Profit Margins with FedEx Routes — Transcript

Full transcript

1. 0:07So today just wanted to talk through the
2. 0:08kinds of margins we can expect in both
3. 0:10the P&D and the line haul space. So for
4. 0:13P&D we generally see between 10 and 25%
5. 0:16margins and for P&D that margin that we
6. 0:20talk about is EBITDA. So that's earnings
7. 0:22before interest, taxes, depreciation and
8. 0:25amortization. So if we take a business
9. 0:27that's doing a million dollars in
10. 0:28revenue and you have a 20% margin it'll
11. 0:31leave you with 200,000 at the end of the
12. 0:33year. Now that 200,000 still has to pay
13. 0:35for yourself, any kind of taxes at the
14. 0:39end of the year,
15. 0:40any kind of debt service whether it's on
16. 0:42your business or on your trucks and then
17. 0:44also capital expenditures or CapEx. So
18. 0:47for CapEx that could either be replacing
19. 0:49old vehicles that have reached end of
20. 0:51life or adding new vehicles as the
21. 0:53business has grown so you're trying to
22. 0:54plan for future growth. Now between that
23. 0:5710 and 25% margin range a lot of that is
24. 1:00going to be dependent on how successful
25. 1:02you are as a contractor. So how well
26. 1:04you're managing things like payroll,
27. 1:06repair and maintenance will depend on
28. 1:08where you'll fall on that curve. So the
29. 1:10better contractors will be at the top of
30. 1:11the curve.
31. 1:13Now for line haul the margins are a
32. 1:14little bit different. We generally see
33. 1:16between 15 and 35% and the variance is a
34. 1:19little bit wider because in line haul a
35. 1:21lot of the margins are dependent on the
36. 1:23composition of your runs. So there are
37. 1:25two types of runs, solo and team runs.
38. 1:28Teams you can just think of as having
39. 1:29two drivers and they can do more mileage
40. 1:31in a week and in line haul you're paid
41. 1:33per mile. So the team runs will
42. 1:35generally have more miles, have higher
43. 1:38asset utilization and generally have a
44. 1:40higher profitability curve. So just the
45. 1:42main thing to know in line haul is that
46. 1:43to reach the high end of profitability
47. 1:45you most likely are going to have team
48. 1:47runs in the composition of your runs. So
49. 1:49really that's it for profitability
50. 1:51curves and what you can expect in both
51. 1:52P&D and line haul. I just wanted to make
52. 1:54sure you had a really firm understanding
53. 1:56as you're going into this space and
54. 1:57purchasing one for the first time.