Get a realistic valuation for a FedEx route.
So you’re probably wondering, “How much is my FedEx route worth?” and want to call up a route broker to get the answer. But most of the times when you call up a broker, they’ll promise to get you the most money possible for your route.
Maybe they can get you the most money, but is the price they’ve quoted an accurate amount of what you’ll actually get?
It’s a common tactic for route brokers to try to state they can sell your route for a high number so that you’ll sign the listing agreement. After you sign the agreement, you become locked into selling with them, which is a common stipulation for many brokers. If they got you to sign based on that inflated price, and then months pass without a sale, they’ll say something to the effect of, “the market has spoken and we need to adjust your price down.” But at that point, they’ve already locked you in and they get to have the listing now at a reasonable price.
Prices of routes have to change all the time, and sometimes the first price advertised isn’t the right price.
And I understand it’s sometimes hard to pick that perfect price right out the gate when selling your route. You want to sell in a reasonable amount of time for a good price and not pick a price so high that no one is interested, and not sell so low that people beat your door down to buy a route from you.
The nice thing is about routes is that there are so many others that have been bought and sold to give us a good starting point for valuation. Unlike buying something unique like a marketing franchise, which may have numerous variables that are different between other business in a similar industry, the route business is fairly uniform for a good making valuation somewhat straightforward. The net income sets that baseline for our valuation, but there are other things that affect that multiple either upwards or downwards.
There are really only a few distinguishing characteristics about routes that have impact on a valuation multiple, they are:
- Location of the terminal of the routes.
- Time required to manage the routes.
- Condition and value of the trucks.
- Potential longevity of current route operations.
That’s it. Everything else in terms of valuation (not due diligence) tends to fall into a subset of one of those 4 characteristics. Things like how far the routes are from a terminal would just go under the umbrella of how difficult it is to manage the routes. And issues such as employee tenure would also go under that same umbrella.
Most route brokers do not do any sorts of verification of your revenue or any due diligence – that’s on the buyer to perform. Therefore, if you misstate your earnings to a broker severely, or under represent the amount of time it actually takes, the broker will likely not help you adjust those things. Not to pick on brokers as I often do, but many brokers haven’t ever sold a route before (unless they’re an established player such as Mr Route, RouteBrokers, etc.). It’d be difficult or even impossible for the average jack of all trades broker to tell you how your business is actually run and what you should actually expect in terms of offers. A typical broker certainly can not ascertain whether the routes you’re selling are a time bomb to adjust the price accordingly. Although sadly enough, most buyers that don’t get professional consultation will focus so much on trying to figure out if the net profit of the route is right or not (which is hard enough to do so properly), they won’t even realize the presence of a route business that’s destined to blow up.
Therefore, regular brokers can often mislead you without even intending on doing so.
If you’re looking to get a quick idea of what your route would actually sell for and what to expect when using a broker, please reach out to me. Also, if you’d just like to know how much your FedEx route is worth but still are not ready to sell, we can discuss this as well.