FedEx Linehaul Routes in Dallas, TX
Sep 15, 2023
Background:
In Dallas, TX, a promising opportunity surfaced when two FedEx Linehaul team routes were up for sale. These routes had been thriving, recording double-digit organic growth since they were established. A savvy entrepreneur, already involved in the trucking industry, identified this as a strategic add-on to his existing business.
Acquisition:
Purchase Price: The entrepreneur clinched the deal at an asking price of $925,000.
Downpayment: He made a 10% downpayment, amounting to $92,500.
Financing: The remaining balance ($832,500) was financed at an 8% interest rate.
Annual Interest Payment: This means he was obligated to an annual interest payment of $66,600.
Strategies for Growth:
Synergy with Existing Trucking Business: The entrepreneur leveraged his existing resources, contacts, and expertise in the trucking sector to extract maximum value from the new acquisition. He was able to consolidate some of the overhead costs and achieve better negotiations with vendors due to increased scale.
Efficient Load Sharing: With the contiguous routes, the entrepreneur optimized load sharing, thus reducing downtime and fuel expenses.
Tapping into Organic Growth: FedEx, with its consistent package volume increase, offered organic growth. The entrepreneur ensured service quality and timeliness to reap the benefits of this inherent growth.
Acquisition of More Routes: Recognizing the success model, the entrepreneur mulled over adding more routes, providing a scalable growth strategy.
Full-time Management: While the business was semi-absentee, the entrepreneur ensured a full-time manager was in place to oversee operations, ensuring the smooth integration of the routes into his broader trucking business.
Financial Performance:
Year 1: Starting with gross revenue of $921,744 and a 10% growth, the new revenue totaled $1,013,918, and the cash flow increased to $333,979.
Year 2: With 15% growth in the second year, the revenue ascended to $1,166,006.16. Maintaining the profit margin, the cash flow bolstered to $383,572.
Business Valuation:
Post two years, considering the steady EBITDA growth and the industry's average multiplier, the business's worth would have substantially escalated. If we use a conservative 3x EBITDA multiple, the business would be valued at around $1,150,716.