Healthy fedex route businesses demonstrate profit margin ranging from 15% to 45%. Where you fall within that range depends on the type of routes you own, the composition of those routes, and how efficiently you manage your business expenses.
Here’s why you’re hearing more than one thing on bonuses: FedEx Ground historically awarded bonuses to contractors. However, FedEx Ground is in the process of phasing out bonuses and so some contractors have them and some do not. Understanding what bonuses used to do, why FedEx Ground is phasing them out, and what comes next is a critical piece of the puzzle as you model future finances.
You are charging FedEx for your services. You will negotiate each of the following charges with FedEx. All of these charges combined account for money flowing into your business. It’s critical you understand how and when those charges occur. And how you can increase your cash flow! Following is a quick overview of the charges you will negotiate as part of your Independent Service Provider (ISP) contract.
If you choose to finance the purchase of FedEx routes, your lending institution may ask you to sign a personal guarantee. A personal guarantee is a set of assets you are promising to surrender or liquidate to the bank if you are unable to make loan payments and you default.
FedEx Ground routes have predictable revenues with few variables. It’s what makes these businesses such solid investments!
If your revenue is predictable with few variables to significantly change it, then how do you impact your Net Operating Income (or take-home pay)? You focus on Total Expenses.
Without a doubt, Listing Percent of Revenue is the most reliable metric for comparing apples to apples when you are considering multiple FedEx Ground routes for sale.
Fundamentally, what you’re buying in this industry is the revenue because Net Operating Income will fluctuate based on how efficiently you operate.
Need a quick refresher on FedEx 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.
Don’t be afraid of using debt/leverage to buy these businesses. These FedEx routes for sale can sustain a higher debt load than what some other businesses allow. Typically, your finance source will require a down payment of 20% or more. With a 20% down payment you lever your business 4:1. You have 1 part down payment and 4 parts debt.
From time to time we encounter route buyers who intend to use a loan from friends of family to cover the cost of their route purchase.
A couple things to keep in mind if you are considering this option…
When we say conventional financing we mean receiving a business loan from a local or national bank or credit union. This is opposed to buying a FedEx route for sale with an all cash offer or using a Small Business Association (SBA) loan.
Why should you consider conventional financing for your FedEx route purchase?
The US Small Business Association (SBA) is a government agency that spurs entrepreneurship and economic growth. They are most well known for their government-backed loans.
What are the benefits of SBA loans?
We talked extensively in past posts about the risks of FedEx linehaul routes. Now, let’s get into more detail about the rewards!
Here are the financial highlights from our industry overviews this year. We focused on content this past year on giving you as much insider information as possible—especially information on the financials of buying a FedEx route. We resurface ideas such as: look for P&D businesses with profit margins between 15 and 20% of revenue; potential buyers often turn to bank financing to purchase FedEx routes; one strategy for acquiring sufficient down payment funds is to reduce the loan amount via seller financing; and have a deep understanding of the charges you will negotiate in your ISP contract.
One strategy for acquiring sufficient down payment funds is to reduce the loan amount. Obviously, that can mean purchasing a less expensive route. However, it can also mean reaching a financing deal with the seller. This is called seller financing.
While a very profitable business, FedEx route businesses do not generate profit margins of 30% or more. As you look to buy a FedEx route, look for P&D businesses with profit margins between 15 and 20% of revenue. These are healthy businesses!