How to Value a FedEx Route
FedEx routes are by far the most popular courier and local delivery service companies. FedEx routes have become more lucrative as the local delivery service industry continues to expand. The two largest companies in this industry are FedEx and the United Parcel Service (UPS). As measured by market share, these two companies make up 76.60% of the market. The other 23.4% of the market consists of smaller companies. As the industry continues to change, it is important to understand how to value a FedEx route.
Knowing the fair market value is key to selling or buying a FedEx route. Peak Business Valuation, business appraiser Utah, is here to help you understand how to value a FedEx route! Many internal and external factors impact the value of a FedEx route. As a certified business appraiser, Peak Business Valuation helps many individuals who are looking to buy or sell a business.
The first step to buying or selling a business is to obtain a business valuation. A business valuation engagement discusses key metrics used in valuing FedEx routes. Below are some of the common metrics we see when valuing a FedEx route. Individual circumstances will result in different multiples, which may vary from the “typical company” multiples we outline below. For more information about valuing a FedEx route, schedule your free consultation call with Peak Business Valuation, business appraiser Utah.
Market Multiples for a FedEx Route Company
- EBITDA Multiple Average: 3.50x – 4.15x
- SDE Multiple Average: 2.72x – 3.50x
- REV Multiple Average: 0.61x – 0.92x
** Disclaimer: These multiples are for educational purposes only. Multiples are based on companies with revenues between $1-$10 million. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.
How to Value a FedEx Route
There are several approaches used when valuing a business. Most commonly, FedEx Routes trade and transact based on a cash flow multiple. Most hypothetical buyers or investors are primarily concerned with the cash flow ability of a company. They want to make a certain return on their investment. EBITDA is a measure of financial performance and is widely considered to be the most reliable multiple. When it comes to FedEx routes, this is the case. The FedEx route industry tends to transact primarily on a cash flow multiple, such as EBITDA and SDE.
However, this industry is very competitive and has increased over time. As such, a revenue multiple is becoming more and more applicable as the cost structure of competing companies becomes more closely aligned. As always, speak with a professional, like Peak Business Valuation, to see what multiples are most applicable to your FedEx route.
The key to increasing the value of a FedEx route is to better understand what drives its value. Once you understand how to value a FedEx route, you can begin taking steps to increase its value. If you are searching for an in-depth business valuation for a FedEx route, schedule a free consultation with Peak Business Valuation, business appraiser Utah.
Key Value Drivers
A business is not valued based purely on a multiple such as an EBITDA, SDE, or REV multiple. Instead, there are various approaches a valuation expert uses to determine the value of a business. There are many qualitative and quantitative factors to consider. Some of these aspects include what Peak Business Valuation refers to as “Key Value Drivers.” A key value driver is a metric that significantly impacts the value of a business. Below we mention some of the key value drivers that impact the value of a local delivery service company. For additional success factors see “Value Drivers for a Courier or Delivery Company”
What are the current contract details? Peak Business Valuation values FedEx routes regularly. One of the key components a valuation expert considers in the valuation of a FedEx route is the contract details. Each FedEx Route will have a contract that determines the base rate for the number of stops on each route. If the flat rate is higher for one contract versus another, then that company will likely have higher revenue and will be worth more. There are other details to consider within contracts. But, the specifics can play a major role in determining the value of a courier or delivery service company.
Machinery and Equipment
A large part of the value of a FedEx route comes from the machinery and equipment. This equipment usually is in the form of trucks, trailers, vans, etc… If the trucks are not in good working condition, then the company will be operating inefficiently. This can seriously impact the value of the business. Additionally, the more trucks a company has to use, the more work the company can do. As certified appraisers, Peak Business Valuation provides machinery and equipment appraisals for trucks and equipment. If you are interested in a machinery and equipment appraisal, reach out to Peak Business Valuation, business appraiser Utah, to learn more!
Employees and Drivers
One of the most important aspects of a FedEx route is the company’s employees. A company’s employees are vital to its success. A FedEx route lacking employees will cause the performance and value of the business to suffer. Most couriers and local delivery service companies have a hard time retaining their employees. This is especially true around the holidays. The holidays are the busiest time of the year for FedEx routes! A company with high employee retention will show on the P&L. It will in turn impact the FedEx route’s value.
Within every industry, certain factors impact the value of a business. An individual can gain an idea of what their business is worth by using multiples. However, there are many other considerations when valuing a FedEx route. If you are looking to buy, sell, or grow a business, you have come to the right place. Let Peak Business Valuation, business appraiser Utah, help you understand the value of a FedEx route.
Peak Business Valuation, business appraiser Utah, values FedEx routes all across the country. We would love to answer any questions you have about how to value a FedEx route. You can reach out by scheduling your free consultation call below.
For more information, check out “Value Drivers for a Courier or Delivery Company.” As well as, “Valuation Multiples for Couriers and Local Delivery Companies.”
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