Do FedEx Routes Make Money?
Absolutely. A collection of FedEx routes, an operation, can be an incredibly lucrative investment.
First an overview of what we’re talking about here:
Total Revenue: (also known as Total Income) this is all of income the business generated in the previous fiscal year.
Total Expenses: this is all of the outgoing money paid by the business in the previous fiscal year.
Net Operating Income: this is the income remaining with the business after you subtract business expenses:Total Revenue minus (-) Total Expenses.
Profit Margin: this is your Net Operating Income (cash flow) represented as a percentage of Total Revenue.
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. The average attainable profit margin, from our experience, is within the 20-25% range. Profit margins in excess of 30% are incredibly rare.
FedEx Pickup and Delivery (P&D) Routes
A strong P&D operation typically has a profit margin between 15% and 20%. This means if you purchase a FedEx P&D business with $1 Million in revenue per year you can expect to pull in about $150,000-$200,000 in net operating income after paying a manager approximately $52,000 per year.
Rarely we see uber-efficient P&D operations with profit margins at or near 25%. Operations advertising profit margins of 30% or more are not honestly representing their financial situation.
FedEx Linehaul Runs
Linehaul operations have a wider range of profit margins; typically, linehaul operations demonstrate margins between 20% and 45%.
Operations that consist of a high number of assigned team runs have the highest profit margins in all of the FedEx Ground marketplace.
Businesses that have mostly solo runs and/or unassigned and spot runs included in the portfolio have healthy profit margins inside of the 20-30% range.
Although the high profits of a linehaul operation appeal to many buyers, we advise new investors to carefully consider both the rewards and the risks of linehaul operations.
Linehaul operations have much higher costs, require greater contingency planning, and it can be much more difficult to correct a deficit.
Many investors new to FedEx Ground routes begin their entities with P&D operations and scale to include linehaul operations after learning the industry more deeply.
Efficient Expense Management
FedEx routes are solid investments in large part because they have stable, predictable revenue streams. Few variables impact revenue and the e-commerce market continues to drive steep growth in the logistics space.
As a contractor, you will cut your teeth in the business based on the way you manage your expenses.
Does your business have a creative strategy for repairing and replacing the fleet? Can you retain high-quality drivers and managers? Do you scale to maximize efficiency?
Sure, we broker FedEx routes. However, we are also actively owning and operating our own collection of FedEx routes. We manage a fleet of over 275 trucks and a staff of over 200 employees.
We are thinking through revenue, expenses, efficiencies, and scale all day long. And we have been thinking about those things for years.
Connect with our team one-on-one to get help valuing a business, modeling revenue and expenses, or optimizing an operation.
We also offer in-person learning experiences—Contractor Summits—designed to teach potential or new investors the ins and outs of this industry.