It will be fine thank you for your comment. Great advice. Most of the routes currently for sale are not 100% overlap with G and HD but meet the the stops per day requirement. I would hope the owners of other routes are smart enough businesses men to realize swapping routes to be compliant is in both our interest.
Looking to buy FedEx routes Need Advice from owners
- Thread starter BigJohn
- Start date
OrioN
double tap o da horn dooshbag
Seriously? You should just invest in real estate instead... less risk and passive income if you rent.
Heck, since I can't have a traditional pension from these investor class bosses, this is a way to get to my retirement goals.
Maybe try a fellow contractor on YouTube who has setup a standard formula for this business:
Message John and find out more
Heck, since I can't have a traditional pension from these investor class bosses, this is a way to get to my retirement goals.
Maybe try a fellow contractor on YouTube who has setup a standard formula for this business:
Message John and find out more
Overlap is overblown. At the end of the day, it's as simple as trading drivers since nobody in their right mind will want to pay to retrain a lot of their drivers in new areas. I think 2021 is simply the calendar date when all current and to be and soon to be agreements will end and the new overlap will be mandatory.
You guys are absolutely correct that the trucks are the only tangible asset in this business. Goodwill based off historical records (years of operating profit) is the largest (intangible) asset you would own.
OrioN, thank you for the information. I have already seen this presentation and contacted John a while back. Great guy to provide the information. He did send me his analysis spreadsheet (which is excellent btw) and I used it on some routes already. I did add some additional info to mine such as growth projections, NPV etc...
bbsam. thank you your comments. More great advice.
It will be fine
Well-Known Member
All HD drivers will need to be retrained. They won't have turn by turns anymore. They have to actually interact with customers and do pickups in windows. When I bought a bunch of HD for overlap the HD drivers that came with it didn't last a month. They went back to HD and I started fresh with new hires.
The problem I'm seeing with people trying to work out trades is the perceived disparity in value. Ground guys think their stuff is more valuable because of slightly higher compensation and all the pickup volume. HD guys think theirs is more valuable because of stop growth potential. It will get messy and a lot of HD contractors will have a hard time managing a Ground operation. They need bigger trucks and a better trained workforce, all with less compensation.
But there will be no more HD. WAGN.
It will be fine
Well-Known Member
My point was it's not that simple to overlap. It's not a big deal for Ground to buy the HD as far as operations. It's a big deal the other way though. I wouldn't trade any of my Ground drivers for HD drivers just for area knowledge.
Just one point
Depending on how many vehicles, and their current value, unless revenue goes up, the value of your business is dropping basically every day as the vehicles depreciate. If you need to sell in 5 years, and haven't replaced the vehicles, you won't be able to sell for as much as you paid. Even with perfect maintenance, a 10 year old vehicle with double the miles is worth a lot less than a 5 year old vehicle.
And some of the cash flow reports I used to see don't take into account any reserve to cancel out that depreciation. Unless you are able to put aside cash reserves to counter the depreciation before counting cash flow, or net income, those numbers mean nothing. I imagine that some sellers who have business experience, or a good accountant actually do take these factors into account. Just watch it. Do you honestly believe that you are going to net $350,000 per year on a million dollar ISP investment???? And if you finance the debt, how much will you have after payments? A 35% return is a lie. Maybe 35% of the cash you invest if you finance most of it. If you put $100,000 down, you might be buying a $35,000 a year income, less if you hire a manager.
Yes, depreciation saves you on taxes, but it negatively affects the value of your business. In fact, the tax savings don't make up for most of the depreciation.
My advice is to calculate all your own figures for expenses, including replacement reserves, and value the business separately from any 'assets' included in the purchase. That's the only way to get the real picture of ROI.
I had a few routes years ago, and have over 30 years in 'investment' real estate, and I found real estate to be more lucrative and easier to deal with from a management perspective. I only had to rely on my own skills, and not trust that others would keep my assets covered. I both flipped and rehabbed for long term and short term, and didn't have to rely on any contract with someone else to make money. I'm sure there are other business investments with less risk, and less work for the same or better return than you will get from Fedex, especially if you are going to have debt servicing costs to aquire the so-called business. If fedex was such a great deal, Trump would be buying routes instead of real estate.
In real estate, if you put 10% down, and rent pays the mortgage, you double your money when the value goes up less than 10%. IF you buy smart, at a minimum you have someone else buying real estate for you when they pay your mortgage. You are going to have to manage about 1.3 drivers for each route you own, including peak planning, meaning permanent employees. You won't be able to afford to keep great employees since great employees will be able to find better jobs whenever they want, not even to mention other ISPs poaching your drivers. No similar issue in real estate since you are not dependent on employees, and can take a day off almost whenever you want.
At least with real estate, the underlying value of the asset generally increases. Unless net income increases over time, the value of the 'business' isn't going to increase despite other inflation. Remember that there is no real asset, and you aren't buying a real business, in my opinion. What you are buying is the right to service a contract, and fedex reserves the right to cancel that contract unilaterally, with your right to challenge cancellation limited.
Depending on how many vehicles, and their current value, unless revenue goes up, the value of your business is dropping basically every day as the vehicles depreciate. If you need to sell in 5 years, and haven't replaced the vehicles, you won't be able to sell for as much as you paid. Even with perfect maintenance, a 10 year old vehicle with double the miles is worth a lot less than a 5 year old vehicle.
And some of the cash flow reports I used to see don't take into account any reserve to cancel out that depreciation. Unless you are able to put aside cash reserves to counter the depreciation before counting cash flow, or net income, those numbers mean nothing. I imagine that some sellers who have business experience, or a good accountant actually do take these factors into account. Just watch it. Do you honestly believe that you are going to net $350,000 per year on a million dollar ISP investment???? And if you finance the debt, how much will you have after payments? A 35% return is a lie. Maybe 35% of the cash you invest if you finance most of it. If you put $100,000 down, you might be buying a $35,000 a year income, less if you hire a manager.
Yes, depreciation saves you on taxes, but it negatively affects the value of your business. In fact, the tax savings don't make up for most of the depreciation.
My advice is to calculate all your own figures for expenses, including replacement reserves, and value the business separately from any 'assets' included in the purchase. That's the only way to get the real picture of ROI.
I had a few routes years ago, and have over 30 years in 'investment' real estate, and I found real estate to be more lucrative and easier to deal with from a management perspective. I only had to rely on my own skills, and not trust that others would keep my assets covered. I both flipped and rehabbed for long term and short term, and didn't have to rely on any contract with someone else to make money. I'm sure there are other business investments with less risk, and less work for the same or better return than you will get from Fedex, especially if you are going to have debt servicing costs to aquire the so-called business. If fedex was such a great deal, Trump would be buying routes instead of real estate.
In real estate, if you put 10% down, and rent pays the mortgage, you double your money when the value goes up less than 10%. IF you buy smart, at a minimum you have someone else buying real estate for you when they pay your mortgage. You are going to have to manage about 1.3 drivers for each route you own, including peak planning, meaning permanent employees. You won't be able to afford to keep great employees since great employees will be able to find better jobs whenever they want, not even to mention other ISPs poaching your drivers. No similar issue in real estate since you are not dependent on employees, and can take a day off almost whenever you want.
At least with real estate, the underlying value of the asset generally increases. Unless net income increases over time, the value of the 'business' isn't going to increase despite other inflation. Remember that there is no real asset, and you aren't buying a real business, in my opinion. What you are buying is the right to service a contract, and fedex reserves the right to cancel that contract unilaterally, with your right to challenge cancellation limited.
Too bad you couldn't buy only the contract not the trucks then lease new units that can be replaced every 3 years. That seems costly but you will be much more able to determine your cost of operation and keep it stable which is of critical importance since you have to negotiate a rate package every few years. And yes I understand the brave new world joint replacements bring forth. I had to have both hip joints replaced not from contact sports but rather from 23 years driving my own route. I could and may go back as needed to handle volume spikes but going out again there on a continuous daily basis that remains to be seen. Buying a FXG contract is like buying a gold mine that has good ore but floods often has a bad roof and the easiest to mine ore has already been taken out.
I guess I should have read every reply in the thread before talking about vehicles. One of my hips is shot too from driving. Of course 15 years of heavy factory labor in my youth didn't help, nor did being a long distance runner for about 10 years.
It will be fine
Well-Known Member
Who says you can't buy only the contract? I'm sure the seller would do that. There's a market for used trucks and he could rent them out while finding buyers. There are a few guys around here that have started transitioning their entire fleet to leased vehicles. It doesn't sound like a win to me though. Most of my fleet is paid off and has been for a long time, I'd hate to have lease payments on the entire fleet. The old freightliners can have 200,000 miles and get by with just routine maintenance for a year as often as not.
It would be more economical if your mileage per vehicle is fairly reasonable . At the same time however if you're in a higher mileage rural area hauling much of the time overloaded on unpaved secondary and township roads then most of the time you've pretty much used up the best years the vehicle has to offer in about 3 years. Out where I'm at it's nothing to have well over 200,000 on a unit in 3 years. The operating environment has much to do with the decision of whether to lease or buy.
overflowed
Well-Known Member
You can just hire an express courier for more than he makes? He or she can do both with no training.
It will be fine
Well-Known Member
I've never been impressed with the work ethic of the Express couriers around here. They move too slowly, chit chat with customers, drive tiny vans, etc. I'm better off with new hires.
It will be fine
Well-Known Member
Same reason I wouldn't hire a ups driver. They'd have crazy expectations, it's better to start from scratch.Sure you will be.
UpstateNYUPSer(Ret)
Well-Known Member
Yeah, who needs a living wage and the ability to go to the doctor without mortgaging their house.
Ah. But those things conflict with X's quarterly financials.
