How Are FedEx Routes Valued?
Have you been thinking about selling your FedEx routes?
It could be that you’re getting ready to retire or relocate, or maybe you want to move on to a new opportunity. Whatever the case, knowing what your routes are worth is the first step toward deciding whether or not this is the right time to sell your FedEx route business.
So, how exactly do you determine the value of your routes?
First, find a broker you can trust.
Sellers are far more likely to attract strong buyers by working with a reputable broker instead of trying to sell their routes on their own. An experienced broker knows the industry inside and out and has a thorough understanding of the FedEx approval process. Perhaps most importantly, an experienced broker will ensure you receive a fair market value for your route business.
How does the valuation process work?
To determine a realistic value range for your route business, your broker will begin with an in-depth analysis of your financial records, vehicle fleet, local and regional market conditions, and more.
In doing so, they can identify areas of your FedEx route business that will strongly attract buyers as well as any areas that may need improvement. This will create a stronger value proposition and build the case for a higher price for your business.
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In short, FedEx route values are based on a multiple of the free cash flow.
FedEx routes are typically valued on a cash-free/debt-free basis, meaning any retained earnings accumulated in the business checking/savings accounts will remain with the seller. Your route valuation will be inclusive of the operating business itself, as well as any vehicles and related assets utilized by your enterprise.
It is typically the responsibility of the seller to pay-off any vehicle debt as part of the purchase price. In some cases, however, it may make more sense for a buyer to assume vehicle debt or leases. These and other variables will be determined during the valuation process.
There are several things that will increase the value of your routes.
On average, FedEx Pickup and Delivery (P&D) route businesses sell for 3-3.5X their free cash flow, while linehaul businesses can sell for upwards of 4X or more. However, a lot of that depends on where your routes are located and how attractive your business is to potential buyers.
First and foremost, buyers will want to see that your business is profitable and has potential for growth. To show this, you will need to have your books in order. Be prepared to provide key financial documents such as business tax returns and profit and loss (P&L) statements to demonstrate that your business is financially healthy.
Interested buyers will also want to know about your employees and your equipment. Remember, they’re not just purchasing your routes; they’re also taking over management of your staff and assuming ownership of your vehicles and all other business assets. Are your employees hardworking and trustworthy? Do your drivers have a history of safety and longevity? Is your fleet of trucks in good working order and properly maintained? If so, your business will be even more attractive to buyers.
Finally, it is important that your FedEx route business operates efficiently and that there are systems in place to ensure processes such as scheduling, staff training, and day-to-day operations all run smoothly. This will put the buyer at ease and reassure them that the transition will be seamless.
KR Capital helps FedEx contractors value, market, and sell their routes for a premium price.
Once you’ve made the decision to sell, you want the process to go as quickly and as smoothly as possible. Rather than go it alone and risk selling your FedEx route business for less than what it’s worth, contact KR Capital today for a free market valuation of your routes.
For nearly a decade, we’ve been helping FedEx contractors value, market, and sell their FedEx routes for a premium price. Our robust inventory of resources and partnerships is second to none. Each route valuation we perform is supported by current market comps, lender input, vehicle appraisals, and other factors that are critical to determining how much your business is worth.
Call KR Capital at 503.664.0753 or fill out our online form to learn more.