Digging into FedEx Linehaul Profit Margins
We talked extensively in past posts about the risks of FedEx linehaul routes. Now, let’s get into more detail about the rewards!
How much money can you make with a FedEx linehaul business?
As you look to buy a FedEx linehaul operation, look for linehaul businesses with profit margins between 20 and 45% of revenue. This wide range depends on whether your linehaul runs are solo, team, or combination runs.
Most healthy linehaul businesses with predominantly solo runs will have profit margins closer to the 20-30% range. FedEx businesses for sale that include linehaul team runs have potential for the higher profit margins, up near 45%. Team linehaul runs have the highest profit margins in all of the FedEx portfolio.
For example, if you purchase a FedEx linehaul business (with predominantly solo runs) that brings in approximately $1,000,000 in revenue per year, it would be reasonable for that healthy linehaul business to pull in approximately $280,000 in profit (or 28%).
Similarly, a line business (with predominantly team runs) with approximately $2,500,000 in revenue per year might successfully pull in $1,000,000 per year in profit (or 40%).
As we’ve noted before, beware of routes for sale that advertise crazy high profit margins (above 45%). Additionally, do not expect linehaul businesses with solo runs to have profit margins up near 45%—listings advertising higher profit margins on solo runs are misleading.
Possible Impacts to Your Profit Margins
Assigned Runs have more consistent profit margins versus unassigned runs. Dedicated, or a contractually guaranteed run between two locations, allows a business to plan in a way that is beneficial and profitable. Knowing where and when you are going can help you secure a driver more easily and at a better rate. It also helps you plan truck payments and maintenance more accurately.
Unassigned runs are a way for FedEx to handle overflow volume that dedicated runs cannot accommodate. These unassigned runs can have margins as profitable as assigned runs, but the profits are less reliable because you as a business owner do not have a guarantee that a run will occur. Some unassigned runs operate daily (just like a dedicated run) and others do not. It is critical that before you purchase a linehaul listing you evaluate the history of each run. There is simply more risk involved in purchasing an unassigned run.
Due to a severe driver shortage in the US, driver pay is increasing rapidly and that can impact business margins on the downside. We have recommendations on how to retain your best FedEx drivers and handle FedEx driver turnover, but it’s absolutely something you should anticipate.
You can secure long-term leases with vendors who will cover 100% of your repair and maintenance costs. The benefit of a contract like this is you can take your largest variable business expense and make it a fixed number. This gives you more cash predictability and you can then plot other business decisions more confidently.
Need help valuing a business or optimizing operations?
Our team consists of actual FedEx contractors and experts who can help you complete a business valuation on a current linehaul route listing. Additionally, if you are a new contractor (or a seasoned one looking to boost your profit margins), we can help evaluate your business financials and optimize your operations.