Should I buy some routes?

Discussion in 'FedEx Discussions' started by fedexbuyer1, Jan 28, 2014.

  1. fedexbuyer1

    fedexbuyer1 New Member

    I have been reading posts about buying a FedEx route and you have left me confused....

    I cannot disclose where this route is or who it is because I have signed a disclosure agreement.

    Will you please help me figure out if I should make the investment? Thanks in advance for your time.

    I am in construction and have done well. I can pay cash for the routes. I live close to the routes. I have a manager in my construction business that wants in on the game and he is 30 years old and no kids so he can manage it for me pretty well.

    Here is what I know:

    The owner bought in 2010 but wants to sell. He used to own routes in a neighboring state and in another neighboring state. He said he sold because they were hard to manage that far away. However, two states away is the last route that he will keep because he has a good driver that wants to stick it out. So, he is not selling all of his routes....he is keeping one....in another state....sort of contradicts himself. He said he is selling because he wants to jump back into construction and make better money or move to the Sunny South.......I dont believe him.

    He wants $650k
    He owns 9 trucks worth about $220k
    He has 4 routes and 2 supplementals
    He has 6 drivers
    Revenue is $650k
    His expenses he says are $500k

    He nets $150k

    He says he only works 2 hours per day in the morning from home to make sure the trucks are working and out........I cant believe this.

    Why would you sell a company that you work for 2 hours per day and make $150k?

    Thanks again for your help....

    BBSAM...What do you think?
     
  2. Operational needs

    Operational needs Well-Known Member

    I know nothing about Ground, but out of curiosity, I must ask, why would you want to buy anything from someone whose information you can't and don't believe?
     
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    Last edited: Jan 28, 2014
  3. fedexbuyer1

    fedexbuyer1 New Member

    He acts like he is telling the truth about wanting to get out. More importantly, do the numbers look realistic?

    Can you really make $150k per year off of 4 routes and 2 supplementals?

    Thanks.

    The dishonesty factor is something I always have to deal with when trying to buy a new business. Hopefully he is telling the truth.
     
  4. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    Ask to see his financials.
     
  5. soc151

    soc151 Member

    The trucks sound ancient with a valuation that low.
     
  6. fedexbuyer1

    fedexbuyer1 New Member

    The trucks values are correct. One thing he didn't bring up that bothered me a bit was he told me his expenses were 450k....then I said "you need to put away $50k for trucks every year don't you?"

    He agreed.

    I have found that the FedEx Revenue reports are accurate but they don't know the expenses. He is giving me the expenses from his records.

    Anyway, the return of $150k from 4 urban routes with an average of $150k revenue from each route......is that possible?

    If it is realistic it is a return of 25%....which is great!
     
  7. bbsam

    bbsam Moderator Staff Member

    25% is unrealistic. I would expect 10 to 13%. That is significantly less and I would tell him so up front. Not that it's a deal breaker, but you really need to get deeper into his expenses to determine what your net could be. You may have avenues as far as truck maintenance that he does not. Look closely at what he pays in work comp insurance. When you get to a reasonable number for ROI, factor in that Ground is an aggressively expanding company. One thing that is not unrealistic is to expect volume growth of 8 to 10% year over year. That also should be evident in his records. When you have a good feel for all that, you should be able to come up with an offer you are comfortable making. He may turn it down. If so, keep his number and call him in a month to see if he's reconsidered.
     
  8. MrFedEx

    MrFedEx Engorged Member

    Why would anyone leave a gig where they are making $150k per year profit for only 2 hours of work? Something stinks.
     
  9. STFXG

    STFXG Well-Known Member

    4 routes for 650k? Lol.
     
  10. DRAisawesome

    DRAisawesome Active Member

    How is the contract with FedEx evaluated? Yearly?

    Can FedEx cut you out at anytime? Is there a buyout if FedEx were to ever merge?
     
  11. Goldilocks

    Goldilocks Well-Known Member

    Put your money in an IRA. Your better off.
     
  12. bbsam

    bbsam Moderator Staff Member

    Now that's just silly and prejudicial. There's alot to weigh before making such a purchase and it may prove not to be in the OP's best interest but that's for him to decide. You've never seen me or any other contractor tell people to "jump right in". Even if Nick were to be honest he'd tell you that I advised him to be cautiousand go into detail about the income and expense accounts. Why are you advising about making a business decision you have no experience with?
     
  13. Goldilocks

    Goldilocks Well-Known Member

    Because Ground is a scam.
     
  14. bbsam

    bbsam Moderator Staff Member

    That's not what the law says and if you understood the vague nature of the law, you'd see how firmly entrenched the model is. Instead you parrot that which you've heard hear in MFE's little echo chamber.
     
  15. Goldilocks

    Goldilocks Well-Known Member

    Tweet tweet, go buy rental homes instead
     
  16. fedexbuyer1

    fedexbuyer1 New Member

    bbsam, I appreciate the encouragement. I have a few questions?

    Do you guys cover your truck insurance or does Fedex? From what I can tell you pay about $80 per week for insurance and uniforms etc....

    Do you pay workers comp or does Fedex?

    This seller didnt list WC insurance as an expense. Thanks
     
  17. Route 66

    Route 66 Flacid Member

    oooo eeee!, Goldi you are some fired up today, girl! ..... (must've watched Frontline or caught a glimpse of a 'FedEx Cares' or 'I Deliver the Purple Promise' poster or some such thing?)....I understand!

    :madashell:
     
  18. bbsam

    bbsam Moderator Staff Member

    Yep. We pay work comp. Might be called "Work Accident" in in contractor states as opposed to ISP states that amount is deducted weekly from the settlement. It's fairly pricey.
     
  19. bbsam

    bbsam Moderator Staff Member

    Yes, but she's much like van. She'll blame Obama for the shady, low-down crap Smith pulls. Classic.
     
  20. bbsam

    bbsam Moderator Staff Member

    parrots don't "tweet", the screech without comprehension.:)