Startup Costs When Closing a FedEx Ground Business

When purchasing a FedEx Ground business, we recommend setting aside $75,000 or 6-months of debt service payments, whichever is higher, for working capital. 

In addition to working capital, however, there are additional costs that come with purchasing a FedEx Ground delivery business. When negotiating a deal and calculating your expected costs to be fully operational on your first day, you must consider startup costs.

Standard Startup Capital 

Key startup costs to consider: 

• Sales Tax: On average, you will pay about 6% of the value in sales tax at acquisition. Sales tax ranges state from state and tax is based on the bill of sale. 

Note: The price listed in the purchase contract is what you will pay capital gains tax on and what you have to depreciate.

• Vehicle Registration: What is stated on the bill of sale directly impacts the sales tax cost when registering the vehicles. 

• Workers’ Comp Insurance: Workers’ comp cost varies by state and quotes given by various providers will range. On average, expect to pay 10% of annual gross payroll allocation, making up your annual workers’ comp charge.

Note: The worker’s comp mod score of the current owner of the business is important in determining your monthly premium. Be sure to ask about the seller’s mod score and determine if you want to try to inherit the current mod score or start fresh with your own.

• Uniforms: On average, expect to pay $300-500 per employee for uniforms. Cost depends on the types of uniforms purchased. 

• Truck Fixes and Deposits: We recommend a minimum of $1,000 of working capital for each truck for any accidental repairs or deposit costs for rental vehicles.  

• Incentials: Consider $1,000 per employee for any unexpected circumstances. 

“It’s not uncommon for contractors to be in the negative weeks before peak season. However, during peak, contractors experience significant profitability compensating for ramp-up costs. ”

Pre- Peak Costs

Closing before peak season comes with additional costs. Keep in mind, prepping for peak is the lowest profitability point for many contractors. Why? Ramping up for peak season volume means incurring more costs for extra resources. 

Expect ramp-up costs to be part of your operating costs for 6 to 8 weeks. 

• Rentals: High volume means more trucks. Many contractors utilize rentals to provide vehicles for peak, resulting in decreased profitability. 

• Payroll: Staffing for additional drivers means more payroll costs. Payroll for each driver during peak varies depending on experience and desperation for drivers. 

• Scanners: During peak, you will need to rent extra scanners. Expect around $200 a scanner. 

It’s not uncommon for contractors to be in the negative weeks before peak season. However, during peak, contractors experience significant profitability compensating for ramp-up costs. 

Having the liquidity to sustain ramp-up costs prior to peak season until you receive payment for additional packages, can be a serious stress reliever during this time of the year.  

Negotiated Costs

Below are not typical startup costs unless overlooked during negotiations. Negotiated costs usually center around technology needs for operating. 

• VEDR (Video Event Data Recorder): Most trucks purchased from the seller come with VEDR. On average, it cost $600 to acquire the technology. Vehicles purchased outside of the seller will most likely not have the technology. 

• Scanners: Understand if current scanners are rented, borrowed, or need replacement. This will determine how many scanners you need to purchase. It cost $1,200 to acquire a new scanner. 

• Backup Cameras: For backup cameras, expect to pay $400. 

• Blind Spot Detection: Blind spot detection technology can range up to $1,200 per unit, depending on the type of detection you purchase. 

• Anti-theft Technology: Anti-theft technology can cost $110 per unit. 

• Stay Bonuses: As the new owner, you should seriously consider offering a stay-on bonus to retain current drivers, helping to eliminate drivers’ walking out. 

Want to Learn More?

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