Growth and Scaling in Linehaul with Alex Frum
This week, Alex Frum shares game-changing insights on scaling a logistics business. Learn about growth strategies, including acquisitions, organic growth through the FedEx point system, and overcoming challenges in the industry. Alex provides valuable tips on building solid relationships within the FedEx network and navigating the complexities of managing multiple trucks and runs.
Whether you're ready to scale up or planning for the future, this episode is full of the insights you need to grow successfully in the linehaul space.
About Alex Frum
Alex is the owner of Alpha Kilo Logistics, a Transportation Service Provider (TSP) for FedEx Ground with operations in Memphis, TN, Olive Branch, MS and Independence, KY. In addition to his Linehaul activities, he is a co-founder of the Linehaul Summit & Expo and provides consulting services to potential and existing Linehaul Contractors. Prior to becoming a FedEx contractor, Alex spent 15 years on Wall Street managing a fixed income trading desk and serving as a regional branch manager. Alex is a former Army officer and a graduate of the United States Military Academy. He is happily married to his wife of 18 years and has 4 beautiful kids.
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[00:00:00] Welcome to Industry Insights with Route Consultant, your front row seat to the fast moving world of logistics and beyond. Each week, we bring you game changing insights, real world strategies and fresh perspectives to fuel smarter investments and build stronger businesses. Join us as we sit down with expert guests to explore emerging trends and pressing topics across a wide range of industries.
This is industry insights. So today I, I really wanted to, you know, we think about your journey. We think about how you've grown from, you know, just getting in for the first time to how large you've gotten today. Mm-hmm. What are you at 30, 40 trucks now? I'm 30 runs. 36 trucks. Yeah. Yeah. And so I, I think when people are trying to get into the space, or even people who've been in it for a long time, really understanding what growth looks like, how to expand is, is always a question I get and I know that people wanna understand is how do you scale?
What are the mechanisms that are built in? What are the [00:01:00] options? Yeah. So I I, I think the, the first way we can just talk about naturally is just, you know, acquisitions. I, I think that's the, the way a lot of people get in.
So I think the, you know, the. There are, you know, route consultants and there are a couple other brokers mm-hmm.
That, you know, post runs. Um, you can also go for the handshake deal between two brand new people that Yeah. Where you have, where you're doing all your own due diligence. Um, we've talked in the past and I think this is something that, um. You know, route consultants is always pr um, promoting is, you know, that first business you buy, buy a good business at a fair price.
Don't buy a fair business at a good price. Yeah. Um, you really need that first time you get into us. Um, this is a challenging enough business. There is no user manual. Mm-hmm. Um. If there was, it would probably be like a VCR manual. So really complicated. It doesn't make a whole lot of sense. Yeah. So understand that you, you know, there are a lot of nuances to this business, and so learning from somebody who's gonna stick around and teach you the tips of the trade is really, really important.
From there, there is no straight [00:02:00] PATH to, to grow. Mm-hmm. Um, and a lot of times. Um, you might take three steps forward and then you're gonna take a step or two back.
Yeah.
Um, don't be afraid if you need to sell or want to sell, um, there's no bad choices in this. Um, you might need to sell because you know what you don't like.
Being in a certain market, um, you might need to sell because you know what? You have a better opportunity somewhere else to grow. Mm-hmm. Um, you might need to sell because you know what? You have a family situation and you know what? You thought your son was gonna go to a public university and he's decided to go to a private college.
Yeah.
And now instead of spending $20,000 a year on college, you're spending $75k Mm-hmm. So that might be a situation. There is no set path to growing. Just be flexible and roll with the punches. Yeah. Um. But yeah, so the best way to grow in this space is organically, okay. It's how you achieve, um, real equity, um, um, you know, capital appreciation, and you get a growth [00:03:00] in your equity.
Mm-hmm. You
know, that is, other than the cost of the truck, that organic growth is really, you know, transform transformative to your business.
Okay.
Um, that's where you are picking up. Um. Unassigned runs through BuildAGroundBiz or FedEx has come to you because you are a really good operator in your tier four, tier three safety, or maybe you're the magic tier five.
Yeah. And they come to you and say, Hey, uh, you're a good operator in this hub area. We're offering you an opportunity to grow in this market.
Mm-hmm.
Would you be interested? Uh,
talk to me a little bit. You mentioned build aground biz. What is that? Yeah,
so Build Aground Biz is just like the, there's MGB my ground biz mm-hmm.
Where you can get, uh, news on what's going on with FedEx and, um, where you can find forms or vendors and stuff like that. Or MGBA, which is now called my Biz account. Um, it's still. Referred to as MGBA. Yeah. Um, so that is where you get your settlement statements, where you can see your run assignment point [00:04:00] statement.
You can see your TSPA. There is a third website called Build a Ground Biz that FedEx from time to time will post growth opportunities and specific markets. Mm-hmm. Um, it's very rare for them to post stuff for line haul, but they do at time, from time to time. You typically see a lot of CSAs on the p and d side posted there.
Um, on the line hall side, they will post. You know, there was one, actually last week, they posted six unassigned runs on the PM rotation in Middletown, Connecticut.
Okay.
Um, so what they do is they, they give you very basic details. They say there's six unassigned runs, um, on the PM rotation, and so a lot of hubs will have an AM rotation, a PM rotation, and then a team rotation.
Mm-hmm. Stations, it's a different story. They're not big enough. They might just have. One rotation. Yeah. And they expect you to do everything. Um, but Middletown happens to have a, a need for PM trucks. Um, you have no idea what the [00:05:00] miles are. You have no idea how often they're spinning the wheel. Um, the wheel, the reason why people call it the wheel is that if you imagine like a big, huge.
Like a roulette wheel. Mm-hmm. You know, it starts at one and it goes to whatever the number of trucks on it. You know, as they use each truck, they spin it one, you know, one by one, one click. And so truck one goes first, truck two, truck three. You know, if they only use four trucks in, you know, in day one on Monday, then they start at truck five on Tuesday.
Yeah. Uh, so that's why it's called the wheel. Um, so they have, they, they post it for six runs. So you submit an RFI, um, that is, it's very similar. The RFI process is very similar to the same kind of information that you provide to a limb.
Mm-hmm.
Um, but it's in a written format, so you'll tell them about yourself.
Um, you know, are you a current contractor with FedEx? Yep. Um, what is your net worth? Uh, or not your net worth. How much capital do you available to, to invest? What is your [00:06:00] processes for safety and, and how are you gonna communicate and how, what kind of equipment you're gonna buy, and, you know, how under, uh, how knowledgeable you are about the FedEx business?
Yeah. Um, if they, uh, that information then goes to SPS Service Provider Solutions, which used to be called Business Development Solutions. Mm-hmm. Which, yeah. At some point in time used to be called contract relations. Yeah. Contractor relations. Um, so it goes into this, uh, system. They will review it and then they usually, you know, maybe five or the five or 10 top choices.
Yeah. Um, goes to the senior manager and the senior manager will then conduct a limb. They can either be in person or in Zoom.
Mm-hmm.
Um. FedEx actually doesn't have a preference. Uh, with Linehaul contractors. They actually don't expect a Linehaul contractor to show up into the terminal on a day-to-day basis.
Mm-hmm. So they're very comfortable with Linehaul contractors, uh, zooming, or actually I think they do 'em on WebEx. WebEx in, um. And then they'll notify you within a certain amount of time period that you've won. [00:07:00] Mm-hmm. The, the growth opportunity, or you did not win the growth opportunity. And then they expect you to provide 'em with a truck and a driver or, you know, six trucks.
And six drivers.
Yeah.
Um, and that's free growth. So now, now you have an unassigned run, and then the goal from there is to convert that unassigned run over time. By acquiring points by not taking declines. Mm-hmm. We've talked about in the past how many points you get on a daily basis, but you can get maximum of 365 points to a truck in any one year.
Yeah. And then there's ways to, um, accelerate that, either through peak points mm-hmm. Or you can do rescues. Um, so rescuing is where you, um. Y you know, somebody's broken down. Um, and you go up, you go and pick up the trailers from wherever the breakdown point is and you deliver 'em to the, uh, the destination.
Destination. Yeah.
Um, before they, uh, they're outta service. Mm-hmm. So they make service. You get awarded 50 points and you can allocate that to any truck. Um. So those are ways for you acquire more [00:08:00] points. So the goal is then to take that unassigned run and to convert it into a dedicated run.
Mm-hmm.
Generally, FedEx will post dedicated runs between March and. Call it September-ish timeframe. Yeah. They don't generally like to post dedicated or post runs for bidding, uh, during peak season. And then they won't post, uh, runs for bidding, um, following post, uh, bids or, uh, peak season until you, uh, until the points are allocated.
So, got it. Um, during peak you have the opportunity to, uh, win or to generate incentive points. Mm-hmm. And so they usually give you a period from about. Late January to early March. Okay. Where you can allocate those peak points. So they come as a block to you so you get a thousand points. You can allocate 'em however you want.
Most people usually put 'em on one or two trucks to try to, um, boost that truck's chances of winning a new run.
Mm-hmm.
So they'll wait until that happens. So that usually, um, the peak [00:09:00] point allocation is over by around March 15th. And so during that time period, then FedEx will start, or the senior terminal managers will submit, runs to engineering up in P-G-H-P-G-H will agree yes.
This run is running consistently and repro project. That this customer or this volume is going to be around for multiple years. 'cause the last thing FedEx wants to do is post a run for bid and then say, turn around three months later and say, we're taking this run away. It's gone. Um, so they want to know that the run that the customer.
Or the customers that are generating the volume is gonna be consistent for a long period of time. Um, so what you'll generally see actually is you'll, if you do a temp run
mm-hmm.
Those temp runs usually get, you know, that's FedEx trying out a run to make sure that it's consistent volume enough, they're practicing and then they say, okay, you know what this is.
And so now we're gonna post this run to bid. So, um, I did a couple, for example, I did a couple temp runs. [00:10:00] Mm-hmm. Uh, from about. We call it late September, early October, you know, through peak and into, uh, this year, um, March 15th, uh, FedEx posted those tempera on Zy have been running, um, into, uh, to, uh, as growth opportunities.
They call 'em cgo. Mm-hmm. Uh, we submitted our tractors and FedEx awarded those runs based off of the bids. And the way those work is, it's a. It's a formula that's based off of your, uh, the number of points your truck has. Mm-hmm. Uh, your safety score, your service, and your availability.
Yeah. And that's, I think that's really important that when people are thinking about the point system, you don't win just because you have the highest points.
Yeah,
no. So it's a, it's actually, it's kind of convoluted the way they do it. So, um, what they do is they take all those four components. Mm-hmm. Um. And there is a frequently asked questions, um, on MGB, my ground biz, that actually kind of details how those points are allocated, but roughly [00:11:00] it's 40% of. So what they'll do is they'll take, um, the truck with the most points that's submitted, and uh, they'll say, okay, that is what is worth a hundred percent.
And then that's 40% of your total score.
Mm-hmm.
So if a truck has say, a thousand points, that truck gets. 40 points. Mm-hmm. Okay. And then truck number two, if it has 900 points, they'll say 900 out of a thousand is 90, and then 90% times four, you know, 40 is 36. So that truck gets 36 points. Okay. And it's, it's not, it doesn't make a whole lot of sense, but that's the way they do it.
Yeah. Um, then they do the same thing for service. Safety and availability? Um, I don't remember exactly the, the distribution. Mm-hmm. But it's roughly, you know, 20, uh, actually I think it's, I think safety's more, but it's, you know, call it twenty twenty twenty. But it's, I think it's maybe like 30 15, 15 or 30 10 or 30, 20 10, something like that.
But it's, and they're based off of tier, it's still a
black box in, [00:12:00] in a lot of ways though, right? Like, they don't say, they don't say there were 10 bids. They each came in at. Like 30, 35 and 40 and the 41. Like, you don't see those? No. So what they'll do
is they just tell you that tractor mm-hmm. You know, 1, 2, 3, 4, 5, 6 won this run.
Yeah. But they don't even tell you how many points it had. Yeah. Um, you can sometimes get information from the senior manager or the, uh, SPS and they'll tell you, you are second. Okay. Or you are third. But they will never tell you that, uh, tractor one was. 99 points and you were 98 points.
What, what do we think do, is there, I, I know anecdotally there's still comments about it.
Do we think there's any, any choice given to the terminal manager beyond the formula? Like is there any leeway? So there in the TSPA mm-hmm.
There is the ability for the terminal manager two award runs with outside the bidding process. Mm. Um. You know, in special circumstances, and this is not really for the hub areas.
Yeah, it's [00:13:00] more for stations. So if there is, say only two contractors in the station. You know, they might say, you know what, we don't want to just, we don't want it open up between the two contractors. Meanwhile, want to give it to this one contractor. Mm-hmm. Because we're trying to balance out Yeah. The volume.
Or there's only one contractor in the station. Well, technically FedEx shouldn't be. It should, FedEx will say, you know what? We want more contractors in there. But realistically, if it's a three truck station mm-hmm. If you give one tractor to a random contractor, he's gonna fail. So it's just better to continue to keep all your eggs in one basket and to award the run to that one contractor.
Yeah. So stuff like that happens. Um, there's other situations, so this has happened to me in the past, like for business reasons, FedEx has, um, cannibalized one of my runs. Hmm. And then six months later they're like, Hey, you know, we took away your. Kalamazoo, Michigan Run. We're gonna give you this Bellevue, Michigan run to, [00:14:00] you know, as a replacement because, you know, we didn't, you know, you've been a good contractor.
Um, you have a good safety score, you know, inver, you know, be nothing that you did wrong. Yeah. Um, is the reason we, nothing that you did is the reason why we took this runaway from you. It was just inadvertent. It was just unfortunate. And so we are gonna try to make it up to you by giving you that run, by giving you a, a similar run.
Yeah. And so the, the senior managers have the ability to, what they call re-designate
mm-hmm.
Or to appoint runs
in those kind of situations. Okay. And this is something I, I see a lot of people get wrong. We're talking about growth here, so people. We're talking about the point system and you know, I see people refer to it incorrectly as, you know, buying an additional run.
So talk a little bit about the mechanics. If you win the bid, do you gain an extra run or what does that process look like?
No. So I mean, you, you don't gain an extra run. Mm-hmm. You actually just convert. Whatever truck you submit. Mm-hmm. So if you remember in your TSPA, um, in the transportation service provider agreement, there is Schedule A one.[00:15:00]
Yeah. So Schedule A talks about run assignment and run assignment point system and how bidding and awarding of runs works. A one actually lists all your tractors and all your runs. Mm-hmm. Um, so your Schedule B is your list of your actual. S Yeah. Your tractors. Yeah. Schedule A one is actually assigning each tractor to a run.
So spare tractors obviously don't have runs, but every single dedicated and unassigned run or assigned run and unassigned run. Mm-hmm. Because FedEx doesn't call 'em dedicated, run. Dedicated, they call 'em assigned runs or unassigned runs or assigned spots. Mm-hmm. Um, are listed on your A one, and they're associated with a.
Specific tractor. Mm-hmm. And so you can submit when they have a CGO or a contractor growth opportunity, but that's what A CGO stands for. You can submit anything you want. Yeah. Most contractors will typically submit just unassigned runs, but you could technically submit an assigned spot or an assigned run to that opportunity.
Like I've [00:16:00] done it in the past where I've had a very short run. Yeah. Um, for whatever, you know, for example, I used to have a run that was. 550 miles a day. You know, FedEx decided for business reasons that they wanted to cut it in half, and so it became a 300 mile run. I took that run and with all the points I had on it.
Mm-hmm. And I submitted it as a bid for A CGO, and then I converted it into a longer run. Yeah. Because I much preferred to have a 500 mile run than a 300 mile run. Yeah. Um. So you can submit anything you want. Um, now once you convert that run, either that unassigned run or that assigned run into something else, you lose whatever you submit it for.
Mm-hmm. Now, some terminals or hubs will want to maintain a certain number of tractors on their unassigned run rotation. Mm-hmm. So if they convert a run, um. From, from the unassigned run rotation into a dead, into an assigned run, they might turn around and, and then post a, uh, a growth opportunity for an [00:17:00] unassigned run ro uh, position.
Mm-hmm.
Um, FedEx cannot tie the two together.
Mm.
They, they cannot say to you, you won. Yeah. Hey, we'll, we'll give you this run, but only if you backfill. Got it. Um, now, um. If you communicate that information to them, they will be very happy to learn about it. Because one of the things that con, uh, term, um, FedEx is worried about is always having tractors on that unassigned run rotation.
Yeah. Um, FedEx recognizes that unassigned runs are not as lucrative as assigned runs. Um, you know. And it just makes perfect sense, like an assigned run, you know what the miles are on a day in, day out basis. Mm-hmm. On a weekly you can proforma out, you know, what the equity value is. Yeah. Right. Yeah. I mean, it's really easy.
We, you know, back of the envelope calculation is that a run that will have 20% margins on it. So you do a hundred thousand miles at. A year. Mm-hmm. You're doing 200,000 in revenue. That's a truck that makes $60,000 roughly. In net margins. You do [00:18:00] a three times multiple, that's $180,000 value. You do a four times multiple, that's a $240,000 value.
So you know the equity value of that run. Yep. Um, real, you know, right off the bat. Yeah. So an unassigned run is challenging. You don't know what the miles are gonna be, so, you know, at times when freight volumes are slower mm-hmm. Um, FedEx struggles to, um, have enough tractors under the undersigned run rotation, but they need them because, you know.
They might have enough volume. Like, you know, one of my terminals, I have tractors on the undersigned run rotation, and they get out six or seven days a week and it's great. Yeah. But you know, day one I'm doing 400 miles. Day two, I do 325 miles. Day four I do 600 miles. You know, you know, it's just, yeah.
Changes, you know, from day to day. Um, because they always have needs. They don't have consistency. And you'll see that with a lot of the transshipment points. So attract, you know, so a, um, a terminal or a hub that is between two major locations, so think like [00:19:00] Columbus, Toledo, mm-hmm. Or Nochi, which are between Chicago.
And the east coast ports. Yeah. So there's a lot of volume that trans goes from, you know, going each direction. It might not be consistent enough volume to make it into an assigned run, but there's enough volume there. It's just, you know, day one might be you're meeting with a Greensboro TRA trailers. Yeah.
Day two you might be meeting with Woodbridge trailers Day three might be Meachum day four, might be New Haven, day five might be Boston, you just don or don't. Um, so that's something that, you know, FedEx is trying, needs that flexibility. Um, or they might have people who call off.
Mm-hmm.
You know, that's the other thing that you do on the unsigned run rotation.
You know, I, you know, I, you know, I had a driver call off this morning and, you know, I couldn't backfill it. And so, you know, goes to the unsigned. I decline the run, and FedEx goes straight to the unsigned run rotation and says, Hey, tractor number one, you're doing. This run. Yep. Yeah. So, um, so that's something that FedEx will a lot of times do.
If they convert a run over from the unassigned run rotation into [00:20:00] an assigned run, they will immediately turn around and post either in the hub area itself, or if they decide that they want to expand beyond the hub area.
Mm-hmm.
Um, they'll post it on
build aground biz. So when we think. Organic growth. So there's definitely an improvement system that's built in through the point system where you can upgrade the value of your existing runs.
What's, what's typically the process, the steps you go through to, you know, if you're trying to just add on a signs, is there a organic way to do that without having to pay for and acquire them? Like what's the process? Yeah, I mean, so I
mean. Letting, I mean, a lot of times FedEx doesn't want to post.
Yeah.
Uh, runs on build ground biz or on my ground biz. Or maybe they've posted something nine months ago. They still there. They didn't get any takers. Yeah. And so the runs will post for only a week.
Mm-hmm.
But there're open for that that entire year. So there was a point in time a couple years ago where, um, one of my hubs was like, yeah, we posted and we didn't get anybody to let to respond.
Mm-hmm. And I'm like, well, I didn't [00:21:00] know because I hadn't. I hadn't grown into that hub area. Mm-hmm. I, I grew into that hub area. Um, they posted a run. I didn't know about it, and I said, you know, I got a spare tractor. You got any extra work? He's like, well, I could use some. I could use some tractors on my unassigned run rotation.
I'm like, well, I'll do it. He's like, can you submit an RFI to me and then I can award it? 'cause they have a process they need to do. So I filled out the, he gave me the link to the RFII submitted it. He's like, well Alex, you are the only person that submitted on this RFI. You've been awarded this run. Yeah.
I was like, great. You
know?
Yeah. Um. So having that great dialogue with FedEx and just talking to them, um, there's also opportunities where you can pick up 10% temporary assignments. Mm-hmm. Um, like I said, these are FedEx testing out a run that they eventually want to convert into an assign
run. And on one of those, you know, like you talked about that you got, and then they eventually were put up for bid.
Yeah. Did you have, do you think you had any kind of preferential view on keeping that run when you bid on the [00:22:00] temporary, when it ultimately went up? Um, I knew I was gonna get it because I was the highest point
tractor in the yard. Yeah. And I happened to be te, you know, tier four, so I had a pretty high confidence that I was gonna get that run.
But no, there wasn't, you know, there is no special treatment for it.
Yeah. Um, I, and I think that's really important to know is like if you're taking a temp run, that doesn't mean you get this forever and like you need to Yeah.
I
think
a lot of people
think that
they should.
Yeah.
Um, but no, it doesn't work that way.
I mean, sometimes I wish it did and sometimes I wish it did. Yeah. Because there have been times where, um, I've won an assigned run. For a temp, you know, and, and I took it away from Josh. Mm-hmm. And I'm like, yes, I got it. And there's other times where I've had a temp run that's been taken away from me and somebody else got it.
And I'm like, yeah. But at the end of the day, it all, you know
Yeah. All balances out now. Now when, one of the things you just mentioned growing into a hub area, so if you are. In Memphis, olive branch area, but you're trying to get into Nochi. Mm-hmm. Say some of the, some of the paths you've taken, what's typically the way to do it if you're [00:23:00] not buying?
Right. Is there any way to do it? Where, so,
um, one is, you know, having conversations with that senior hub manager or SPS mm-hmm. S sps. This is where really SPS can facilitate. Um, you growing into another area Okay. Or going to the Ford Summit down in, um, FedEx, Orlando. Yeah. Um, that's an opportunity for you to talk so the senior managers won't be there.
So like the, the head of Olive branch Yeah. Or Memphis or Nochi won't be there. But the district manager. Mm. So the guy who runs, you know the Gulf region mm-hmm. Will be there. Mm-hmm. Or the guy who runs the Ohio Valley region, so he's in charge of Columbus, Toledo, Indianapolis and Nochi will be there, and then you can have a conversation with him and say, Hey, I really want to grow into this.
And he'll keep it in mind. So when there is an opportunity, so like I said, FedEx doesn't always post things on the build a ground biz. Yep. A lot of times they will post things only to terminal, uh, to contractors who have a really good safety score because they don't want to expand the pool of the number of contractors.
But they [00:24:00] do wanna encourage contractors to get bigger. What they've noticed is that. Bigger contractors because they're held to a higher Sta SA standard or generally safer.
Mm-hmm.
They have less incidences of CSA violations and accidents. They, they see that they're usually a little bit more professional because they actually have.
The more runs you have, the more back office support you can build. So you might have somebody who's actually a safety manager for you. Yeah. Or you have a maintenance manager, and so they have a, you have a more professional organization that FedEx is handling, so FedEx is trying to incentivize you to grow.
You know, do I know what their sweet spot is? No.
Mm-hmm.
Um, I can tell you that, um, there are a number of contractors that have over 90 trucks. Yeah. It's not, I mean, there are, there are plenty of contractors that have over 90 trucks. There are. I know of, I can think of like four or five off the top of my head that have over a hundred trucks.
Mm-hmm.
Um, and you know, that's just me knowing some people. Um, the number, even though I said I'm an extra large [00:25:00] carrier at 36 trucks, I, I don't ever feel like I'm the biggest contractor in my hub. There are plenty of other contractors who I'm aware of who are much bigger than I am in my hubs. Um, and I happen to be in three, so I'm in Noki Olive Branch in Memphis.
I have 36 tractors and there are a lot of contractors that are bigger than me.
Yeah.
So, uh, there is always room to grow. Um. You know, you can always reach for the stars. Mm-hmm. So there's plenty of opportunities there, but you know, having those conversations, um, you know, or you know, I've seen guys who just like said, you know what, I want to grow into Savannah, so I am going to show up.
That's the nice thing your FedEx ID gets you into in the building. Yeah. Into every door. Yeah. Now, you might not know who the senior manager is, but like, for example. Um, a couple weeks, a couple months ago, I really wanted to get into this one station. Mm-hmm. And that's near Nokia. I do a lot of, I do a lot of equipment, moves around there.
I'm like, you know what? It'd be really easy if I just actually kept. A truck [00:26:00] at the station instead of having it in Nochi. So the last time I went to Nochi, I just drove up to the station, walked in and said, okay, who's in charge here? And they're like, who are you? And I'm like, I'm the guy who does all your equipment moves.
And they're like, oh, we really appreciate that. I'm like, yeah. So what is it gonna take for me to, to put a truck here? Yeah. And so the, we, we walked around the facility and like. So this is my facility. I don't really have a lot of room for a truck here. Yeah. Um, but if I do get room, you know, we can have that conversation.
Okay. You, that's something that, so we had, we, we actually had a really good dialogue.
Yeah.
Um, and I, I do do a, a tremendous amount of work for them. I do it out of my hub instead of out of the station. But they know who I am now. They know who my managers are. You know, they, they have my business card, they have my manager's business card.
So whenever they have needs. They know they can call my managers. And that's another way to like kind of, um, so that that little station will, you know, will [00:27:00] be able to say, you know what, we're going to, we have a growth opportunity.
Mm-hmm.
Um, they can. You know, they can say, okay, we only want tier four safety in the hub area.
Yeah, well, that means I'm gonna get a pretty good idea that I'm tier four safety. I am in the hub area. So they're gonna say, okay, I get that opportunity. I, I can submit for that opportunity. Now everybody else can submit to it. They just can't say, only Alex is gonna be able to apply for it. Um, but you know, they can then, you know, look at all the different opportunities.
They can interview me and they could say, you know what, Alex, we already have an existing relationship with you and you already understand how we operate, so we
can give you that
growth
opportunity. Yeah. So in some ways, you know, FedEx, you don't have to worry about bringing in revenues, you're not doing the sales in that perspective, but growth from a Linehaul perspective oftentimes involves you actually.
Going through the front door of some of these stations and selling yourself in some of these areas. Yeah. And, and just building relationships and just, you know, just offering to help out, you know? Yeah.
Um. You don't ever want to go in there demanding work. Yeah. But if you're, if you're vol, you're, if you're going in and [00:28:00] saying, Hey, I got extra power.
Mm-hmm.
You know, FedEx always appreciates extra power. Mm-hmm. Um, will they always u need that extra power or use it? No, but so you can't complain about when you're not using that extra power. So you have to make that choice. It's one of the reasons why, you know, I don't like having a lot of assets that are unused.
Yeah. So, but I will always have. I always have power, uh, and FedEx always knows that they can call on me, Hey, it's 10:00 in the morning. We've already, you know, I don't know if we can get anybody off the wheel. Is your manager around? I need to run these two trailers up the road 40 miles to this location.
Yeah, I
can do that. No problem. So without, I guess giving too much secret sauce, if you were to think about over the next couple of years, where would be some of the places you'd most likely to to grow into?
Well, so for me. I like to have density.
Mm-hmm.
So I'm actively trying to grow. I mean, I'm very close to my limits about how much I can grow.
Probably in Nochi. Yeah. I have 24, [00:29:00] I'm up to 24 assigned runs there in that location. So I don't know how much more. Um, they will allow me to grow. Um, there are, there are expanded limits and I know I can grow larger.
Yeah.
Um, but I wouldn't mind growing in the region. Mm-hmm. Like, I would love to grow into Louisville, into Indianapolis, into Columbus because I like density.
Yeah. Um, it means that my managers there. Could manage those locations and then there's support, right? So like if I have a truck breakdown in Louisville, well it's only an hour and a half away so I can run another truck down there. Mm-hmm. Or like if one of my drivers calls off, you know, if he gives me enough notification, I can have another driver drive down there and run the run.
Yeah. Um, so for me it's not always looking at what is the most opportune opportunity based off of where I think there's gonna be growth. Mm-hmm. A lot of times it's like, what makes sense for my business? Yeah. Um, because the last thing I wanna do is have one truck in Savannah. Savannah might be great and it might be growing like hot cakes, but.
How am I supporting that [00:30:00] one truck in Savannah? Yeah. You know, you know, really at the end of the day, I'm at the point now where I don't want to be managing trucks. Um, I have managers who manage trucks for me.
Mm-hmm.
Um, I'm trying to work on my business. There's a lot of other things I'm working on. So for me, I'm trying to get density in a location.
So for me it's three or four trucks as a starter bite for me. Yeah. That allows me to, I might eat the manager's salary at that point. But I'm sure I can find additional work then get to the point where I can support that manager.
Yeah. You're trying to, like you said, build density so you can have systems to support a business as opposed to, so, um, like granularly,
so like in Memphis and Olive Branch, like, you know, going to Little Rock.
Yeah. Um, going to Anniston, going to Mobil, going, you know, down to Gulfport, going to Nashville. Um, St. Louis is a little bit of a stretch, but from Nochi, you know, going to Champaign, going to, to Toledo, Indianapolis, Columbus. Going to Nashville, actually Nashville will be be perfect is two hours from each location or two to four hours from each location.
So yeah, we get you here often [00:31:00] enough. Yeah, we might as well get you a few
more times right
now, Nat. You know, there's other challenges, uh, and then, you know. Maybe I wanna partner up with Josh and Josh happens to be in KCMO.
Yeah.
So maybe Josh and I can build a relationship and say, Hey, you know what, you know, you know, two heads is better than one.
Why don't we both go try to, you know, win some runs in Lenux and we can be partner up together that way. Yeah. Um, I will say that once you get to a certain point, um, having a partner, um. Who is 100% committed to the business is really helpful. Mm-hmm. Like you look at some of these larger contractors, the largest out there, they're not doing it by themselves.
You know, once you get beyond. You know, 50 or 60 trucks, you probably need to have a really strong partner. You know, somebody who is either handling the day to day mm-hmm. And you're handling the, the week to week or vice versa, just to be able to manage everything. You need a chief of op, you need a chief of op, uh, operations at that point.
Yeah. Um, and you can do it [00:32:00] internally and have. Uh, you can still be the CEO of the company, but you have to find that person who you confident can be your COO. Mm-hmm. Um, or otherwise you split the AO duties in half and you have somebody who's more the day-to-day guy, and the other guy is the week to week.
Okay.
Yeah.
And so,
so I'll end on a, well, we never talked about acquisition strategies. Oh, like in terms of the, like buying the right ways to buy. Yeah.
So I mean, it's, it all boils back down to your return on capital and return on investment, right? Yeah. And return, and your cash on cash returns. So when you're, you know, when you're getting in the business.
You know, and when you're growing initially, you know, depending on how aggressive you are and how confident you are in your abilities
mm-hmm.
You're gonna wanna buy good businesses. Mm-hmm. Um, at some point you're gonna be like, you know what, I'm an, I'm a subject matter expert. I've, I'm, I've graduated from the, the school of hard knocks.
Yeah. I went to college at, you know, Memphis U. Now I'm ready to go to, uh, get my master's degree in taking over dumpster fires. Yeah. There's a lot of [00:33:00] ways to find the dumpster fires. There's no, I mean, it's just keeping your ears open. Having conversations with a lot of contractors, talking to terminal managers, finding out when there's contractors who are failing.
Mm-hmm.
Terminal managers will generally not share that information with you, but you can get the sense from like, looking at the operations. Like I know that there's contractors in Nokia or Memphis Olive Branch who are, who are struggling. Yeah. And know, and then, you know, approaching, they say, Hey, you know.
If you need some help or if you're looking to get out, let me know. I'm, I'm, I'm here for you.
Yeah. Um, because a lot of, you know, we, we talked about how, you know, route consultant and other brokers sell Linehaul, but a lot of Linehaul transactions that happen ha actually happen within the network Yeah.
Between contractors that never hit any kind of brokerage or market.
Yeah. And I mean, there's crazy stuff that happens in the line haul. Like somebody will be like, you know what? I'm having so many problems with my Geneva run. And you'd be like, well, I'll change, I'll, I'll trade my Geneva. Your Geneva run for my, you know, for my Chicago run.
Yeah. I'd rather run Geneva than Chicago.
Hmm.
You [00:34:00] know, if you throw in a couple thousand bucks, I'll make that switch with you.
Yeah.
You know, and you, it's, it's amazing to me how that kind of stuff happens. Yeah. So it happens all the time.
Yeah. Um. Yeah. And just to echo your point though, you know, the, the challenging ones, the ones, you know, buying a, a, a business that has a great price but has a lot of things to fix, you don't wanna do that as your first one.
No. And, and it's not just because you won't know how to fix it, but it's also because if that, if you come in as is that with your first one and you struggle and ultimately maybe even fail. That's all FedEx knows you as. Yes. You don't have any record to fall back on. That is that you have been, you know, a failure that your black mark is your only mark and you might not get another shot.
Yeah. So I mean, FedEx will, um. FedEx is not in the business of running people outta business. Yeah. Um, FedEx wants to have strong, viable contractors. Mm-hmm. But at times, you know, there are, you know, for whatever reason, a contractor will fail. I mean, I've seen it happen because the AO had a heart attack.
Yeah. I've seen it happen [00:35:00] because the AO passed. I mean, recently there was a woman who owned a bunch of runs and she passed away. Surprise, just
mm-hmm.
You know, outta the blue. Yeah. And, you know, she hadn't built a, a succession plan. And so this, the business started struggling and, you know, FedEx turned to the family and said, Hey, you know, we're gonna, we suggest you sell.
And they asked FedEx like, do you have any recommendations? And FedEx is not in that business. But they said, you know, they kind of suggested them to go talk to other contractors in the, in the. Yeah. In the terminal.
Yeah.
Um, so there are opportunities like that. And then there's just, just the downright, you know, they've taken too much money out of the business.
They don't, they can't invest in their vehicles. Their vehicles are breaking down. They're, they're failing on service. They're failing on availability, or they're failing on safety. And FedEx has said, you know, Josh, we really appreciate being partners with you, but we think it's time that you find a new, uh, a buyer.
Yeah. And they'll usually give you. Probably about [00:36:00] three months.
Mm-hmm.
Um, the problem I, I, what I think is a lot of contractors.
Wanna fight it. Mm-hmm. Instead of saying they get three months and then they come and tell us with 10 days left. Yeah. That's what happens often. Yeah. So, yeah. So, you know, I think there's, there's lots of things to be thinking about there from, you know, there's ways to grow in this space, organically acquisition, and there's all kinds of internal mechanisms and just understanding that really helps you understand the landscape of growth in this space.
But I wanna leave on. A side question when it comes to growth. Sure. Which is, how do you feel about the growth of the FedEx space over the next five years? How are you kind of thinking through it? So,
I mean, so for me, um, like, I mean, I think you guys understand that I'm a really big Warren Buffett fan, and so I, I keep going back to Warren Buffet over time and maybe Warren Buffett will someday buy a, you know, a Lion Hole business.
You know, we'll see. Yeah. You know, if I say it enough times, yeah. But no, realistically, um, I don't know if it was him or Ben Graham or somebody, you know, or, you know, big, maybe a big hedge fund guy, but you wanna be [00:37:00] greedy when everyone is fearful.
Mm-hmm.
And you wanna be fearful when everyone is greedy. So, um, I think right now is a great time to be, um, investing in the linehaul space.
Mm-hmm. Uh, coming outta the pandemic when everybody was, you know, had, um. Accelerant growth and accelerant. Um, net income was probably not the great time to buy.
Mm-hmm.
Right now, um, it's really attractive. One, you have the FedEx one initiative, and so there's opportunities where you're gonna have contractors going into these airline ramp or airport ramps to pick up freight that's coming from in, from overseas.
If we don't have tariffs that is, um, but there's opportunities there. Mm-hmm. But in general, um. You know, the United, the US market's only getting bigger. We're 390 million people now. We grow at roughly, well, if we had an immigration, we'd probably be growing at 3% population growth per year. So that's about 10 to 12 million a year.
So, you know, we're getting bigger. So there's always gonna be more, more deliveries being [00:38:00] made to people's homes. Mm-hmm. Um, FedEx has kind of identified that the market that we want to be is bigger than five pounds. You know, our sweet spot is delivering Chewy's, delivering Wayfair, delivering Nike, anything that's bigger than a shoebox, we want to be in that market.
Uh, and we do really, we do it really, really well and really, really efficiently. And so there's opportunities for that, you know. Um, and so for me it's a really attractive. Time to buy. I'm kind of ambivalent about, um, where in the United States. Um, I probably wouldn't go into California just because I don't want to have to deal with the, the regulatory climate there.
Um, the five boroughs more because I don't, I think it's challenging to drive in those markets. Yeah. In New York City. Um, but otherwise I don't really care. Um, I'm looking for, I mean for me, 'cause I've, you know, been in the business for a while, I'm looking for. Um, poor businesses at a great price. Yeah. [00:39:00] But that's who I am.
Yeah. Um, and then I'm looking for a lot of our organic growth. So, you know, right now, every single time I convert an unassigned run into an assigned run, I will immediately turn around to FedEx and say, Hey, I. You know, if you need a tractor on that unassigned run rotation, please let me know. Mm-hmm. I have capital and I can provide you with a truck.
Yeah.
Um, and then I'm turning around constantly going to FedEx and say, Hey, if you have power needs, I have spare capacity.
Yeah.
Um. And so that's what I'm trying to do right now. I really think this is a very attractive time to buy, um, or a very attractive time to invest in my business. I'm seeing better than 20% cash on cash returns, and that's really hard to get.
I mean, I think we've all been spoiled by the last two years, the stock market that you had 20% returns, but. If you think about it, historically, the stock market has returned 7%. So 20% cash on cash returns is the, is where you want to be in the small business universe. Mm-hmm. And you can get that in FedEx.
[00:40:00] Well, I'll, I'll leave it at that. It's a perfect summary,
thinking about growth and, and where we're going. So, Alex, thank you. My pleasure.
