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KR Capital LLC
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The FedEx Peak Season

FedEx has recently announced that it expects to ship 317 million packages between Black Friday and Christmas Eve (a time referred to by FedEx contractors as “peak season”).  In anticipation of this record package volume, FedEx will be hiring more than 55,000 seasonal workers – up from about 50,000 in 2014. 

The “peak” season is an interesting time to be a FedEx contractor.  October begins the season where FedEx contractors across the country start to feverishly to recruit, qualify and train seasonal drivers, locate and reserve additional rental trucks, and ultimately buckle down for the busiest time of the year. 

In contrast, the window to sell FedEx routes narrows considerably in November and December.  This is primarily due to the fact that FedEx is not keen on bringing in brand new contractors during the busiest time of the year.  As such, those looking to sell their FedEx routes must often wait until January of the following year.  

A few words of advice for those FedEx contractors hoping to close a sale between Thanksgiving and Christmas:  Wait until January.  First and foremost, you will have an extremely difficult time convincing your terminal manager to push the sale through during that period.  Second, with January right around the corner, waiting a few more weeks will allow you to focus on your business operations and make the peak season as profitable as you can.  This will allow you to present your new buyer with a fresh set of year-end financials.  A buyer’s offer price will be most heavily influenced by your most recent set of yearly financials.  As such, buckle down through peak and finish the year strong.   

http://www.deliveryroutesforsale.com/2015/10/the-fedex-peak-season/
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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!

http://www.deliveryroutesforsale.com/2015/08/when-to-sell-your-fedex-routes/
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New Study: Small Businesses Selling Faster than Ever

According to new data from BizBuySell.com, the median number of days it takes to sell a small business has been declining since mid-2012. 

According to the report, the median business sale time has decreased to 153 days in Q4 of 2014, down 23% from its peak of 200 days in Q2 2012.  Bob House, Group General manager of the company, states that the reason for the decline is likely a combination of factors to include a steadily improving economy and an overall growth of buyers on the market.

For FedEx contractors who are looking to sell their routes, this should be of particular interest.  Our experience suggests that FedEx routes sell far more quickly than more traditional businesses.  We believe this is the case for several reasons:
Weekly settlement statements directly from FedEx allow buyers to quickly validate the income of the business given that the reports are coming from a trusted source
Simplicity of the business model.  FedEx contractors aren’t required to constantly seek out new customers or innovate their product offerings.  In short, a contractor’s job is to primarily maintain the trucks and retain employees.
Steadily increasing revenue.  Often small businesses experience peaks and valleys with respect to their overall growth and revenue.  FedEx routes produce highly steady and consistent volume and rarely decrease in revenue year-over-year.
Lack of competition.  Because contractors have exclusive contracts with FedEx to service certain areas, they are not in competition with each other.  Often small businesses struggle with new and larger competitors entering into their marketplace, therefore decreasing sales and making a sale of the business more difficult.
For more information on the article referenced above, please visit

http://www.deliveryroutesforsale.com/2015/06/new-study-small-businesses-selling-faster-than-ever/
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We recently received an inquiry on our blog asking us to share our perspective on how the FedEx model works.  While that question deserves a very lengthy and detailed answer, we did our best to break the FedEx model down into a concise, easy-to-read explanation...
In short, FedEx contracts with thousands of independent contractors across the US to fulfill most of its package deliveries.  It is important to note that overnight shipping (FedEx Express) is not contracted out to independent contractors.  Rather, this is handled by FedEx corporate employees.

With that said, there are 3 segments within the independent contractor model: linehaul, ground, and home delivery.  Ground and home delivery are sometimes jointly classified as "ground". 
The independent contractors have a contract with FedEx (typically ranging between 1-5 years at a time) that stipulates the rates, service areas, obligations of the contractor, etc.  Because the contractor effectively "owns" a certain geographic area, that contractor is responsible for ensuring the safe delivery of all FedEx packages which are destined within their territory.  Depending on the state (specifically whether the state is an IC or ISP state), that contractor has a certain degree of independence regarding how the routes are configured, and the number of trucks that will be servicing the territory.

The delivery drivers are often W-2 employees of the independent contractor's corporation.  It is the responsibility of the independent contractor to pay their drivers, maintain the vehicle fleet, purchase fuel, insurance, etc.  

The compensation to the independent contractor is calculated based upon the terms stipulated in the contract with FedEx.  The contractor is paid each week (via direct deposit) for the prior week's work.  The independent contractor, in turn, pays its expenses out of the revenues earned from FedEx.

For more information about FedEx routes, please visit us at:  

www.deliveryroutesforsale.com
 
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FedEx Ranks as 39th Most Reputable Company in the World

According to the Reputation Institute, published in Forbes, FedEx ranked # 39 on the 2015 list, up 15 points from its 2014 position.  Companies achieve a spot on the Global Rep Trak list based on the public’s perception of seven categories: innovation, leadership, governance, citizenship, workplace, performance and products/services.  The database examines 7,000 companies, across 50 countries, in 25 industries. 

As noted in an unrelated article by Forbes, FedEx has placed significant resources into its technology in an effort to transform the company into a “Cloud Centric Enterprise.”  The link below contains a very interesting interview with FedEx CIO Rob Carter on how he’s taking the company and its technology to the cloud…

http://www.deliveryroutesforsale.com/2015/04/fedex-ranks-as-39th-most-reputable-company-in-the-world/
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Real-time Buyer Activity for FedEx Routes

As specialized brokers of FedEx routes, much of our day is spent marketing to, and speaking with, buyers all across the country.  As part of this process, we talk to hundreds of buyers each week to determine exactly what they are looking for in an effort to connect them to the right FedEx opportunity.  Our buyer database contains information on literally thousands of buyers who are looking specifically to buy FedEx routes.  For each buyer we speak with, we strive to intimately understand what they are looking for, including: location preference, cash flow requirements, financial capability, # of routes desired, and more.  These preferences are kept on file and the buyers are alerted when a new opportunity matches their criteria.
In addition to the buyer list that we have already developed in-house, we undertake a number of outbound marketing efforts.  This results in a new buyer list being developed for each new transaction.  As part of this process, we receive important feedback regarding the buyer activity for each opportunity marketed. 

The information below contains some top-level information on the buyer activity in each region we are currently working in.  FedEx contractors working with KR Capital gain access to our extensive (and exclusive) in-house buyer database, as well as new outbound marketing initiatives.  We run these marketing efforts in parallel, thereby increasing the buyer list, and creating a quick sales cycle.  Click the link below a summary of our current buyer activity on several active projects:

http://www.deliveryroutesforsale.com/2015/03/real-time-buyer-activity-for-fedex-routes/
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In an effort to keep buyers and sellers of FedEx routes up-to-date on the latest valuation metrics, we have compiled a report which reflects the most recent sales data that we have available.  The report (taken from BizBuySell) shows sales data from recent FedEx route transactions across the country.  The information includes data from routes which reported seller’s discretionary earnings (SDE) of $200,000-$400,000.  We have used the data contained in this report to determine an average sales multiple for routes across the country.  This is done by dividing the sales price by the earnings to arrive at an earnings multiple.  As of 2/6/2015, the average multiple for routes generating between $200-400k in seller’s discretionary cash flow was approximately 2.785.  This is very much in line with our experience and what we have seen in the market.


To view the report, or for additional information on FedEx route valuations, please visit our website.

http://www.deliveryroutesforsale.com/2015/02/updated-buyer-multiples/
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FedEx Delivers Vince Lombardi Trophy to Super Bowl

Super Bowl Sunday is on its way and who better to deliver its coveted trophy than FedEx?

http://www.deliveryroutesforsale.com/2015/01/fedex-delivers-vince-lombardi-trophy-super-bowl/
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2014 FedEx Route Sales
2014 has been a great year for FedEx route sales and we thought we'd share a summary of some of our successes!If you're interested in getting more information about buyer activity, route pricing, sales timing, location-specific buyer demand, etc. we would be more than happy to discuss with you further.  In the meantime, here is an overview of our 2014 FedEx route sales.  Happy holidays!
 8 Home Delivery (Worcester, MA)
 5 Home Delivery (Hartford, CT)
 3 Ground (Silver City, NC)
 7 Ground (Sacramento, CA)
 5 Ground (Lenexa, KS)
 8 Ground (Hartford, CT)
 8 Ground & Home Delivery (Manchester, NH)
 8 Ground (Worcester, MA)
 11 Ground & Home Delivery (Cape Cod, MA)
 2 Home Delivery (Dallas, TX)
 2 Ground (Indianapolis, IN)
 5 Linehaul (Hartford, CT)
 3 Home Delivery (Eau Claire, WI)
 1 Ground, 9 Home Delivery (Moline, IL)
 7 Ground (Tri Cities, TN)
 5 Ground (Cape Cod, MA)
1 Linehaul (Hartford, CT)
 3 Ground (Baltimore, MD)
 3 Home Delivery, 2 Ground (Fargo, ND)

http://www.deliveryroutesforsale.com/about/
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