Here’s a riddle for you:
I had a contractor tell me he hated his FedEx route and wanted to sell. He had a 4 hour work week, a net income of $115k/year, but said it was a terrible mistake buying that route and wants to sell. If all that info is 100% true, then what’s he hiding? Read on to find out, because if this seems mystifying to you on how that’s possible, then you’re in need of getting help with acquiring FedEx routes as much as this guy.
This contractor called me up saying that he had purchased the routes on his own with no outside help a couple years ago. The owner and broker even had provided “due diligence” documentation and proof of income such as legitimate tax returns and 1099’s to prove the income. He had a background in finance and knew how to read a balance sheet and tax returns (sorting out the BS deductions like depreciation from legitimate ones like payroll).
He still got scammed with buying a FedEx route.
The FedEx route business is excellent overall, but a few of these greedy sellers are ruining it for others.
So, what was the problem? The problem was that he expected to be making about $200k, and work closer to 0-2 hours a week while having a manager in place because the business was advertised as netting $200k a year and the owner being fully absentee.
Just because a business is being run absentee, doesn’t mean it’s SUCCESSFULLY being run that way.
If you’re coming from outside of this industry, you’re crossing into a treacherous path. Even if you have a background in finance, buying businesses, reading balance sheets, or even if you’re an expert in logistics itself, all these things still won’t help you figure out what’s “normal” or “expected” of a contractor.
No amount of outside experience can tell you what’s expected of you in a job that you’ve never done before.
Nor will it help you understand what is a normal amount of money to be generating from these routes. If you have no idea of what’s normal, one can convince you of anything with enough charisma and force to back it up. We can bend financial numbers left and right to say just about whatever we want a lot of times if you don’t know how to interpret the settlements or know the historical norms from FedEx. A seller can also mislead you in regards to how much time it takes to run this business correctly. I would like to emphasize the word “correctly” as much as possible.
Let’s step back and discuss finding and buying an absentee FedEx route for sale.
So can any FedEx route actually be run absentee? Sure! But, I can buy any business and run it absentee.
Want to know how? Easy. I buy a local delivery and catering restaurant that the owners are currently working 60 hours a week managing employees, their daily routes, and customers non-stop. After I purchase the business, I’ll tell one of the longest tenured drivers they’re now the manager. The next day I don’t show up and continue to not show up day after day, and then after a few weeks I’ll sell the business, and advertise it for sale as being absentee. Voila! I now have an absentee route business! Also when I go to sell it, I have a listing that sounds WAY better than other restaurants for sale.
Should you buy it? Well…first you might want to verify that the owner really IS absentee. You do your “due diligence” and verify that indeed, I sit at home drinking margaritas while running the routes absentee. Must be totally legit then, right? Wrong. Because if my absenteeism is slowly allowing the business to drift into an inevitable path of destruction, maybe you should think twice.
If you think you show someone several hundreds of thousands of dollars in an offer price and expect the recipient to be 100% forthcoming with all information, you’re in for a costly lesson.
But perhaps the seller seems very convincing that he’s legitimately fully absentee, and the rest of the contractors out there just don’t know how to manage businesses appropriately. Do you believe the masses (which don’t always advertise their business as an absentee route for sale) are just poor business owners (which might be the case), or believe the seller (who might just be that good at business management)? If you don’t know how to tell the difference, well, you can guess that I’m going to highly encourage you to get some help evaluating that difference.
Also, maybe the seller honestly feels like he’s running his business perfectly and feels like you can do the same.
If you’ve ever met someone in a job that thought they were doing a fine job (but you knew they weren’t) and then were amazed when they were the first to get laid off or fired, you can also see that even honest people might be screwing up and not even realizing it. This is doubtful, as I think most sellers know exactly what they’re up to, but I’d like to give the benefit of the doubt every now and then.
I want to emphasize that just because sellers twist, bend, or omit critical pieces of information, doesn’t mean that FedEx routes don’t provide a tremendous opportunity for a lot of people looking for a stable business to acquire. But trying to learn from a seller, or a forum (even worse?), or a broker (which it’s not really a brokers primary job to teach you an entire business model or to show you how to perform proper research on a business), then suddenly something as legit and wonderful as a FedEx route can suddenly be marred terribly.
Let me help train you personally on how to evaluate FedEx routes like a pro today and don’t do this alone.