Buying a FedEx Route? Do These 5 Things First

As it is often said in business, you need to start your business planning long before you actually start your business. This means you need to do a lot of analysis and planning to ensure you get the type of FedEx route you want and can handle in the location you want, and for the right price.

And currently, there are a lot of people out there looking to start a business, so FedEx routes are in high demand in both the pickup and delivery (P&D) sector and with linehaul routes. This makes it more important than ever that you do your due diligence and prepare yourself before you start shopping for routes. Here are five steps to follow to ensure you don’t miss out on this lucrative business opportunity.

Do your Research on FedEx Routes

First and foremost before you start any business, you want to do some research to make sure the industry and the business itself are right for you. There are some things you should do even before you contact a FedEx route broker and start your search.

Do some research online to determine what the FedEx Independent Service Provider (ISP) model looks like, and what is required of contractors, including vehicles, insurance, driving records and more. You can figure out really quickly if entering the logistics business is right for you. Browse articles and online forums, watch videos, and, if you can, reach out to existing contractors to ask questions. This can help you get a real feel for the business.

You’ll also want to research the buying process, how much FedEx routes cost on average, and the different types of financing available. You’ll have to get FedEx approval before you can purchase a route, so you should learn how that process works, what steps are involved, and what you will need before entering into a purchase agreement.

Finally, research potential brokers just as diligently to ensure they understand the FedEx Ground business and offer the best routes in terms of both quality and value.

Establish your FedEx Route Corporation

To operate as a FedEx Contractor, you will have to be incorporated as either a C corporation (C corp) or an S corporation (S corp). While the two have a lot in common, there are some differences you will need to consider before you decide which path is right for you. The best policy is to talk to an attorney and an accountant familiar with your local tax laws, and the advantages and disadvantages of each to your unique situation.

Find Out Your Credit Score (and fix it if you need to)

As with most financial investments, it is important that your credit is in good standing if you are considering buying delivery routes and becoming a FedEx ISP. This is especially important if you are applying for a loan, specifically as a small business owner. Do yourself a favor and get a free copy of your credit score ahead of time to help determine if any loan you apply for will be approved.

If you have some issues with your credit report and credit score, it is best to resolve them before you attempt to get financing for your business. Unless you have enough cash to purchase the business and leave enough working capital for the first six months or so of operations, you will likely need financing of some sort.

This is also a part of the FedEx approval process, so it is important to know and understand your credit score and how those in banking and financing will evaluate your creditworthiness.

Get Your Money Together

Obviously, if you are thinking about buying FedEx routes, you have a pretty good idea of how you will pay for them. Still, it’s wise to have all your proverbial ducks in a row beforehand.

If you will be paying in cash, be sure to consolidate your funds ahead of time to ensure a smooth transaction. Be aware that the process of allocating funds from your 401K can take up to a month or more, so begin the process early to ensure the money is available at closing time.

If you will be working with a lender, research available loan types (and terms) to decide which best fits your needs and finances. Look into things such as the loan repayment period, what your monthly payments will be, and what interest rate(s) apply.

There are a lot of different financing options for FedEx routes, from friends and family to home equity lines of credit (HELOC) to more conventional bank and small business loans. The better your research, the more likely it is that you will get a loan that meets your needs.

Have Your Request for Information (RFI) Ready

FedEx has a comprehensive approval process you must pass before you can sign a purchase agreement and a contract with them. As part of that process, they will ask you for a Request for Information document, which is essentially your business plan. FedEx will use it to evaluate your ability to successfully fulfill your obligations as a FedEx contractor.

Your RFI should include information about your financial viability, along with your plans for employee recruitment and retention, customer service, safety and security, delivery fulfillment, contingency situations, and compliance. You’ll need to have a plan to cover operations and labor costs, maintenance, and other expenses. Your customers and FedEx will be counting on you.

Partner with a FedEx Route Broker

Earlier in this article, we cautioned you to research route brokers, and the reason is simple. The route purchasing process is much easier when you have someone who knows the ropes on your side from the start. A broker can help you get your finances in order, and make sure you are prepared for the approval process. They also have route listings you may not find elsewhere and can help you find the right route in the right place for the right price.

Route Advisors is a highly specialized brokerage firm focused exclusively on the sale of FedEx P&D and linehaul routes. In addition to helping you find quality routes in your area and within your price range, our expert team will assist with financing and help you navigate the FedEx approval process like a pro.

When you’re ready to take the next step toward owning your own FedEx route business, please reach out to us at Route Advisors.

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