Valuation Multiples for a FedEx Route
FedEx routes are popular companies in the courier and local delivery industry. FedEx routes operate as independent businesses which provide package delivery services on behalf of FedEx. There are thousands of FedEx routes in the United States. According to IBIS World, these companies generate over $30 million dollars. We can expect an increase in revenue for the next several years. However, FedEx route operators face extreme competition from other major players like UPS. To build a successful FedEx route, it is crucial to understand the value of a FedEx route. In addition, if you are buying a FedEx route or selling a FedEx route, it is beneficial to learn about the valuation multiples for a FedEx route.
Valuing a FedEx Route
There are various factors to assess when valuing a FedEx route. As part of a business valuation, the business appraiser will analyze key value drivers for a FedEx route as well as financial statements. They then compare your FedEx route to similar FedEx routes that recently sold. The business appraiser uses various valuation methods to determine a fair market value for the FedEx route.
If you are buying a FedEx route, a business valuation can help you determine a fair purchase price. If you are looking to sell a FedEx route, a business valuation can help determine the listing price. Receiving a business valuation is also key to increasing the value of a FedEx route.
Peak Business Valuation, business appraiser, is happy to value a FedEx route. We can also answer any questions you may have about valuing a FedEx route. Reach out today by scheduling a free consultation with Peak Business Valuation, business appraiser!
Valuation Multiples for a FedEx Route
The image below shows average market multiples for a FedEx route. A business appraiser at Peak Business Valuation often uses multiples when valuing a FedEx route. However, this diagram is only a guide. For multiples that are specific to your FedEx route, receive a business valuation. Peak Business Valuation is happy to provide a valuation for a FedEx route. Schedule a free consultation with Peak to learn more!
Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation or its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.
What is a Valuation Multiple?
When determining the value of a FedEx route, experts often use valuation multiples. These values are ratios that compare your FedEx route to similar FedEx routes that recently sold. Doing so helps the valuation expert determine an appropriate valuation multiple for your FedEx route. The appraiser will then use different valuation approaches to determine a range of value for the FedEx route.
A common valuation multiple is the SDE multiple. An SDE multiple for a FedEx route compares the seller’s discretionary earnings with an implied value of the FedEx route. For example, the seller’s discretionary earnings of a FedEx route are $360,000. When using a 3.03x SDE multiple, the implied value of a FedEx route is $1,090,800. ($360,000 times 3.03x). Contrarily, if a 3.40x multiple is most applicable, the implied value of the FedEx route is $1,224,000. ($360,000 times 3.40x)
Peak Business Valuation provides business valuations for FedEx routes on a regular business. We are happy to work with individuals who are buying, expanding, or selling a FedEx route. Start today by scheduling a free consultation with Peak Business Valuation, business appraiser!
SDE Multiples for a FedEx Route
Average SDE Multiple range: 2.93x – 3.43x
Based on Peak’s data, FedEx routes have an average SDE multiple range of 2.93x – 3.43x. To determine an implied value of a FedEx route, apply the SDE multiple to the seller’s discretionary earnings. The calculation is as follows:
SDE X Multiple = Value of the Business
For instance, a FedEx route generates $485,000 in seller’s discretionary earnings and transacts at a 3.19x multiple. In this context, the business value is approximately $1,547,150.
$485,000 X 3.19x = $1,547,150
It is common to use the SDE multiple when valuing a FedEx route. This is because SDE takes into account common add-backs during the business valuation. These may include personal expenses, a fair owner’s salary, and any nonrecurring or non-related business expenses.
EBITDA Multiples for a FedEx Route
Average EBITDA Multiple range: 3.60x – 4.06x
The average EBITDA multiples for a FedEx route range from 3.60x – 4.06x. Apply this multiple to EBITDA to determine an implied value of the business. See the calculation below.
EBITDA X Multiple = Value of the Business
For example, a FedEx route has an EBITDA of $418,000. It transacts at an EBITDA multiple of 3.83x. Using the above metrics, the FedEx route is worth approximately $1,600,940.
$418,000 X 3.83x = $1,600,940
The EBITDA multiple measures the return on investment (ROI) that the operator expects to make from a FedEx route. The valuation expert will determine what multiple is applicable to your FedEx route. The EBITDA multiple may be preferred since it includes normalized ratios. Normalized ratios allow the valuation expert to compare similar FedEx routes. This is because it normalizes differences in taxation, capital structure, and fixed assets. In addition, normalized ratios can more accurately estimate the future earnings that a buyer can expect from the FedEx route.
REV Multiples for a FedEx Route
Average REV Multiple range: 0.64x – 0.81x
According to our data, FedEx routes sell an average REV multiple of 0.64x – 0.81x. A business appraiser can determine the implied value of the business by multiplying the amount of revenue a FedEx route makes by the valuation multiple. Refer to the equation below.
Revenue X Multiple = Value of the Business
For instance, a FedEx route makes $2.2 million in revenue. It then transacts at a 0.75x multiple. In this case, the business is worth approximately $1,650,000.
$2,200,000 X 0.75x = $1,650,000
The REV multiple represents the total revenue generated by a FedEx route. During a business valuation for a FedEx route, experts examine the REV multiples of comparable FedEx routes that have recently sold. Doing so enables them to determine an appropriate multiple for your FedEx route. It is important to note that REV multiples can vary based on factors such as location, competition, and industry demands.
Summary
There are various factors that affect the valuation multiples for a FedEx route. As such, it is important to receive a business valuation for a FedEx route. As part of a business valuation, an appraiser at Peak Business Valuation evaluates your FedEx route’s strengths and weaknesses. In addition, they will compare your FedEx route to similar FedEx routes that have recently sold on the market. Using various business valuation methods, they will then determine a fair market value for the FedEx route.
Peak Business Valuation, business appraiser, values FedEx routes frequently. We are happy to provide you with a business valuation for a FedEx route. In addition, we can answer any questions you may have on valuing a FedEx route. Start today by scheduling a free consultation with Peak!
Be sure to also see Valuing a FedEx Route and Value Drivers for a FedEx Route.
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