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    1 Reply Latest reply on Jan 19, 2012 9:43 AM by momo

    Fedex Contractor Business - Do NOT Overpay

    kingswood Newbie

      I have been looking for about 1 year now at purchasing fedex home and ground routes for sale.  I have not purchased any and found that there are a lot of people over paying for these routes in my opinion.  I am seeing routes being sold for $120,000 and from my best guesstimate are netting around $30,000 (as a non-driving owner).  A 4 multiple for this type of operating business with 1 client is overpaying in my opinion. 

       

      So the question remains, how do you calculate the net profit number for a fedex route in order to determine what you should pay for it.  The fedex settlement statement shows a "net pay" number at the end of the settlement statement.  This number shows revenues and expenses which results in a Net Pay number at the end of the settlement sheet.  The revenues includes the stops/packages delivered + fuel reimbursement + misc..  The expenses include your total fuel cost + misc + insurance + escrow (as a contractor you can choose to escrow a portion of your net revenue into an escrow acct to be used for unexpected repairs or whatever you choose).  At the end you have your "Net Pay" number.

       

      You then need to subtract your labor + payroll tax + truck payments (if any) to come to a fair net profit number.  There are other considerations such as quarterly and monthly bonuses, but I don't want my post to be too long.

       

      What are you guys seeing out there?  I get the sense that a lot of folks buying these routes are not factoring in the true costs for these routes.

       

      After studying this business for 1 year I believe I can add a lot of value to other folks evaluating this business.

       

      Cheers!

        • Re: Fedex Contractor Business - Do NOT Overpay
          momo Wayfarer

          Kingswood, thanks for your reply on Fedex route valuation.  I am looking at different routes in different geos and each one seems to be a bit different (one for 3.7x EBITDA, others for 2x EBITDA, etc).  It's hard to tell unless you do a thorough income statement analysis - which means making settlement sheets tie out to total revenue accurately and verifying payroll stubs and truck expenses, fuel receipts, etc.  Lots of digging.  My question is that should we hire a financial auditor to do all of this work prior to purchase?   Hard for us to do it ourselves considering that we are not accounting people, just sales/marketing type folk. 

           

          Please advise.....thanks!