You’re ready to buy a FedEx Ground route. You understand the difference between a pickup and delivery (P&D) route and a linehaul run. You know a P&D route is the right business for you.
After perusing the web and exploring your options you see a business for sale advertising a 30% profit margin.
Wow, 30%!? That’s amazing! But is it too good to be true?
Yes. That is too good to be true.
Evaluating Profit Margins
While a very profitable business, FedEx Ground route businesses do not generate profit margins of 30% or more. As you look to buy a FedEx Ground route, look for P&D businesses with profit margins between 15 and 20% of revenue. These are healthy businesses!
For example, if you purchase a FedEx Ground route with approximately $800,000 in revenue per year, you can expect to pull in approximately $120,000 in profit (or 15%).
Net incomes within that 15-20% range are what FedEx Ground routes are actually capable of making. Anything advertised as higher than that is likely exaggerated.
Evaluating Business Expenses
Similarly, when you look at listed FedEx Ground routes, pay attention to their expenses. Look at what they claim to pay out for payroll, repair and maintenance costs, etc. Be leery of claims with figures far outside the ranges of other listed businesses.
In our experience, payroll costs equal between 40 and 50% of total business revenue. Some very resourceful businesses keep payroll costs to 35%, but be cautious of claims that payroll costs are lower than 35% of total business revenue. Businesses with payroll costs above 50% have serious efficiency problems.
Truck repair and maintenance numbers vary widely based on a businesses investment and efficiency strategy, but new contractors can expect fleet maintenance expenses to account for approximately 11 to 15% of revenue. If most of the trucks in the fleet are new models with low miles, the maintenance costs can equal less than 11% of business revenue, but this figure is rare.
Other business expenses will include fuel, taxes, insurance, license plates, equipment, uniforms, accounting, office supplies, and required medical physicals for drivers.
Need Help Figuring Out Your Numbers?
When buying a new business, due diligence is crucial. If you don’t know where to start or what to ask for, Route Consultant is always here to help.
Route Consultant can guide you through the entire process of purchasing your own FedEx Ground routes.