Need-to-know terms when you are looking at a FedEx Ground route for sale
Need a quick refresher on FedEx Ground Route financials in order to make the right purchase?
Here’s the top financial terms and definitions you need to understand to review a FedEx Ground route for sale:
Total Revenue: (also known as Total Income) this is all of income the business generated in the previous fiscal year. This is the easiest to verify line item and buyers can confirm Total Revenue by reviewing settlement statements that the contractor received directly from FedEx Ground.
Total Expenses: this is all of the outgoing money paid by the business in the previous fiscal year. The largest expense of any FedEx Ground route is payroll. Expenses also include vehicles, taxes, office supplies, and more.
Net Operating Income: this is the income remaining with the business after you subtract business expenses. To calculate the net operating income (also known as cash flow) you take Total Revenue minus (-) Total Expenses. This number is typically reflected as a pre-capex (capital expenditure) EBITDA (earnings before interest, tax, depreciation and amortization) net income number.
Profit Margin: this is your Net Operating Income (cash flow) represented as a percentage of Total Revenue. To calculate you divide Net Operating Income by Total Revenue.
Listing Multiple: this is a ratio of the listing price and net operating income (or cash flow). You calculate the listing multiple by taking the listing price and dividing it by the cash flow. The listing multiple provides you with an estimate of how many years it would take you to make back your investment if cash flow remained at present-day levels.
Value of the Fleet: this is an estimate of the financial cost to buy all trucks or trailers included in the sale of the business. These are physical financial assets for the business.
Listing Price as a Percent (%) of Revenue: this is the amount you are paying for the business as a percentage of gross revenue. Revenue is the easiest item to verify on a profit and loss (P&L) statement for FedEx Ground businesses. This is the most reliable metric for comparing apples to apples when looking at multiple businesses. To calculate you divide purchase price by Total Revenue.
Financial Facts about FedEx Ground Routes for Sale
Want more detail?
Here are some quick financial tips if you’re looking to buy a FedEx Ground route:
FedEx Ground routes for sale can range in price dramatically. Our listings recently ranged from $299,000 on the lower end to our highest priced listing at $5,390,000. Our current portfolio of Active and Under Contract routes have an average list price of approximately $760,000.
Presently, our average Listing Multiple is 3.86. The multiple is on the rise year-over-year as these FedEx Ground routes for sale are considered incredible investments!
Look for FedEx Ground P&D routes for sale with profit margins between 15 and 20% of revenue. Be leery of brokers or sellers advertising margins higher than 25% — these margins are likely exaggerated.
As you look to buy a FedEx Ground linehaul operation, look for linehaul businesses with profit margins between 20 and 45% of Total Revenue. (Linehaul profit margins vary widely based on route composition and distance.)
Pay attention to advertised Total Expenses! In our experience payroll expenses average 40-50% of Total Revenue—and, sometimes even higher for inefficient operations. Be suspicious of payroll expense claims that are 35% of Total Revenue or lower.
FedEx Ground P&D listings typically sell at roughly 70-75% of Total Revenue, whereas linehaul operations typically sell at 90-110% of Total Revenue because they average a higher profit margin.
The Value of the Fleet can be very important in some sales. FedEx Ground routes come with assets (P&D and linehaul trucks) that the banks view as collateral. In another instance, buyers may choose to assume existing vehicle debt as an alternative financing strategy.
You can use financing to buy a FedEx Ground route for sale. You need to find the right route and the right financial institution for your situation.
Need more help understanding the financials of a FedEx Ground route for sale? Connect with our team for one-on-one support and advice.