Independent contractor routes that net over 1,000,000 a year

MAKAVELI

Well-Known Member
No joke Smith's stated goal when the restructuring of express was announced was to get x up to a profit margin of !0% Hasn't made it anywhere close to that. Restructuring ? Where re they getting the money to commit themselves to the purchase of 100 brand new Boeing 767's and 777"s . Ground of course. Check the operating results Without ground X instead of being a $160 stock would be a $70 dollar stock.
I wonder how UPS does it with no contractor scam?:confused:
 

OUMick

Well-Known Member
No joke Smith's stated goal when the restructuring of express was announced was to get x up to a profit margin of !0% Hasn't made it anywhere close to that. Restructuring ? Where re they getting the money to commit themselves to the purchase of 100 brand new Boeing 767's and 777"s . Ground of course. Check the operating results Without ground X instead of being a $160 stock would be a $70 dollar stock.

Never believe a major corporation when they give they give the "profits" of certain division of their company.
 

dex 84

Well-Known Member
Never believe a major corporation when they give they give the "profits" of certain division of their company.

I wonder about this sometimes. FXG doesn't really have anywhere you can walk in and be a customer of theirs. You can go to Kinko's or FXE and ship Ground, and from what I've seen there is a lot of Ground coming through both those companies. There might be a simple answer to this but how do they determine how much of the revenue of these packages belongs to Ground and how much to Express or Kinko's?

It reminds me of back when I worked retail and I noticed that certain products were always on sale for below cost, yet we kept getting more of them every week. The retail price would be $25, the cost to us was about $12, and they were on sale at least 3 weeks a month if not 4 for $10. This went on for years. My best theory was that we were getting some sort of bonus from the manufacturer for selling a certain number of units. All I know is no company is in business to lose money so if it doesn't add up there has to be something extra in the equation that we're not privy to.
 

OUMick

Well-Known Member
I wonder about this sometimes. FXG doesn't really have anywhere you can walk in and be a customer of theirs. You can go to Kinko's or FXE and ship Ground, and from what I've seen there is a lot of Ground coming through both those companies. There might be a simple answer to this but how do they determine how much of the revenue of these packages belongs to Ground and how much to Express or Kinko's?

It reminds me of back when I worked retail and I noticed that certain products were always on sale for below cost, yet we kept getting more of them every week. The retail price would be $25, the cost to us was about $12, and they were on sale at least 3 weeks a month if not 4 for $10. This went on for years. My best theory was that we were getting some sort of bonus from the manufacturer for selling a certain number of units. All I know is no company is in business to lose money so if it doesn't add up there has to be something extra in the equation that we're not privy to.

Most likely they were receiving ordering bonuses and applying them to another part of the business. In my retail days, I was told it was for tax purposed but most likely it was a way to satisfy shareholders.
 

UpstateNYUPSer(Ret)

Well-Known Member
I wonder about this sometimes. FXG doesn't really have anywhere you can walk in and be a customer of theirs. You can go to Kinko's or FXE and ship Ground, and from what I've seen there is a lot of Ground coming through both those companies. There might be a simple answer to this but how do they determine how much of the revenue of these packages belongs to Ground and how much to Express or Kinko's?

It reminds me of back when I worked retail and I noticed that certain products were always on sale for below cost, yet we kept getting more of them every week. The retail price would be $25, the cost to us was about $12, and they were on sale at least 3 weeks a month if not 4 for $10. This went on for years. My best theory was that we were getting some sort of bonus from the manufacturer for selling a certain number of units. All I know is no company is in business to lose money so if it doesn't add up there has to be something extra in the equation that we're not privy to.

Those products are called loss leaders and are intended to bring people in to the store.
 

dex 84

Well-Known Member
Not always. Many times the corp gets a great bonus from their supplier for buying in bulk. They actually make money but it is paid and recorded in another area of the business.

This is what it must have been. I think on some products the bonus was triggered from the number of units sold in a certain time period though because there was a time when we were giving away a certain product for free because we were so close to hitting the number with only a couple days left.
 

OUMick

Well-Known Member
I've seen 30-40% discounts given for a large order at a particular time by manufacturers. Could be they got a good deal on "parts" or they just needed to pump up some business.

The whole thing is profits for one part of a major corporation can be manipulated by the corp if they see a need or a tax savings.
 

dmac1

Well-Known Member
Wasn't implying that the house was everything. Sorry! I've researched individual route where netting 65-80 with paperwork backing up. Average fedex ISP drivers are making 40-50 k a year. I'm assuming 60-70 routes

That number likely doesn't include the reduction in value of his vehicles over the year. Depreciation is written off annually but not realized until the vehicle is sold. That fact disquises the actual income by putting off the loss until later, while taking a tax savings now, falsely inflating annual income.

For example, if I have a van 1 year old at the beginning of the year, worth $50,000, and at the end of the year worth $35000, and saved $5000 on my tax bill by deducting depreciation, you can show a net income of maybe $50,000, but the vehicle is worth $15000 less than at the beginning of the year.

Unless you take that loss into account, you are fooling yourself. Leasing a vehicle can help with accounting for that if your lease takes into account all the miles you drive. If you have a per mileage cost over a certain number of miles, then until the lease is over and you pay that fee, you need to take that fee figured as an annual cost and deduct from the net income.

Point is that net income needs to be looked at to make sure that deferred out of pocket expenses are subtracted. If you suddenly become unable to operate for fedex, and need to sell a van, that is when you can take a huge hit, and the more vehicles you have, the bigger the hit.
 

It will be fine

Well-Known Member
That number likely doesn't include the reduction in value of his vehicles over the year. Depreciation is written off annually but not realized until the vehicle is sold. That fact disquises the actual income by putting off the loss until later, while taking a tax savings now, falsely inflating annual income.

For example, if I have a van 1 year old at the beginning of the year, worth $50,000, and at the end of the year worth $35000, and saved $5000 on my tax bill by deducting depreciation, you can show a net income of maybe $50,000, but the vehicle is worth $15000 less than at the beginning of the year.

Unless you take that loss into account, you are fooling yourself. Leasing a vehicle can help with accounting for that if your lease takes into account all the miles you drive. If you have a per mileage cost over a certain number of miles, then until the lease is over and you pay that fee, you need to take that fee figured as an annual cost and deduct from the net income.

Point is that net income needs to be looked at to make sure that deferred out of pocket expenses are subtracted. If you suddenly become unable to operate for fedex, and need to sell a van, that is when you can take a huge hit, and the more vehicles you have, the bigger the hit.
The older diesels are holding their value pretty well these days. Anything that is pre-DEF is desirable and people will still pay quite a bit for trucks with 150k miles.
I don't think many contractors put too much value on their fleet anyway. The value in the company is in the revenue it generates, not in tangible assets.
 

dmac1

Well-Known Member
If the value of your assets is down, then your net worth is down. If you bought a route including a vehicle, and that vehicle needs replacement, you need to account for it somewhere. I'm just saying that looking at net income alone doesn't tell you everything you need to know. Those numbers are almost forced to be exaggerated just by the way the tax code works. Net income for a one year period means nothing. You need to look at a ten year tax return history, and very few sellers will have that available for you.
 

STFXG

Well-Known Member
And what about those using the standard rate for vehicle deductions? Depreciation doesn't matter and it can deflate net income.
 

dmac1

Well-Known Member
The standard rate can trick you too. A lot of miles and you get a big savings on tax, which makes your net income look higher even though your truck is worth a lot less. Most fedex vehicles will cost more to operate than the standard deduction allows. If you take the standard deduction, you can't deduct insurance, fuel, maintenance, or depreciation. Still say that net income alone means little without all the proper context.
 

FedGT

Well-Known Member
I don't think this is really worth repeating too much. Every piece of machinery depreciates, everyone should easily know that before buying any business. These trucks do not depreciate nearly as fast as you claim. 2006 MT-55 p-1200 with 180k still sell for $32k+, consider a brand new one is $66k. 9 years of driving and 5 of depreciation for a truck that is still 50% value. It is not like the new owner does not get to depreciate the assets when they buy them either so I don't know why you believe this is a massive situation. If the truck is junk and needs to be replaced the likelihood is that reoccurring costs are going to be revolving around 8-15k a year to keep it running which when you by a new one you can add the majority of those costs plus the cost that the contractor had to pay in renting another truck.
If you want to try and claim the trucks actual cost including finance charges, that is not valid. If you can't cash out a truck and want to pay the ridiculous interest that is on the individual taking the loan and has nothing to do with depreciation.
 
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instiches

Well-Known Member
If the value of your assets is down, then your net worth is down. If you bought a route including a vehicle, and that vehicle needs replacement, you need to account for it somewhere. I'm just saying that looking at net income alone doesn't tell you everything you need to know. Those numbers are almost forced to be exaggerated just by the way the tax code works. Net income for a one year period means nothing. You need to look at a ten year tax return history, and very few sellers will have that available for you.

The most important thing is cash flow
 

instiches

Well-Known Member
Yes but 2016 cash flow can much different than 2015 if you need to replace 3 trucks. When looking to purchase, looking at everything is most important.

Spending cash to add/replace assets is part of any business. That isn't possible without cash so amount the business can produce is important. My point was that net income (i.e. tax returns) can be "manipulated" in different ways. Cash flow is a better way to gauge the health and economics of a business.
 

dmac1

Well-Known Member
You support my point that looking at just one or even two years of tax returns or net income means almost nothing. Generally, new buyers, especially of single routes, aren't relly educated in bookkeeping. Suggesting to a newbie that cash flow is most important is not very nice without the caveat that you need to look at more than one years cashflow. Someone buying a route for one year and then selling after netting $60,000 may see that reduced by an easy 20% when he sells the business assets remaining after the sale. And absent extreme appreciation, his business will be worth less every year, based on the value of the assets.
 
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