Are FedEx Ground Linehaul Runs a Good Investment?
FedEx Ground Needs Linehaul Contractors
If you are a prospective buyer or current contractor who has never considered investing in a linehaul operation, you really should consider it. FedEx Ground is hurting for linehaul contractors (aka tractor power).
This need for available tractor power is primarily due to FedEx Ground having to use purchased power more than they ever have before. Purchased power (or cartage) is when FedEx Ground has to pay a third-party carrier service to move freight because there are not enough internal contractors to service the available trailers. This external cartage service comes at a premium, costing FedEx Ground significantly more than it would if a FedEx Ground contractor serviced the run.
Not all linehaul runs are cross-country endeavors.
There are many solo runs and local spot runs available to move trailers from one location to another. Linehaul can be intimidating if you are not familiar with it, which is exactly why education is your best path forward. Route Consultant is available as a resource to teach you about linehaul and to help you discover if this is something you seriously want to consider. If you’d like to learn more, we highly recommend attending on of our New Investor Summits. This event will teach you everything you need to know about this industry so that you can make a confident decision if this endeavor is right for you.
On top of the demand for linehaul contractors in the network, the financial opportunities can also be very lucrative. Linehaul has its own challenges different from P&D, but if you can overcome those challenges, you have the opportunity to make millions in this space.
Linehaul Profit Margins
FedEx Ground linehaul runs can be very lucrative investment opportunities, but just how lucrative?
“Linehaul can be intimidating if you are not familiar with it, which is exactly why education is your best path forward. ”
As you look to buy a FedEx Ground linehaul operation, look for linehaul businesses with EBITDA profit margins between 15-35% of revenue. This wide range depends on whether your linehaul runs are solo runs or team runs and the total weekly mileage your tractors are traveling.
Most healthy linehaul businesses with predominantly solo runs will have profit margins closer to the 20-25% range. FedEx Ground businesses for sale that include linehaul team runs have the potential for higher profit margins, up near 35%. Team linehaul runs have the highest profit margins in the FedEx Ground network.
For example, if you purchase a FedEx Ground linehaul business (with predominantly solo runs) that brings in approximately $1,000,000 in revenue per year, it would be reasonable for that healthy linehaul business to pull in approximately $250,000 in EBITDA profit (or 25%).
Similarly, a well-run linehaul business (with predominantly team runs) with approximately $2,500,000 in revenue per year might successfully pull in around $875,000 per year in EBITDA profit (or 35%).
Beware of linehaul runs that advertise crazy high-profit margins (above 40%). With the right business structure and economic factors, 40% profit margins are possible, but only in rare cases. These numbers should raise a flag for you as a buyer and prompt you to ask further questions and work with Route Consultant to confirm the financials of the business first.
Additionally, do not expect an average linehaul business with solo runs to have profit margins up near 35%—listings advertising higher profit margins on solo runs can be misleading.
Assigned + Unassigned Runs
Assigned runs have more consistent profit margins versus unassigned runs. Dedicated, or a contractually guaranteed run between two locations, allows a business to plan in a way that is beneficial and profitable.
Knowing where and when you are going can help you secure a driver more easily and at a better rate. It also helps you plan truck payments and maintenance more accurately.
Unassigned runs are a way for FedEx Ground to handle overflow volume that dedicated runs cannot accommodate. These unassigned runs can have margins as profitable as assigned runs, but the profits are less reliable because you as a business owner do not have a guarantee that a run will occur.
Some unassigned runs operate daily (just like a dedicated run) and others do not. It is critical that before you purchase a linehaul listing, you evaluate the history of each run. There is simply more risk involved in purchasing an unassigned run.
Dig More Into Linehaul
If you are a prospective buyer looking seriously at an investment in linehaul runs, we highly recommend you join us for an upcoming New Investor Summit. By the end of the event you will have the knowledge you need to determine, with certainty, whether or not this investment is right for you.
If you are a current contractor who is currently in linehaul or interested in expanding into linehaul, we would love to see you at one of our current contractor events. We host various live road shows, happy hours, and even linehaul specific events across the country each year.
Want to Learn More?
Dive into the world of logistics and delivery routes with our complimentary FedEx Ground Routes 101 E-Course. This course will teach you the fundamentals of delivery routes so that you can decide if this is an industry worth pursuing further. Whether you’re interested in FedEx Ground routes, Amazon routes, Bread routes, or other logistics operations, we are here to help. Enroll now for free and take the first step towards entrepreneurship in the e-commerce space.
