When to Sell Your FedEx Routes
FedEx contractors contemplating the sale of their routes often ask us whether there is a right or wrong time of the year to sell. Should I sell now or wait until after peak? Do route prices vary with the time of year? How do I incorporate my new route(s) into the valuation of my overall business? I need a new truck – should I purchase/lease one before the sale or leave it to the new buyer? These are just some of the questions we receive on a daily basis. We’ll do our best to answer some of those questions here…
First and foremost, routes are consistently bought and sold based on a multiple of your profitability in a given YEAR. Period. While your revenue and volume may ebb and flow with the time of year, your aggregate annual revenue will take into account the peaks and valleys of the business and will manifest itself into your 1099 at the end of the year. As such, regardless of the time of year, your routes will be valued based upon how they have performed in the past and present; and some buyers may give you some upside consideration for the future earnings of the business.
Most contractors understand that FedEx is very hesitant to allow new buyers into the business during peak season. In the past, we have seen route transfers being blocked as early as October, thus forcing the buyer and seller to wait until January of the following year. With that said, we have completed transfers in November and so it can be a difficult thing to gauge. Bottom line: If you are thinking about selling your FedEx routes, you will want to start the process in August at the latest as it can take several weeks (and sometimes months) to procure the right buyer, the right price, and allow for the FedEx transition process (which is typically 30+ days unto itself). If you are expecting an above-average surge in volume and revenue during peak season, it may be advisable to wait until January so that your year-end financials reflect the strong peak revenues.
Selling contractors who have received (or will soon receive) a new route are faced with a difficult decision about whether and when to sell. Often new routes are awarded to contractors who are in good stead with FedEx and who have demonstrated a desire to stay with the FedEx family long-term. Most buyers who are looking to purchase FedEx routes have never been a FedEx contractor before. The FedEx business is entirely new to them and thus they barely know what to expect with existing routes, not to mention a brand new route. For this reason, it is difficult to convey the financial implications of a new route to a buyer without any prior knowledge of the business. Buyers love looking at historical data and basing their offer price on actual, historic figures. In most cases, presenting buyers with projections of a new route will simply not hold as much water as existing routes. Knowing this, the decision of whether or when to sell becomes a question of motivation: Do I run the route for a while to demonstrate history and justify a higher price? OR Do I immediately sell the new route and profit from what may likely have been a free route from FedEx?
To be sure, there are a wide number of variables that will determine the right time for you to sell your routes. Routes and circumstances vary with every single contractor and so it is difficult to identify a “golden rule” for when to sell. If you’d like to speak with us about your exit plans, please don’t hesitate to contact us with any questions. We’d love to hear from you!