Acquisitions Anonymous - #1 for business buying, selling and operating - Fedex long-haul routes and are we crazy - Acquisitions Anonymous 177

Episode Date: March 21, 2023

Michael Girdley (@Girdley) and Bill D’Alessandro (@BillDA) look into Fedex long-haul routes and whether you want to own one.-----Thanks to our sponsor!This episode is sponsored by Acquisition Lab. Acquisition Lab, created by Walker Deibel author of Buy Then Build: How to Outsmart the Startup Game, is an accelerator with a highly vetted cohort-based educational and support community for people serious about buying a business. After going through the Lab's month-long intensive, you have ongoing access to almost daily Q&A sessions with advisors, regular live deal review forums with Walker, hand-picked vendors for your deal team, and a very active Slack group with other searchers on this path. Our team personally understands how to buy a business and will help navigate all the complexities of the process, as well as provide a trusted framework, tools, and resources to support you from search to close. The Acquisition Lab recently celebrated its 70th business being acquired and well over $100m in aggregate transaction value. The Lab is there to stand by your side, so you can take the right action (at the right time) and avoid wasting countless hours trying to "go it alone".For more information, check out acquisitionlab.com (link in the show notes) or email the Lab's director Chelsea Wood, [e-mail] to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, everyone. Welcome back to another episode of Acquisitions Anonymous. This is Bill D'Alessandra, one of your hosts. And this week, we did a deal that I was personally very interested in. I brought this one to the guys and said, I want to cover it. So Michael and I dive into a FedEx line hall contractor this week. This is a niche business that I have always just had this weird fascination with. So anytime one comes across my desk, I want to talk about it. So I really think you're going to like this one. We dig into a fairly unique business model. And you'll also be treated to some sideways rants about sales tax. government intervention and depreciating assets. So I hope you enjoy this episode of Acquisitions Anonymous. This episode is sponsored by Acquisition Lab. Acquisition Lab created by Walker Debel, author of Buy Then Build, How to Outsmart the Startup Game, is an accelerator with a highly vetted cohort-based educational and support community for people serious about buying a business.

After going through the lab's month-long intensive, you have ongoing access to almost daily Q&A sessions with advisors, regular live deal review forums with Walker, handpick vendors for your deal team, and a very active Slack group with other searchers on this path. Our team personally understands how to buy a business and will help navigate all the complexities of the process, as well as provide a trusted framework,

tools and resources to support you from search to close. The Acquisition Lab recently celebrated 70th business being acquired and well over $100 million in aggregate transaction value. The lab is here to stand by your side so you can take the right action at the right time and avoid wasting countless hours trying to go it alone. For more information, check out AcquisitionLab.com, link is in our show notes,

or email the labs director, Chelseawood, at chelsea at buy-then-build.com. All right, I am psyched for today's deal, Michael, because this is, if longtime listeners will remember the dumpster rental business episode, which was my white whale. I've always sort of had this weird fascination with dumpster rental businesses. This is another business today that I,

I also have this weird, ongoing fascination with, which is FedEx line hall runs. We're talking about what those are, how they're distinct from package and delivery, et cetera. So, Michael, will you read us today's deal? Yeah, yeah. Do we not get to rant about the U.S. government first? Are we going to go straight to it?

Oh, do we get to do that first? Yeah. Let's do that. Well, you were late to the call today because you're dealing with government bureaucrats, so this is your chance to get off your chest. Okay, so here's the deal. If you guys listened,

episodes ago, we talked about how the wholesale tax situation in America is very, very convoluted and messed up. Compliance is impossible and it's a very small business hostile. We will put in the show notes probably which episode that was. But today, we got a letter from the state of Oregon or Washington, one of those communist republics on the Pacific Pacific coast. California, Washington, I'm only like half in jest like they are, these are like three of the most aggressive money grab states on remote taxes. Basically, like they sent a letter to one of our entities

that does not exist in their state, has never done business in their state, has never done anything, never shipped a package into their state or anything. I don't know how they got hold of this, of the mailing address for this entity, demanding that we start paying taxes, that this entity start paying taxes in their state.

And so now they have zero grounds for this, right? But now I've got to hire my accountants. I'm going to spend thousands of dollars arguing with them about the fact that this entity, which is filed in Delaware and has never been to their communist republic, is going to, does not have to pay taxes. And I'm going to call me thousands of dollars and, you know, tens of money.

hours. And it very much frustrates me a lot. That sucks. Well, it's one of the toughest things where it's like you're basically unable to have any sort of defense whatsoever against people trying to on a bureaucratic side to kind of exceed authority to collect taxes if you're not anywhere near being a voter in that state. Like, there's no, nobody's looking out for you whatsoever. So I feel your pain. And they have infinite time and money. Like, you know, government. like they will, like, I guarantee you, we will still be arguing with, about them, with them about this in a year.

Yeah. Because like, you know, you send a letter, six months go by, like, you know, they send a letter back. And they just don't care. They have forever. They have all the time in the world. Yeah.

And businesses don't. It's very, very frustrating. Nothing has, nothing will change your mind more about, you know, government and stuff and taxes when you, until you go through a sales tax audit, and they come back in and start asking

for books from like 13 years ago. You're just like, oh, this is going to go on forever. It's not fun. It is outrageous. Bill, we should just get jobs. No, that sounds worse. For real. That sounds worse.

For real. I'm speaking of getting jobs, though, by the way, the poor people who live in these states when it comes to getting jobs are screwed. So like, we don't hire in these states because the compliance burden is too onerous. So, like, we have run into good. good candidates that we really like, and we're like, sorry, you live in California and I can't hire you. And they're like, what do you mean? I can't hire you. And it's like, well, first of all, your cost of living is insane and your salary demands are ridiculous. But second of all, I can't have

on the ground in California employees or it totally wrecks my entire life. I got to hire a whole separate HR person to deal with your state's stupid compliance burden. It's brutal. It's brutal. All right. Let's talk about this deal. Enough, enough business owner complaining. The business owner complaining segment of the episode is over. So you got sent this, and you shared it immediately with us, which is a good sign. And it came from KR Capital, who I guess is a business broker. And it is titled Absentee Opportunity, 11 FedEx line hall runs for sale located in Denver. And below are the details of this new FedEx opportunity.

If these routes are of interest, please email us. And we are happy to send you additional information, including a sign following a sign confidentiality agreement. Summary overview. Absentee owner lives multiple states away. Hello, I'm listening. Business includes five dedicated solo runs, two unassigned solo runs, four local spot runs. All runs are domiciled out of a single terminal in Denver, Colorado, and a full-time manager is in place with nine years experience and a assistant manager in place with five years experience. And the seller has been in business since 2011 and has decided to retire. So, okay, so what's the difference between I'm owning, so people can own FedEx routes, right? Like, and I guess most people don't know that like those Amazon trucks that you see and the FedEx trucks that you see,

those are not actually owned by Amazon or FedEx. They're owned by independent contractors who own those trucks and they're under a specific contract with Amazon or FedEx. So there's that kind of relationship that you have as an independent contractor company with with the mothership. But is this different? This is called line haul. So do you know what line hall is different than normal bill? Yeah. So this is very different. So as you articulated, the FedEx guy or the Amazon guy that comes to your house and drops a package off, he does not work for FedEx or Amazon. He is a contractor. He is working what's called a P&D or package and delivery route. Okay. You know, around town, stopping at your house, all the neighbor's houses,

delivering lots and lots of packages. The P&D business is generally a tough one. You know, it's like how many miles can we drive in a day? How many packages can we get delivered? And your only customer is FedEx. And it's, you know, if the packages are late, you get dinged. It's just, there's a lot of complexity, right? You got to get like 500 boxes to 500 addresses in six hours and then come back for more than the next day. I have a buddy who owns one here in Texas. And basically, after an hour of lunch, I concluded and I was like, so basically Amazon tells you exactly the business. how you can run it and how much money you're going to make.

And he's like, yeah, that's basically how it works. It's like, that's terrible. Like, your upside is totally capped. Because they just tell you, like, we're going to give you subsistence wages or just enough to make it interesting for you, but no more. Yeah. I think the way this, it does get interesting is if you can own a lot of them, if you can scale it.

You know, the problem is, though, FedEx hates that. So they start putting caps on the number of routes any one person can own because they don't want anyone to aggregate any negotiating, leverage at all with FedEx. They don't want to take that risk, right? Because if they end up with like one guy servicing all of San Antonio and that guy goes bankrupt or whatever, like suddenly they're screwed. They much rather have San Antonio serviced by 12 different guys.

So if one of them goes away, the other 11 can absorb his volume. So the P&D business is a tough business. But this is not the P&D business. This is the linehole business. So the way that's different is there are. are, as you can imagine, FedEx distribution centers, you know, all over the country. Very often, when you're driving down the highway, you will see the 18-wheeler FedEx trucks, right? And what is in those trucks are a bunch of packages. Those trucks are redistributing packages inside the FedEx network.

So they're taking, you know, all the packages from San Antonio, you know, they wait until they have a tractor trailer load of FedEx packages that's going in North Carolina, and they send a tractor trailer from San Antonio to North Carolina with all those packages to the North Carolina FedEx Terminal, and there those packages are picked up by the package and delivery guys. That route between San Antonio and Texas over highway to 18-wheeler, that is a line haul route. And these are generally much less complicated than the P&D routes because, you know, as you can see, this business has five dedicated solar runs, two unassigned solo runs, and four local spot runs.

We'll talk about what those are. So this basically means that there are a lot of. 11, maybe at most 11 trucks, you know, running one route. And it's like a, you know, 10-hour drive and then it turns around and comes back. And you get paid per mile by FedEx. So you get paid per mile. You know, you employ a truck driver. You absorb the depreciation and the wear and tear on the truck and the gasoline.

And the difference is your profit. And you know that every day you wake up, FedEx is going to tell you, you know, just pull up to this terminal, hook up to this trailer. you don't have to even touch the package at all, drive it over here, drop the trailer at this distribution center, and pick up a different one and go back home. So that's what line hall is, and it's a lot simpler. Well, let me go through some of the numbers and more details of listing,

and then I would love to talk more about this. So let's see, revenue has been growing. So in 2020, they did $2.2 million in revenue. 2021, they did $2.8 million in revenue. In 2022, they did $3.4 million in revenue. 2021 cash flow was $320,000, and 2022 cash flow was $486,000. So significant uptick both in overall profits and overall overall profitability. So 2.2, 2.7, 3.4 in terms of revenue, and then cash flow was $320 and then almost a half a million dollars.

So it doesn't seem too shabby. Vehicle details, all caps, outstanding vehicle fleet. So I think if Mills was here, he would tell us, like, look, the thing that you got to worry about with all these heavy equipment businesses is what's the state of the equipment and how much is it getting valued. So they know that. So they're highlighting that here in the listing. 12 vehicles included in the fleet and majority of vehicles are 2021 and 2022s with low mileage. Again, goes to Mills point, me channeling him that he's not here. The fleet value is estimated at $1.3 million.

I know we'd love to talk about how you've got to figure out how they estimated that. is it market price or is it depreciated value or is it something in between sometimes it'll be the original is it what they paid originally very often uh all vehicles will be transferred free and clear to the new owners so you're they the argument they're making here because the asking price is two million dollars and sba financing is available for qualified buyers the argument that they're making here is that you're buying the fleet for 1.3 million and they're throwing in the business for another 700,000 for a business that last year made $486,000.

So look, except for the fact that this listing looks like it was done by somebody with Microsoft Paint, it is, they're hitting the right things in terms of what to tell people. Yeah, I mean, the basic math here is for $2 million, if in fact the fleet is worth $1.3, that's $700,000 of purchase price for the business. And it throws off $486,000. That's a 1.4x multiple. So you could put some SBA debt on this thing, and especially because there's a trucks as the assets, you could put some major debt on this thing.

And I mean, I think you could potentially have your capital back in months, not years, like half a year. They're very quick return on capital here. And then you've also got some downside protection because you've got $1.3 million at trucks. And look, if you're the right type of owner, right, let's say you're absentee owner and you want to have some depreciation losses happening on the regular, correct me if I'm wrong here, but you could take and lease these trucks, well, not lease them.

You could buy them with financing and do some bonus depreciation to offset gains from either this business or other ones. So big props for that, right? You're going to buy them with financing upon acquiring this business, right? You're going to take an SBA loan out and you're going to get a whole bunch of trucks in addition.

Bill, I do have to tell you there is a problem with borrowing money and that strategy. Would you like to know what it is? I would. People, when you borrow money from them, they like to get paid back. It's really annoying.

That is a problem. That is a problem. So even though you get that bonus depreciation, you're still paying for these trucks and doing that sort of thing. That is my least favorite part of borrowing money, to be honest. Otherwise, it's really great.

Okay, so walk me through this, though. Okay, so I buy this business, and who's my customer? I have one customer here, right? How do I keep... One customer in FedEx. How do I keep them from changing the terms? And the favorite quote that I like to have,

which my brother uses all the time because he's a genius, is he will send me the meme of Darth Vader, and it's Darth Vader, it'd be like, you should accept what I'm going to give you. Otherwise, I will change the deal again, you know,

when he's dealing with Lando Calrissian, which is like the best business quote ever. Like, how do I keep FedEx from being Darth Vader here? What protects me from that? You can. FedEx is Darth Vader. I mean,

you will have a contract where, you know, they can't change the terms, about every year or two. But eventually, yes, they can completely turn your contract upside down. I think your only kind of defense here is if, you know, they know your economics backwards and forwards, right? Like, it's not hard to figure out your business model for FedEx.

Yeah. So they know what they're paying you. They know what it takes to operate a truck, et cetera. So they know how much money you're making. They can't put you out of business or they're out of business too. You know, like they need you. So it's this like constant. battle between, you know, the network, right?

All the P&D guys and all the line haul guys, you know, arguing with FedEx that we need more money. But at the end of the day, what leverage do you have? Your trucks say FedEx on the side. Yeah. Well, so let's do this. Put me out a business thing. Can't they just take and, like, bid out this business to another person, say the guy that owns the line haul routes next door?

Like, what's to stop that from happening? Well, so for one, as I mentioned earlier, they don't like that consolidation. They would like to have a whole bunch of mom and pops, right? But for two, I think your contract does protect you, and that actually brings me to something that's really interesting about acquiring these routes. So all of these routes are based out of the Denver, Colorado terminal, right? So that means that all of the routes they run, one end of the lag is in Denver. That's really desirable because you basically have a headquarters, right, in Denver.

It means your drivers can live in Denver, and they can switch between routes very easily, your general manager can live in Denver. You know, it's not a distributed org. So that's good. The thing, though, that you got to know is that there are lots of other, like, these are not the only line haul routes operating out of the Denver terminal, right? There's tons more. And all those other line haul routes are owned by other guys, right?

And because this is listed here, all of those guys have already passed on this one. Yeah. Right? Because as soon as one of those guys wants to sell their business, the first people they ask are the other 10 guys at the same terminal. They all know each other. Right. So he basically asked all the other guys and for some reason, they didn't want to buy it. So then your question is, why do I get to buy it?

To your point, to your point, I googled FedEx linehole routes for sale. And the first thing that came up was in paid ad, by the way, for a brokerage that specializes just in FedEx linehole route. Well, this brokerage, KR Capital, is one like that as well. Oh, it is really? KR Capital does it? Yes. Yes. There's another one called Rout Consultant.

There's a whole bunch of drama around that one that we can talk about in a minute. This is a total cottage industry. There's whole consultants that all they do is specialize in helping people make more money doing this. There's whole brokers that all they do is specialize in brokering these routes. And by the way, there's FedEx routes, but there's also like bread delivery routes that go to every Kroger in America. every morning at 4 a.m. and put the bread out. I mean, there's all kinds of routes that use this model, where the brand that you know does not want to own all these trucks

and operate all these routes, so they contract it out. My favorite, actually, I think we looked at one in an early episode, was remember the Boershead brand routes, where you would own like a territory for Boershead? I thought that was super fun. But Boershead, if you don't know, is mostly centered, I think a lot in the Northeast, but it's the only kind of national brand of meat,

which also is kind of a weird thing. You know, like, Bill, I don't know if you've ever noticed this, but like there's branded bananas, like there's branded oranges, there's branded cereal, there's all kind of brands and stuff, but nobody's ever succeeded in branding meat, right?

Like there's a few, like, kind of pre-packed sausage-type things, but like if you go, like everything's kind of like the white styrofoam thing, which is always kind of fascinating to me that nobody's figured out how to make meat more,

like specialized, if that makes sense. You don't mean lunch meat like Boris Head, you mean like steaks or like chicken thighs or something like that. Yep. Like, it is either generic bag of frozen whatever, or it is white styrofoam that the grocery store put out. It's like very interesting. There's a, isn't there one brand of chicken like a red something?

What's it called? My quick Google foo. Yeah, there's one brand of chicken that I have seen. But anyway, yes, you're right. It's hard. Yeah, there's a, God, they're located in. Bentonville. I know exactly here you're talking. It's Tyson is Tyson, I think. Well, yeah, Tyson is the biggest chicken manufacturer. Yes. Yes. I didn't know they were in Bentonville.

Yeah, people don't realize how many Fortune 500 companies are in Northwest Arkansas, like the whole Bentonville, Fayetteville kind of area. Like, it's more than San Antonio, and it's probably rivaling what Charlotte has going on. I think they have three Fortune 50 companies there that don't quote me on that, but it's something stupid. Is this the Walmart artifact? So there's Walmart? No, because they're weird. It's like Walmart, a trucking company, and like Tyson Foods. Like it's some weird combination where you're like, well, this doesn't make sense. It's just like, they just happen to be, you know, you know, what's happened in San Antonio is we've homegrown a lot of global 2,000 companies, but they all end up being on the wrong

side of mergers. So like Marathon Oil bought Tesoro here, I think it's Tesoro here in San Antonio, and like it should have been the other way around. So the headquarters is in like, you know, BFF, BFF, Ohio now as opposed to San Antonio. So like we keep losing headquarters, but places, you know, like Bentonville have gone the other direction. Weird. And Charlotte's done very well, especially. That's how Charlotte became such a banking, right? The whole Wachovia and Bank of America roll-ups, Charlotte kept being on the winning side of the mergers and keeping the headquarters.

Yeah, it's one of the kind of tragedies of San Antonio for the last 20 years. like our, we lost AT&T here, which was obviously a Fortune 50 company. And then like Rackspace, you know, turned into a disaster. And then all the way down, like we basically have one big publicly traded company in San Antonio now. And then there's nothing after that. So you have USA Valero. And then there's like, you know, it's like cats of dogs after that. So I mean, one of the thing I really wanted to kind of point out about,

I pulled up this premier route consulting brokerage. You know, I think this is a place where I think being a small business broker is horrible, unless you find a niche. And I love that these guys have found a niche. I think it's pretty cool. Yeah, I mean, they understand it inside and outside. Like, here's all the way, here's what your P&L should look like. I mean, they will consult you on what a market rate is for all of your drivers.

Here's the software that you should use. I mean, they all taste like chicken. They're all exactly the same business just at different terminals and different highways, right? They should run exactly the same. But FedEx, because they're independent contractors, it's not a franchise. FedEx can't prescribe to them how to run their businesses because FedEx needs to maintain this plausible deniability like this is a contractor. We don't tell them how to run their business.

They do it however they want. So this whole cottage industry of consultants has popped up to basically help homogenize the franchisees because the effective franchisor can't do it. Here is what they talk about. This particular consultant talks about what it takes to sell your line haul routes. and there's a bunch of data and that sort of thing. And then it says, here it actually says they have this paragraph. It's all about your drivers, which is not what I would have guessed, right?

Because I immediately went to like, oh man, FedEx is going to screw me over. So I don't make any money, which has me worried about this listing. And I wanted to point this out, notice when I talked about revenue, I gave you three years of revenue, but I only gave you two years of cash flow. They did not give us a cash flow number for 2020, which to me is an immediate like question mark. Like, what is going on with that? And, like, I would want to know what happened in 2020 and years before, especially since then. Well, I know what happened in 2020, right? COVID happened in 2020, right? Wait, but wait, shipping was killing it. Like, should they have been killing it during that period of time?

Like, that's what everything switched on delivery. Yes and no. But that was, it was instant supply chain indigestion. Remember, the line hall here, this isn't the bring the package to your house. Right. This is redistribute packages throughout the FedEx network. A lot of, you know, what's interesting about FedEx is I think they have one of the lowest e-commerce penetrations of the major shippers. So they're doing their, what's their heritage, right? It's documents, right? So they do a ton of B2B.

We actually ship a lot of our B2C stuff, FedEx, but, and I know this from talking to our rep. FedEx does a ton of business to business shipping and a ton of document express shipping. So I wasn't close enough to it in 2020 and don't know how the pandemic might have affected, those, but I can just imagine major disruptions kind of throughout the supply chain. Because in this business, if you don't go, you don't get paid, right? So if they were canceling runs or who knows what, like, you don't get paid. It's really, and it's really smart the way FedEx and these guys have set it up. It's like they tie precisely what their independent contractors get

paid to when they make money, right? It's kind of like, I don't know if most people know this, but when you're on an airplane and you see like the flight attendants like sitting around and like really pissed off that the plane's not taking off. It's because most of those guys, including the pilots, they don't get paid unless the airplane is in the air. So, like, it's really, really smart to motivate and incentivize everybody. Like, you get paid per flying hour. Which is also why, like, if you fly on very desirable, like long haul routes, like New York to Tokyo, for example, or New York to Paris, all the flight attendants. Have you ever been on a flight like that, Bill? The best flight attendants, right? Well, it depends on the airline. It depends on the airline.

they end up being the most senior flight attendants because it's a seniority system. So like I've been on like New York to Paris or L.A. to Paris type flights and like all the flight attendants are like 80 years old because they've been there forever because they have seniority. And I'm like, they're like having trouble

walking down the aisle. And it's just kind of a mess. But like that's because they want to be in the air as much as possible. There's mandated breaks for flights over eight hours. And like you end up spending the weekend in Paris. Like kind of a win. if you're a flight attendant,

you're going to choose that versus doing the Dallas to Oklahoma City round trip nine times a day and then all the delays and stuff and sitting on the ground and not being, you know, it's just a totally different kind of thing. So if you look at it,

where you're on a flight, the shorter and more frequent a flight is, the younger the flight attendants are typically going to be. That's kind of the correlation in terms of their age with the airline. So, all right, anyway, so back to this deal.

Coming back in business, like here's why I like it. I mentioned I have always sort of had this weird draw to these businesses, right? You own, this business owns 10 or 12 trucks. It's got presumably 10 or 12 drivers. It's got an assistant manager and it's got a general manager. And the owner is several states away. Yeah.

Right. That is a lot of layers between of people that get called before you get called. Right. You know, we always joke on the show that you better like what the business does because of the business cleans toilets. At some point, you're going to be cleaning a toilet. Right. you know, this is the same business. Like, if you're not careful, pretty soon you'll be driving a truck,

right? Right from San Antonio to Ohio. Oh, good. So, you know, you need to have enough, there's enough layers. So I see an assistant manager here who probably knows how to drive a truck. Yeah. And a senior manager who probably knows how to drive a truck. I just kind of picture, you know, you've got 10 trucks on the road. It's very, very linear. Like the trucks depreciate by the mile, the trucks burn gas by the mile. You know, your guys get paid by the mile. You know, you get paid by FedEx. by the mile, it's sort of this very elegant, like contractually locked arbitrage, right? And you also like, yeah, you can't grow the business, but like on the other side, there's no pressure to grow the business. You know, you just like do the runs that they tell

you to do and cash the checks. And so it becomes entirely about staffing and operations. And something is elegant about that. It's that you got to love how simple it is. But I guess that's the price you pay when you all have one customer, right? I think about like the trade-off idea. It is what it is. You're trading off, you're trading off the downside of, okay, I have one customer. Well, they're giving you a stupid, simple business to run, which is exactly what you're talking about. Just make sure you have drivers. And guaranteed volume, basically, right? It's good. It's a good bit. So, like, imagine you've got, like, so you buy this, you got 10 routes going out of the Denver terminal, right? Imagine two of your routes are going to

Dallas. Then next year, one comes up for sale and you can buy 10 more routes in Dallas, right? And you can start to build a little bit of a network, you know, where you can share drivers, you know, and infrastructure. And, you know, you can basically build a little trucking company that is way simpler to run than a real trucking company. 100%. Yeah, I mean, because trucking is all about finding liquidity, right, in your, in your jobs. And this is a group that's going to give you liquidity. Like, you're just, getting, you know, they're finding the demand for you. You just hope they don't stop making the demand. There's some, there's one more thing that's important to talk about, uh, in this line hall

business. It says the business includes five dedicated solo runs, two unassigned runs and four local spot runs, right? So the, there's, these are kind of varying levels of desirability. So the most desirable is a dedicated run. That means that you can predict it, like every, day you drive from Denver to Dallas and back or, you know, or whatever. Like it's scheduled. It's yours. You can't lose it unless you screw up. Like that is money in the bank, right? Like as long as your driver shows up, he picks up that trailer. He takes it. He picks another one comes back. Repeat every single day. It's the most predictable thing in the world. Right. Businesses love it. Drivers love it. All that stuff. That's the dedicated solar runs. So of 11 runs,

this one has, five of them are dedicated runs. So the higher number of dedicated runs, the better the FedEx line hall business. The unassigned and the local spot runs are much more lumpy, right? Like if they don't necessarily go every day, you know, oh, now we've got a trailer to this zip code that we don't usually go to, you know, is anybody free to take it? Right. Right. And you book that like that morning or the day before, right?

So it's harder to staff. Sometimes they pay a little bit more, but it's just less predictable, right? So the longer runs versus the local runs, the longer runs are always better, right? Because the starting and the stopping and the loading, the unloading is what's expensive. Like once you're rolling, you're just clipping miles. So the local runs are probably the least desirable. And then the dedicated runs are more desirable than the unassigned runs, which kind of you have to grab as they pop up. So I want to make one last point

and then I think we've beat this horse dead. But going back to the very beginning of discussion, they are making the argument here. They're selling the business for $2 million. $200,000. They're trying to tell you that you're going to make, you know, buy $1.3 million worth of vehicles, $2 million sales price.

And for $700,000, the difference, you're going to make $500,000 a year, assuming hassle and what. that is not accurate. That is the math they're trying to trick you on. And so, Bill, put you on the spot. Why is that not accurate? What do I need to be thinking about

that's kind of a phantom in terms of that argument? I mean, your trucks are going to crap out eventually, right? You got $1.3 million worth of trucks that are eventually, you're going to need to spend another $1.3 million on a whole bunch of new trucks. Right? So there's a depreciation schedule. This is I'm Mills.

Mills is like working in my mouth here. Right? Mills is like the one that's always, goes, but the depreciation. It's got to be, right? Like, let's say the fleet is worth 1.3 million. Those trucks are going to last, you know, well, you have to, you have to figure in, okay, there's ongoing capital expenditure to maintain the trucks, and the trucks are

going to last a certain number of years. Let's say you get five years out of the trucks. Without any capital expenditures, that means five years out of the truck. You're spending, what, 250 grand a year on trucks. So you actually have to deduct that from the profit number, because that's, That's going to be going forward a problem there. So then you deduct that from last year's profit number. That's $486,000 minus $250.

So that cuts it basically in half. That means you're really paying $700,000 for $250,000 in profit for a business with one customer. And you can start to see how they ended up with this pricing being much more aggressive than it looks at face value. Now, yes, super true. You have to figure out how long a truck lasts. I will give it to this deal, though. This deal explicitly says all these trucks are new.

They're 2022 and 2021 models, right? And so you want to be diligently, are they well maintained? Have they been, you know, repaired, all that stuff? Are they in good shape? But, I mean, I've got to believe a tractor trailer that lasts more than five years. Like if it lasts 10 years, now you've got, you know, $1.3 million divide by 10. You got $130,000 of, you know, annual depreciation. In the last 20 years, you've got $65,000.

Right? So, like, eventually, like, maybe it's not so bad. It depends a lot on the useful life remaining on the trucks. Million percent. Well, cool. And then I think my advice, if anybody looks at this one, go figure out why the all the other line hall people passed on it. Like, find out from that.

The best reason, by the way, the best reason, by the way, would be that FedEx prohibited them from buying it for concentration reasons. Yeah. And I'd really want to see what that contract with FedEx says. That's what you're buying here. Totally what it is. Plus some drivers.

It seems like recruiting 10 class A or class B drivers, right? now, good luck with that. They ain't out there. They ain't out there. Who are reliable, right? You know, show up. Remember, if they don't show up, your trailer doesn't go, you don't get paid, and then you also miss your FedEx SLAs, and eventually they will start digging you money, and then

you'll lose your contract. On that note. On that note. Okay. It's a staffing business like so many other ones. You know, again, you just got to figure out what the pay in the house is going to be, and we just figured it out right there. Every business has a pay in the house factory.

You just need to know what it is. On that note, I think we're good. Any other thoughts from you? Nope. I would love to talk to somebody. Tweet us if you own FedEx Line Hall or have looked seriously at investing in FedEx Line Hall.

This is a topic I'm super interested in. Tweet me, I would love to talk to you. Super good. All right, and ask for you, Mr. and Mrs. Audience, do us a favor. Pick one person in your network who you think would enjoy this podcast.

Send it to them and say, hey, check this out, and hopefully they subscribe. That's how we grow. And we're looking for more subscribers that click go into the podcast app and click to download us every week and that helps us keep moving the ball forward

and bring it on more people that are going to find value from this sort of thing. Business buyers, brokers, business nerds, we welcome all-comers, Bill. It's a big 10 here. All comers. Nerds are not even brokers. Super cool.

All right, catch you next week.