Should You Consider Buying a FedEx Route?

If you’re interested in a way to generate more income, you might consider buying a FedEx route. You can buy a FedEx route on a FedEx route marketplace, or from an independent owner; once you do, you’ll gain access to a fleet of trucks, employees, and equipment necessary to deliver packages all over the country.

FedEx routes function as a business and can be a great way to make money. But are they worth buying?

The Advantages of a FedEx Route

There are several advantages to consider when buying a FedEx route, including:

• Access to existing infrastructure. If you were to start a business of your own, you’d need to invest time and money to research and buy all-new equipment and infrastructure. But with a FedEx route, all that infrastructure already exists. You can simply step in and take over as a new owner.
• A reliable business model. FedEx routes operate profitably all over the country. They’ve been in existence for decades, and since home deliveries are only increasing, we can expect FedEx deliveries to be relevant for decades to come. This is a reliable business model that doesn’t rely on timing, luck, or strict innovation—making it appealing to a wide range of would-be entrepreneurs.
• Semi-passive income. Passive income is all the rage these days, enabling entrepreneurs to make money with little to no effort. Because FedEx routes operate almost autonomously, they’re almost a passive source of income. You will have to step in and manage at least a few hours per week, but this is mostly a hands-off system.
• Potential for future sale. If you decide to retire, or if you decide to pursue other ventures, you can always sell your FedEx route to someone else. Depending on the timing of the sale, you can probably make back most of your initial capital as well.

The Disadvantages of a FedEx Route

However, there are also some disadvantages to consider, including:

• Demand for initial capital. Buying a FedEx route can be expensive, with most routes going for at least $1 million. If you don’t have the cash, or if you aren’t able to qualify for a loan, this could be prohibitive. Still, you could always purchase with a partner to increase accessibility.
• Decision pressure. FedEx routes aren’t a “true” passive income source. If you want to remain profitable, you’ll need to keep your route effectively managed. That means you’ll be responsible for ongoing analysis, major business decisions, and occasional upgrades and improvements. It can be a lot of stress to manage.
• Inconsistent cash flow. While many FedEx routes benefit from consistent cash flow, this is far from a guarantee. You may see your profits ebb and flow with the seasons, or you may encounter dry spells that interfere with your ability to operate the business profitably.
• Potential profitability. FedEx routes can be highly profitable, but they may not offer the full potential profitability of starting a business from scratch. If you invent something new or capitalize on a new market, you could conceivably make more money that way.
• Because these routes are designed to work with FedEx, they often must follow strict rules. That means you won’t have much flexibility to innovate or experiment with new approaches. For some entrepreneurs, this is limiting.

How to Make Your Route Successful

If you decide to purchase a FedEx route, there are a number of steps you should take to make your route as profitable as possible.

These include:

• Choose the right kind of route. Pickup and delivery (P&D) routes are designed for local and business deliveries. These tend to be smaller and less expensive; they’re also easier to manage because they cover fewer miles and don’t have as many driver requirements. Linehaul runs, by contrast, tend to cover a lot of ground since they ship between FedEx hubs. They tend to be bigger and more expensive, as well as harder to manage, but they offer superior returns.
• Be prepared to actively manage. Though somewhat passive at generating income, you’ll still need to make management decisions on the fly. Be ready to look at financial reports, buy new equipment, make cuts where appropriate, and gradually optimize your business.
• Know when to sell. You probably won’t want to hold onto your FedEx route forever. Knowing when to sell can help you make an even greater profit—or avoid a major loss. Time your sale for the market, as well as for your own personal priorities (such as retirement).

Buying a FedEx route isn’t the right investment for every aspiring entrepreneur, but it could be the best way to utilize your existing capital and management experience. If you decide to move forward, consider talking to existing route owners to get their perspective, and do your research before finalizing any decisions.

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This article, "Should You Consider Buying a FedEx Route?" was first published on Small Business Trends