These Answers to These Questions Can Make or Break Your FedEx Ground Investment
1) How much business can I afford?
Our listings this past year ranged in price from $200,000 to almost $6,000,000. Our average listing price is approximately $750,000.
If you plan to finance a route you will likely need a down payment around 20 to 25% of the purchase price. For our average price listing, that’s a down payment of approximately $150,000. We also recommend contractors keep upwards of $50,000 of additional liquid funds on hand as working capital.
If you have a healthy amount of cash on hand, your next consideration should be how much net income (or take home pay) you hope for the business to bring in. Healthy P&D businesses bring in profit margins between 15 and 20% of Total Revenue. Linehaul operations feature wider profit ranges: between 20 and 45% of Total Revenue (depending on the structure of the operation).
Use your availability of cash on hand, your ability/willingness to finance part of your purchase, and your desired Net Income to determine how much business you can afford.
2) How involved do I want to be with the day-to-day operations?
As you consider this potential investment, think about how much time you are able or willing to devote to the business. FedEx Ground operations have a range of owner involvement levels.
For example, some operations we sell lend themselves well to an owner-operator model. In these instances, the owner would run the day-to-day aspects of the business and even, on occasion, drive a truck.
On the other end of the spectrum, there are many opportunities on the market for remote or absentee owners. You do not have to purchase routes in or around the area where you live. Rather, you can leverage a highly skilled manager to run the day-to-day operations while you focus on the financials and on maximizing your investment.
And there are, of course, opportunities in the middle of the spectrum. Some businesses will require, or benefit from, an owner’s daily involvement, but the owner does not need to be providing operational or driving support.
3) Are you interested in a FedEx Ground P&D or linehaul investment?
In our experience as contractors, pickup and delivery (P&D) is a great place to enter the FedEx Ground space for the first time. This side of the business is easier to learn and may be less capital intensive.
P&D operations deliver to local homes and businesses in a designated territory.
You can think of FedEx Ground P&D routes as the box trucks you see out and about in your community. Conversely, you can think of the FedEx Ground linehaul runs as the semi-trucks you see on the highway.
Linehaul runs feature longer distance transportation, stricter driver requirements, expensive vehicles, and more risk.
Everything is bigger in linehaul operations: the risks and the rewards.
4) What sort of returns do I expect from my investment?
In part, we talked about returns above. How much Net Operating Income do you need/want your business to bring in for you?
We should also acknowledge here that some businesses offer solid financials, a long history of success, and predictable revenue/expenses. There are some businesses where you will know exactly what you’re getting when you buy them.
Other businesses are “fixer uppers”. Whether due to an owner’s personal challenges or business missteps, some operations for sale are not on excellent footing. The sale price of fixer upper businesses will reflect their challenges. Thus, there’s an incredible opportunity for growth in these investments! Though this path typically requires greater sweat equity, successful turnarounds see a much higher return on investment.
Get clear about what type of work you want to pour into your investment.
5) What are my long and short term goals with the business ?
In order to make a strategic FedEx Ground Route purchase, you need to understand your timeline and expectations for the purchase.
If this is a side investment that you are plan to hold for a few years and then sell, your strategy should differ greatly from someone looking to scale a business and create a long term, sustainable business model.
The length of your investment impacts the choices you will make around leverage, fleet strategy, management and ownership structure, and location—and, ultimately, which business is the right fit for you.
It’s also critical that you understand the decisions you make around leverage and management will alter your exit strategy, making them a key factor in your purchase decision.Considering your timeline and objectives prior to starting the acquisition process is key to starting your investment on the right foot.
Do you need help to understand how all of these answers impact your investment?
Our team of experienced FedEx Ground route owners can help you navigate the terrain.