Before you buy any business or property, you go through a process called due diligence. It’s a term that means, quite simply, that you are getting what you paid for. Due diligence and an Amazon Delivery Service Partner route is not much different, but you do need to take some steps specific to a delivery route.
Think of it like the process of buying a used car. You kick the tires, sit in the driver’s seat, take it for a spin, and make sure the engine and transmission is working as expected. If you notice anything not working, you ask.
So what are the questions you ask related to due diligence and an Amazon Delivery Service Partner Route? Here are the things you need to know.
Talking Profit and Loss
At the heart of any business is profit and loss. Profit and loss statements are usually pretty straightforward, but with Amazon businesses, you usually have several routes, and that is where things can get tricky. While the overall business is profitable, individual routes could be breaking even or losing money, and that cost is covered by other routes.
Dig deeper. Understand what you are buying and why those routes may or may not be profitable. Is it possible to buy the business and turn those around? Are there ways to combine routes or create other efficiencies?
While the current owner of the business may not have done those things, that does not mean it’s not possible. But a hard look at profit and loss is a vital part of the process.
Tax Time and Due Diligence and an Amazon Delivery Service Partner Route
Ah, the dreaded tax man, the thing no business loves to deal with. However, when it comes to due diligence, there are two important things to look at related to taxes:
- Are taxes current? Does the business have any outstanding tax debt? What are the projected taxes for the current tax year? Are quarterly taxes up to date?
- How much is the business paying in federal, state, and other local taxes? Is this more or less than you would expect for this type of business? Are there deductions and savings that might be missing?
For this part of the process specifically, you will want a route broker and an accountant. The route broker will have a good idea of what routes earn and what normal tax rates are. Your accountant can take a close look at the books and determine what the actual tax situation is with the business. They can also help you determine if that situation will remain the same when you buy the route.
Taxes are something business owners often hate, but they are a necessary part of understanding how a business is actually working.
Vehicle Age or Lease Terms
For any kind of delivery route, you need to look at vehicles when you purchase the route. In some cases, you can purchase the route with no vehicles included, and buy or lease your own. In the case of Amazon Delivery Service Partner routes, most vehicles are leased through an Amazon leasing program.
This means you need to know the age of the vehicles, where they are in the lease, what lease renewals will cost, and any other lease terms you need to consider. Your vehicles and your drivers are the lifeblood of your business, and keeping your delivery fleet in top shape is a high priority.
Driver pay is important and can be a big factor when you purchase a route. With Amazon Delivery Service Partner routes, most drivers are employees of your company, and they must be qualified through Amazon. Because of this process, it is generally cheaper to retain a current driver than to train and find a new one.
This does mean that you need to pay drivers a living wage and offer cost of living raises as well. You may also want to consider some simple benefits to keep them happy. That means you need to look at what the current owner is paying drivers and determine if they will stay on after a change of ownership.
Then you can determine if there will be an increase in costs when it comes to wages or if you will need to hire new drivers, in which case you will need to examine those costs as well.
Due Diligence and an Amazon Delivery Service Partner Route
As with any business, there is a lot to look at when you purchase an Amazon route. From ROI to profit and loss, from bank statements to tax returns, and labor and vehicle reports. Looking for and purchasing the right route can almost turn into a part-time job for a while.
At Route Advisors, we’re here to help and take some of that work off your plate. We can help you find the right business at the right time and in the right place. We’ll be with you every step of the way, from due diligence until the closing paperwork is signed. When you’re ready to purchase an Amazon Delivery Service Partner Route, contact us. We’re here to help.