How to Evaluate FedEx Routes for Sale in Uncertain Financial Times

 

As part of your due diligence, you need to estimate the operating costs of a route so you can weigh that figure against the likely revenue and the purchase price. To properly evaluate FedEx routes for sale, you need to consider the various operating costs, particularly fuel and labor. Fuel costs, interest on loans, leasing costs, and labor costs obviously vary over time, but there are some resources to help you get a general idea of what to expect.

Estimating Operating Costs

You’ll find plenty of general guidance on the cost of running a pickup and delivery route. Capital Route Sales offers estimates along with other information for conducting due diligence. Here are the cost estimates:

  • Payroll: 40% to 50%
  • Repairs and maintenance: 10% to 15%
  • Fuel: 10% to 15%
  • Truck payments: 10%
  • Workers comp and truck insurance: 5%
  • Miscellaneous (scanners, tools, uniforms, office equipment): 5%

 So, if you are about to buy a route, keep in mind how transient events like recent gas price hikes will affect your operating costs. Labor and fuel are the most subject to predictable changes. Those two things are major factors (up to 60% or more), so they deserve careful consideration when planning to buy a route.

Fuel Costs

Fuel costs rise and fall throughout the years, but when estimating costs, it's best to err on the high end. This helps to ensure you are prepared for times when prices are higher than usual. If you’ve used 12% for fuel cost estimates before, you could be in for a shock when the true cost ends up at 18% for the next two years. In all cases, you want to evaluate the factors that drive fuel cost, including pickup and delivery volume, number of stops, and fuel efficiency.
 

Labor Costs

The largest cost associated with FedEx ground routes will be labor. Labor costs are much less extreme than gas and diesel costs, but small variations can really eat into a route’s revenue. The cost of hiring new drivers or hiring a route manager will vary, as will overall payroll costs and related expenses like worker's compensation insurance. Find out how much pickup and delivery drivers are earning, and whether the rate is going up or down. If rates are going up, you can reasonably expect your labor costs to increase as drivers gain experience or need to be replaced.

Evaluate the Likely Operating Costs Carefully

When analyzing FedEx routes for sale, consider how you need to modify guidance on estimating costs with an eye on current economic conditions. If you want to buy a route, we have listings and resources that can help you make an informed purchase and learn more about how to buy a FedEx route. Contact us at 770-726-0149 for more information on FedEx ground routes and everything that goes into the buyer process.

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