answer this question, but it all depends on your
personal preference. We believe Amazon DSP 2.0 routes are much easier
to operate, require very low capital to start, are more financially
profitable than FedEx Routes, but Amazon Logistics is a relatively new
organization that requires contractor flexibility due to the massive
growth. FedEx Routes are more complicated to operate, have lower
financial returns after vehicle replacement considerations, but are a
more mature and stable organization. It all depends on your goals.
Q: I see ads showing FedEx Routes or Linehaul Runs make a 30% or more margin, is it too good to be true?
Yes, it is too good to be true. Routes and Linehaul Runs make an
Earnings before Interest, Taxes, Depreciation, & Amortized Items
(EBITDA) significantly less than 30%. It is possible to get a 30%
EBITDA if the Owner is driving and
not paying themselves a market wage. Payroll would then be understated
and you're just buying a job.
is actually just one part of the equation though. Looking at it in
isolation could be a major flaw. Routes and Linehaul Runs are a very
capital intensive business. Delivery Trucks and Road Tractors require
major capitalized repairs at times (by definition they aren't in the
P&L/EBITDA) and scheduled replacement. These activities are
extremely costly. Engaging a professional advisor that can calculate
Cash-on-Cash, Return on Capital (ROC), and CAPEX is critical. EBITDA
and Owner's Cash Flow is of little concern without knowing the other
metrics, especially if the majority of the EBITDA and Owner's Cash Flow
ends up being used for CAPEX (i.e. the capitalized repairs and natural
We encourage Route and Linehaul Run Buyers to engage a true business consultant like MyGround® Support
that knows how to calculate the important metrics and isn't just a
"Route Guy" that focuses on simple EBITDA or Owner's Cash Flow. FedEx
Routes and Linehaul Runs may or may not be for you considering the
financial expectations and returns you desire and the risks you are
willing to take. Knowing vehicle
replacement costs and vehicle operating costs (capitalized and
non-capitalized) inside out
are critical in the FedEx Route and Linehaul Run market. It you don't
know aspects of this you will likely have buyer's remorse as your actual
return will be much less than what you thought.
+ + + Its important to note that the
returns provided by FedEx Routes and Linehaul Runs can be lucrative in
comparison to returns in retail, restaurants, gas stations, convenience
stores, liquor stores, and many other businesses. As such they can be
lucrative businesses in comparison. + + +
Q: Outside of financial related items, What should I be asking for in due diligence?
of the first things a buyer should get and ask for is the Seller's
current Agreement related items with FedEx Ground. If you can get a
copy of the Seller's entire Agreement plus all their performance metrics
great. If not you must have the following as a very first step.
TSPA Attachment A-1, Schedule B, and Schedule C for linehaul. Service
Level & Availability Metrics. Screenshot of CSP Performance
ISP Attachment A-1, Schedule B, and Attachment C-1. Inbound Attainment
& Cure Letters. Screenshot of CSP Performance Dashboard.
It is critical to engage an independent FedEx route consultant like MyGround® Support
to understand what these items represent. It is typically too
complicated for a buyer without deep FedEx contracting knowledge to do
it on their own.
Why do FedEx Route or Linehaul Run owners sell their routes? Who in
the world would want to sell something that makes 30% margins?
A: As noted in an earlier
question, the 30% margins don't exist unless you're going to be a full
time driver and count your pay in that 30%...no one would be selling if
it was true and Fortune 100 companies across America would all drop what
they were doing and buy FedEx Routes. In our experience a Seller is
selling for one of the following reasons.
- The Seller has an aged fleet and it is going to cost a massive
amount of funds to replace the fleet. Buying routes or linehaul with an
aged fleet is like buying a herd of dairy cows that have gone dry. CAPEX IMPACTS ARE ONE OF THE MOST IMPORTANT FACTORS IN ROUTE AND LINEHAUL EVALUATIONS.
- 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. Shipping with Amazon (SWA) is
coming soon and its not just for Amazon fulfilled packages.
- The Seller's contractual standing with FedEx Ground is in jeopardy.
Engaging a FedEx skilled consultant is key to help determine if this is
- The Seller is being affected by a change in FedEx Ground contracting
requirements. CHANGES IN CONTRACTING TERMS ARE OCCURRING ALL THE TIME AND LATELY ARE VERY SIGNIFICANT. This could be caused by ISP overlap requirements, "e-commerce"/SmartPost obligations at extremely low rates, 7 day delivery, new
equipment standards, new vehicle technology standards (FCAM - 2024 in
Linehaul), ISP rates that were negotiated poorly / don't cover the
costs, decreasing rates from FedEx, and numerous other factors in both linehaul runs and P&D
- 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 especially after CAPEX considerations. It is likely they
didn't engage a skilled and unbiased FedEx Route Consultant in their
initial purchase, overpaid as a result, and now have a full
understanding of the true financial considerations and are trying to
exit quickly. These routes will typically contain an aged fleet and an
inflated asking price.
- 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 likely running the day to day operations or
driving so remember not to "buy a job". The Seller's salary when they
are driving 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.
Valuation of FedEx Routes must reflect
the contractual situation with FedEx, operations, fleet value, CAPEX
needs, and EBITDA all combined - Don't overpay!
Q: Can FedEx P&D Routes be run absentee or semi-absentee?, what about Linehaul Runs?
We will boldly say anyone claiming FedEx P&D Routes or Linehaul
Runs can be run completely absentee has never owned them (we have!) or
has something to gain from telling you that they can be. A Buyer could
be making a very poor assumption assuming FedEx P&D Routes or
Linehaul Runs could be run fully absentee either operationally or from a
financial perspective. Depending on the level of involvement and
margin erosion that will occur, some P&D Routes and some linehaul
can be run semi-absentee. DO NOT BELIEVE ANYONE THAT TELLS YOU ROUTES CAN BE A PASSIVE INCOME ACTIVITY AS AN INVESTOR. 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?
Sometimes a Broker or Seller shows you a "Proforma" P&L (i.e
estimated P&L) that looks like expenses are pretty small in number.
It sometimes contains just a quarter of all the true expenses and would
be significantly over simplified. As noted earlier P&Ls DO NOT HAVE
CAPEX in them. CAPEX IMPACTS ARE ONE OF THE MOST IMPORTANT FACTORS IN ROUTE AND LINEHAUL EVALUATIONS.
We encourage Route and Linehaul Run Buyers to engage a true business
consultant like MyGround® Support that knows how to calculate the important metrics and isn't
just a "Route Guy" that focuses on EBITDA or Owner's Cash Flow that are the simplest part of a much more complex equation. EBITDA or Owner's Cash Flow means nothing when you could be using nearly ALL of that EBITDA or Owner's Cash to replace vehicles or perform capitalized repairs for poor quality routes and linehaul runs.
As for a sampling of expenses...non-capitalized expenses
would include, but aren't limited to 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, Non-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, Business/Commercial Property Taxes on Assets,
Mobile Phone reimbursement to drivers,....the list goes on and on.