Driving Success: Industry Benchmarks for FedEx Routes

Industry benchmarks serve as a critical starting point when evaluating the financial and operational performance of a company. High performance often correlates with a higher valuation, making these benchmarks essential.

GCF Valuation is a full-service business valuation firm dedicated to privately held businesses and the professionals who support them. During our appraisal process, we invest significant time researching and analyzing industry data. A key part of this involves identifying industry benchmarks, which provide a basis for comparing a subject company to its industry as a whole. With 26 years of experience, we are adept at understanding benchmarks across various industries, enabling us to deliver accurate valuation conclusions for our clients. Additionally, we prepare market intelligence reports for common industries to share valuable insights with our clients.

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Understanding Industry Benchmarks For FedEx Routes 

Industry benchmarks are key performance indicators (KPIs) of financial and operational performance. These KPIs are used in business valuations to compare a company’s performance to its industry peers, helping to highlight strengths and weaknesses. For example, FedEx Routes are highly dependent on the health of the vehicles that service those routes. So, CapEx on equipment (and vehicles) is a key metric to pay close attention to. 

Key Performance Indicators (KPIs) For FedEx Routes 

Fed Ex Route businesses are not complex since the operation depends on drivers (labor) and vehicles. Performance comes down to the length of life of each vehicle, so it’s very important to service and maintain the engines regularly. The average engine life is about 300,000 miles. With a minor overhaul, you can extend engine life by another 200,000 miles before a major overhaul (or engine replacement) is needed, which is about $25K. 

New trucks are too expensive, so FedEx Route owners will choose the lesser cost of maintaining their existing fleet with regular maintenance and service. Because of this, CapEx is a key metric to pay close attention to. This will be a key financial benchmark that’s part of the Debt Free Net Cash Flow calculation, which drives the value of the business. 

Financial Benchmarks 

With FedEx Routes, there are just two key financial benchmarks for assessing the strength and financial performance of the business.

• Labor is a key operational benchmark since the business needs drivers to service the routes as well as some office administration to manage logistics. The average labor costs for this industry should be between 30% – 45% of annual revenues. 
• As mentioned earlier, fleet service and maintenance is a key expense and the 2nd largest expense in the operation. Service and maintenance costs should not be above 15% of annual revenue. 

If labor and maintenance align with the industry, the rest of the income statement should yield cash flow margins at or near 26% of annual revenue. As appraisers, if we observe an SDE margin of less than 26% of revenue, we look closer at maintenance and labor costs to identify deviations from these benchmarks. Understanding the reasons behind these deviations can often lead to simple solutions for performance improvement.

Regional And Market Variations 

Contrary to popular belief, businesses in most industries, including FedEx Routes, tend to perform similarly across different regions of the country. While there are exceptions, regional and demographic factors typically have minimal impact on performance.

Using Benchmarks To Improve Your FedEx Route Business 

The good news is that monitoring performance using benchmarks is relatively straightforward. For privately held companies, benchmarks often focus on just a few key areas. In the case of FedEx Routes, business owners can compare their performance to industry peers by examining a couple of critical metrics. Regular financial oversight throughout the year and a detailed annual review can help keep a business on track with its long-term financial goals. Achieving this consistency ensures a solid company valuation when it’s time to exit the business.

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Our Accreditations

Your GCF Business Valuation appraisal team has one or more of the following business valuation accreditations:

• Accredited Senior Appraiser (ASA) – is recognized as having achieved the highest level of education, training, and report writing for business valuations. The ASA designation is the gold standard for a business valuation professional. (source: American Society of Appraisers)

• Certified Business Appraiser (CBA) – a very prestigious credential in the eyes of all who are familiar with it as it earned the reputation of being a difficult credential to obtain. (source: National Association of Certified Valuators and Analysts®)

•  Certified Valuation Analyst (CVA)
• Accredited in Business Valuation by the American Institute of CPAs (ABV by AICPA) – a credential granted exclusively by the AICPA to qualified valuation professionals who demonstrate expertise in valuation through knowledge, skill, experience, and adherence to professional standards. (source: American Institute of CPAs)

• Accredited in Business Valuation (ABV) – credential is granted exclusively by the AICPA to CPAs and qualified valuation professionals who demonstrate considerable expertise in valuation through their knowledge, skill, experience, and adherence to professional standards. (source: American Institute of CPAs)
• Certified Public Accountant (CPA)- Over 25 years of experience and expertise in business valuations and appraisals.  An accredited appraiser receives extensive training, remains in good standing, and follows specific industry practices to determine the value of a business.

GCF’s Machinery And Equipment Appraisal Accreditations

• Expert Equipment Certified Appraiser (EECA) – Our appraisers are recognized with a deep understanding of valuation principles and extensive experience by the Institute of Equipment Valuation.

• Certified Machinery and Equipment Appraiser (CMEA) – a CMEA professional has the expertise and certification to conduct a third-party machinery and equipment appraisal.