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- [00:00]
Connor Gross
Today's guest bought a FedEx route at the peak of COVID which as you'll recall was also the peak of E commerce and shipping, which meant FedEx and its hundreds of contractors were making hay. You'll also recall the pullback in online shopping as the pandemic dissipated and life returned to normal. This comedown was extremely painful for our hero, Avery Tomek, whose recently acquired FedEx business quickly began to suffer. But he pulled through, acting not just defensively to save his business, but offensively to take advantage of the blood in the streets buying opportunity. Other FedEx contractor businesses were also suffering, many shuddering, and there was a window to expand his little FedEx business aggressively. The fruits of those moves are visible today. Just three years later. Avery's FedEx empire is run rating about 25 million per year utilizing his fleet of hundreds of trucks that spans a half dozen states. We unpack how he built this business and so quickly and we get a Masterclass on the FedEx contractor business opportunity, what it's like, what the dynamics are, the pros and cons and and how you business buyer should think about it for yourself. Avery believes that this model is limited only by your own appetites and ability to operate. See if you agree. Please enjoy this Incredible story and FedEx deep dive with Avery Tomek, owner of Tomek Logistics in the webinar from back in May on how to build a franchise hold code, host Connor Gross mentioned how many acquisition minded entrepreneurs are entering franchising through the strategy of planting your flag that is Purchasing new territories in a franchise system intentionally to then execute an acquisition strategy once their foot is in the door. We received a lot of feedback and interest on the topic and decided it warranted a deep dive in a webinar of its own. So in a follow up webinar with Connor GROSS this Thursday, August 7, you will learn what the plant your flag strategy is, the types of searchers for whom it makes sense, how to evaluate franchise opportunities with this strategy in mind, funding strategies for franchise acquisitions and stories of flag planters who have executed this strategy and seen wild success. That is this Thursday, August 7th noon Eastern. The webinar is the Plant yout Flag Build an Empire with ETA and franchising link to register for the webinar is right at the top of this episode's show notes or on the Acquiring Minds homepage.
- [03:07]
Will Smith
Acquiringminds co.
- [03:20]
Connor Gross
Welcome to Acquiring Minds, a podcast about buying businesses.
- [03:24]
Will Smith
My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs and on this podcast I talk to the people who.
- [03:32]
Connor Gross
Do it looking for an SBA loan to buy a business. Then meet Pioneer Capital Advisory, your team for getting an SBA 7A loan quickly and at great terms. The team at Pioneer has closed 81 SBA loans in just the last two and a half years, with an average close time well under the industry standard. Founder Matthias Smith and general manager Valerie stash both have 10 years of SBA experience and know the process cold. There are three analysts at Pioneer who build you a lending presentation that speaks the language of the bank's underwriters and gets them to yes, two account managers to guide you from underwriting to close as fast and smoothly as possible, and two sales associates ready to walk you through the Pioneer Capital advisory process. That's nine people at Pioneer, a real team to get you where you're trying to go. New owner of a business. Go to pioneer capital advisory.com or click the link in the notes.
- [04:42]
Will Smith
Avery Tomek, welcome to Acquiring Minds.
- [04:45]
Avery Tomek
Yeah, thank you for having me.
- [04:46]
Will Smith
Avery, you're an entrepreneur in the FedEx route space. You barely survived when you bought your first route during COVID today.
- [04:57]
Connor Gross
You are absolutely crushing it.
- [05:00]
Will Smith
We're eager to hear your story and learn all about this world of FedEx routes and what opportunities there might be for acquisition entrepreneurs.
- [05:11]
Connor Gross
Start us off please, Avery, with a.
- [05:13]
Will Smith
Quick background on you.
- [05:15]
Avery Tomek
Yeah, so I am originally an accountant. I'm a cpa. Did that for about a year and I knew before I started it wasn't for me. And I've kind of always been sort of a business mind entrepreneur. But I went to college, UT University of Texas in Austin, graduated master's accounting. So I knew if I, in order to get a cpa, which, you know, I went five years of school, it was like the logical thing to do that I should go work for a year to get my cpa. So I fulfilled that requirement. And while I was working, I became a real estate broker. First I was an agent in college, leasing apartments and selling units to students. It's always kind of always doing something to make money. And so then I ventured out, became a broker, started buying houses, renovating them, renting them out, never selling them and just continuing to buy. And so I was doing that while I was working and then decided, well, you know, this clearly isn't for me that the whole 9 to 5 working a job, I knew it never was, just not in my blood. So I left, tried to do that full time. And I did and I was, it worked well for me at my age.
- [06:39]
Will Smith
And how old were you and how many doors did you get up to?
- [06:44]
Avery Tomek
I was so I, you know, I worked a year, and I think I graduated when I was 22. So at 23, when I was 26, I bought a. My first apartment complex. 24 units, renovated. All those. The rents when I got it were 625. When I was done renovating them, they're at 1300. So, yeah, quite the. Quite the run up there. Still have them thought about selling it during COVID but, you know, I was like, what do I put my money into after that? You know, everything's so inflated. I get a high price for the apartments, but then, you know, inflation was high. It's like no one wanted to sit on cash, so I just held on to them.
- [07:23]
Will Smith
Yeah.
- [07:24]
Avery Tomek
And real estate was too expensive at the time. I felt like the risk reward was skewed. It didn't make any sense. Everything was so expensive. And, you know, you do your pro formas and try and, like, pencil in a price you'd have to pay to make some acceptable return. And it was always way higher. You know, it was just a bidding fest here, at least in North Texas, really. All of Texas. So I was like, well, this isn't for me. You know, if one thing goes wrong, you know, it just doesn't work out. And a lot of people, they were just. They were buying because they had been working so well the last five, even 10 years. And so it's like, well, you know, everyone feels they're. They're paying too much at the time, but during COVID they truly were paying too much. And things came down one of those few times in real estate where real estate is inflated and it did come down. So I'm glad I didn't buy, but instead I bought into a FedEx business, which it was tough.
- [08:21]
Will Smith
Avery, how did you decide on buying a business broadly and then a FedEx route in particular?
- [08:32]
Avery Tomek
So I had known about FedEx routes for a while. I had a friend who owned them for several years, and they were seemingly successful, done well with it. And I had looked on biz by sell. You know, they're all. They're always posted on there.
- [08:47]
Will Smith
And did you consider any other businesses or was that kind of the. As you pivoted away from real estate, that was your first idea?
- [08:53]
Avery Tomek
I looked at other businesses and, you know, if you go on biz by sell, there's a lot of junk. It's. It's like all the junk, you know, pool routes, that kind of stuff, where what are you really buying and is it sustainable? So I never considered those. And everything else was like, real estate based, which I was moving away from, and, you know, just a lot of capital, which I didn't have the money for. So this was something where relatively little capital get into a business that's cash flowing, pays every week. Very consistent, very reliable cash flow, and just huge amount of growth. Like, you know, it's the revenue. It's as much as you want, relatively speaking. You know, if you do a good job, they'll just keep giving you routes. I mean it. There's. There's more than I can handle. Even. I turn stuff down every week, even today.
- [09:43]
Will Smith
Well, as much revenue as you want sounds a little too good to be true, Avery.
- [09:49]
Avery Tomek
As much revenue as you can handle as.
- [09:51]
Will Smith
As you can handle. Although. But we are going to hear the evidence of this phenomenon in your own story. So it's. It's maybe not overblown to say that we'll get there. So. So tell us about this first deal. Did you find it on Biz by Sell?
- [10:08]
Avery Tomek
I. There's a broker. I probably found the broker on Biz by Sell, connected with them, and then they. They sold it to me in East Texas. It's like a Nacados area. We service the city of Nacogdoches. And so I. I live in Dallas. It was the only one in Texas and the only one that was SBA eligible in Texas. And I didn't want to waste any time, so I just jumped on it and said, you know, the sooner I can get started, the sooner I can start compounding and learning and growing, because, you know, it takes a long time to get good at anything. So the sooner you can start, the better off you are. Even though I paid a lot too much at the time, it was still the right choice because of, you know, getting started at the time. I did, and I kind of figured I was paying too much. You know, it was Covid. The valuations were high, and actually, interest rates were pretty cheap. Unfortunately. S. My SBA loan was a variable, so, you know, it shot up, basically doubled. But, yeah, I. I was able to start learning and start, you know, getting my foot in the door and figuring out what to do. And so I could have maybe waited six months and paid quite a bit less.
- [11:19]
Will Smith
Yeah, yeah.
- [11:20]
Avery Tomek
But it was still the right decision.
- [11:21]
Will Smith
Well, th. This orientation of yours, this toward action, getting in the game, is one that we celebrate here. Of course, you don't want to be reckless, and there can be pain if you're just all action, all the time, and indeed in your case there was some pain and not even just what you referred to that you probably overpaid. There was more, more pain than that. But still, it's. It is. When considering what business to buy, there is so much opportunity to paralyze yourself with. With analysis. And it's really hard to find a sweet spot of how much analysis is too much and how much action is too much. And a lot of it has to do with one's personal kind of own disposition. This business was in Nacogdoches. Where's Nacogdoches in. In relation to Dallas where you are?
- [12:21]
Avery Tomek
Yeah, it's about three hours east.
- [12:24]
Will Smith
Ah.
- [12:24]
Avery Tomek
So you were there in a day, you know, in the morning you could.
- [12:26]
Will Smith
Get there in a day. But you were going to be running it remotely.
- [12:29]
Avery Tomek
Yeah, my. I fully intended to run it remotely the entire time. I never planned to move out there, which. The bank, they don't want me doing that, you know, obviously. But, yeah, I. I felt confident. You know, I run real estate remotely, and I've been able to succeed with that. And I knew you didn't need to be there with these businesses, and you truly don't. And actually, I think it's better if you're not for a lot of people, because when you're there, everyone relies on you and you're. You're the guy to figure everything out. But if you're not there, your managers have to figure it out, and they. They always do. And so it works out better, especially for scaling, you know, you can't. You can't do everything. You can't be everywhere. You have to rely on other people. You have to rely on their judgment. Maybe you coach them, train them so that you can rely on their judgment. But ultimately, you have to give people some Runway to make decisions.
- [13:26]
Will Smith
Yeah.
- [13:27]
Avery Tomek
Otherwise you won't scale. You can't get there. You can't do it alone. So me never being there, I mean, I would go occasionally just like for the morning and then drive back, but not being there on a regular basis was probably the best decision I made. And it. I think it's the biggest hindrance for a lot of people getting into FedEx, because they're probably not going to find routes where they live. You know, the station's probably not in your backyard. And even if it was, the likelihood of someone selling when you need them to and, you know, needing an SBA eligible, the price you want and the business you want, it's, you know, good luck, so.
- [14:07]
Will Smith
Well, that is fascinating. And that is actually counter to, I guess, Best practices, conventional wisdom and business buying land, that what you're describing is actually the fantasy that somebody not need to be in the business managing the operations in person, but that they can run it from their laptop remotely. But we actually generally dissuade that people from that fantasy because it can be dangerous. And it sounds, it sounds too good to be true, to be running a million dollar, multimillion dollar enterprise remotely from your laptop and not have to basically be dealing with the frontline operations or the management of your people. But I want to spend some more time on that when we turn our attention to the business of FedEx routes. Give us a sense of the numbers around this business that you, this first business that you bought.
- [15:02]
Avery Tomek
Yeah, so FedEx pays weekly, every Friday. I think at the time it was like $22,000 revenue a week and actually dipped down to like 18 at one point when, you know, Covid was, was at its tail end. Everyone became broke again, no more stimulus. And people were kind of sort of tired of buying stuff online. They're ready to go to a store, ready to maybe not buy stuff and go on a trip. So the revenue, revenue dropped to a kind of concerning amount, especially for me at the time, you know, in the debt that I took on.
- [15:44]
Will Smith
And so it was doing 22 a week. So that's about a million a year in revenue.
- [15:49]
Avery Tomek
Yeah, a little bit over a million one around there?
- [15:51]
Will Smith
Yeah, 1.1 million.
- [15:52]
Avery Tomek
So probably a little bit higher peak season.
- [15:56]
Will Smith
And what does profitability or your take home look like on a FedEx route? Doing 1 or 1.1.
- [16:04]
Avery Tomek
So if you don't have any debt, like your EBITDA margin, I think 20% is realistic. And then if you have debt, call that like another 10 to 12% of your margin, just depending on what your capital structure looks like. But so you should be able to make, you should be able to make 8 to 10% on it if you finance your fleet of trucks, which is really the only capital intensive part is the trucks. You know, we buy scanners and like dollies and that kind of stuff, but it's not, it's relatively inexpensive. It's the trucks that are expensive. So the way to scale in this business is to find a way to get debt to buy more trucks.
- [16:48]
Connor Gross
You know that one of the most common levers to pull in a target acquisition is technology updating the systems of a business that may still be running off a spreadsheet or even pen and paper. But tech is complicated with tons of solutions out there. So choosing the right cloud Platform, CRM, telephony, compliance and cybersecurity. Not to mention implementing all that is a job in itself. Acquiring Minds Guest Nick Akers knows this firsthand. As a former searcher who now owns Inzo Technologies, Nick has seen the tech challenges searchers face when acquiring businesses. His team at Inzo regularly works with searchers and their acquisitions, offering a complimentary IT audit of the target company. Nick takes a personal interest in all their searcher clients, drawing from his own experience in the search phase. Enzo dates back to 1989. So this is a company that has managed the tech for hundreds of small businesses over decades. And one last thing, no long term contracts with Enzo. A big differentiator. Check out enzotechnologies.com I N Z O or email Nick directly@nickzotechnologies.com and don't forget to tell them you're a searcher.
- [18:11]
Will Smith
This first route. So how was it priced? What? I mean, what was it selling for? And how was that, how was that enterprise value calculated?
- [18:20]
Avery Tomek
Yeah, it was like, I think I paid like a 4.6 multiple of EBITDA, which was high. Yeah, it was Covid numbers. And so I think now it'd probably sell it a 4. But even that 4.6 of earnings, I think the earnings were skewed or incorrect or had drastically fallen by the time that I actually closed on it. Because it was valued during COVID and then I bought it basically after Covid, it probably took like six months and they probably got the perspective built two to three months before that. So maybe even nine months before I purchased it was the numbers that I was looking at. And to be honest, I probably didn't do my due diligence on it either. But if I were to go back and not take it, knowing the numbers weren't what they should have been, the right decision would have been to still buy it and to undergo that pain that I endured for a while.
- [19:17]
Will Smith
We keep, we keep teasing this pain. I promise audience, we're about to get there. And so when you say four and a half, you're talking about on about 200,000. This business was claiming about $200,000 in profit.
- [19:29]
Avery Tomek
Yeah, around there. Yeah.
- [19:32]
Will Smith
And when we say EBITDA, in fact it's more like what we would call SDE. Because that $200,000 needs to pay you, right?
- [19:40]
Avery Tomek
Yeah.
- [19:41]
Will Smith
Needs to pay you yourself.
- [19:42]
Avery Tomek
Portion. Yeah, yeah. Which I never took a salary and I still don't. But yeah, so that helped. That helps for growing. If you can just push everything back in. Obviously, you know, you're you're going to compound a lot faster.
- [19:55]
Will Smith
Sure. But then the multiple that you paid is actually higher because your time is worth something, your time is worth a lot. And you're basically investing your time in the business without compensation. Which.
- [20:08]
Avery Tomek
Yeah, fair. Which I'm fine with that.
- [20:11]
Will Smith
Yeah. Well. And it certainly has worked out.
- [20:13]
Avery Tomek
Yeah. Yeah.
- [20:14]
Will Smith
And are you. So were you at least then living off your real estate?
- [20:18]
Avery Tomek
Yeah. And like savings really. Not even my real estate. Just, you know, there were a few things in my life that I, I got lucky and I, I'm kind of like tired of bitcoin and talking about it. But like I made in college, I made quite a bit of money. I bought it very cheap. It was like 400.
- [20:40]
Will Smith
Wow.
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Avery Tomek
So, you know, it just blew up. So I had, at my age, I had a lot of money. It, you know, in bitcoin, I sold a lot of it. But you know, that allowed me to put the a hundred thousand dollars down on the SBA loan, allowed me to buy real estate. Allowed me to have, you know, some cushion for hard times. And I mean, you know, my whole life I had been, you know, kind of a saver and a doer and always working and always, you know, just saving onto cash and for a rainy day or a good opportunity, I don't really need that much money for myself.
- [21:17]
Will Smith
Yeah.
- [21:18]
Avery Tomek
At least not right now.
- [21:19]
Will Smith
Yeah.
- [21:21]
Avery Tomek
And you know, I get more enjoyment out of just like building.
- [21:24]
Will Smith
You buy the one SBA eligible in Texas route. It's doing a little over a million dollars in revenue, generating about $200,000, give or take in what we call STE. You buy it for about a million bucks and tell us what happens. You've already told us that you bought it basically at the peak of COVID when everybody's just clicking, buying, buying, buying online E commerce is surging. So you sort of buy at that peak and then things immediately start, that demand immediately starts softening. What else happens? Take us through the first six or so months of, of your near death experience here.
- [22:16]
Avery Tomek
Yeah. So, you know, I, I paid a high price. I, I bought it when interest rates were very low on a variable loan. The, the earnings I think were not actually what the earnings were. So, you know, therefore an even higher price volume started to soften. So my revenue dipped. Russia invades Ukraine so diesel prices skyrocket more than double and there's no like additional fuel surcharge we were getting. And FedEx was doing their drive initiative which they were trying to cut as much expense as they can because their earnings Were not looking too good. And, you know, they're trying to prop up this stock price so they weren't going to pay contractors any more than they needed to. And it wasn't just me that suffered. I mean, it was a huge falling out for a lot of people. But, you know, with every downturn or market cycle, there's always an upside as well. And if you can find that upside, you can do pretty well with it, if you play your cards right. But the reason other people don't is because they don't know where to look. So if you can, you know, be kind of clever and have your. Your ear to the ground, you can probably do pretty well, I believe, in any market cycle with anything.
- [23:36]
Will Smith
And so what did you do that was pretty clever or had your ear to the ground that took advantage of this, you know, that you found opportunity in crisis?
- [23:45]
Avery Tomek
Yeah. Well, first of all, as, as contractors fail their routes, you know, sit, they don't get service. So the packages start filing up. So someone has to run it. So FedEx will pay you additional money to come in. It's called contingency or their contingency resource. And you can run that. And the revenue is double, maybe triple.
- [24:06]
Will Smith
And the profitability, the rate that they pay you per whatever package delivered is two or three times your normal rate or a normal rate.
- [24:15]
Avery Tomek
Yeah, not in all cases, but a lot of them. But the expenses are higher too, because you're like bringing a driver and a truck from probably another state, paying for hotel rooms, paying higher driver pay, paying a per diem to the driver, probably not being as efficient as you could be because you're just, you know, just trying to get the packages out the door delivered. And so I saw that and I was able to make, you know, my debt payments and buy some more trucks. And more and more people were failing. And so these routes just kept popping up. And routes that were, you know, I, I paid a high price. They were worth a lot. Now they were just flooded. Just as many as you wanted. And so I grabbed a few contracts, which.
- [24:58]
Will Smith
And, and by. Grabbed a few contracts. What does that mean? They showed up on biz by sell or FedEx themselves gave them.
- [25:04]
Avery Tomek
They awarded them to me because I was running it contingency. And then they said, well, you know, we have no one else. Do you want it? And so on some of them. And early on, I was a little eager and I just took anything because, you know, I just paid a million dollars for one. So I was like, okay, well, seems like free money if I can do it correctly.
- [25:21]
Will Smith
Yeah. And this is an important point, Avery. So. So these. What you're calling contracts is essentially a. A route, right?
- [25:29]
Avery Tomek
Yeah, like a set of routes, like maybe 10 to 15 or a set of routes.
- [25:33]
Will Smith
Okay. Which is, in fact, was somebody's business that, like you said, you know, you just bought one of those that was somebody else's business. So this set of 10 or 15 routes, this contract might be something that we'd see on biz by sell. And here you were getting it for free. You were just being. You were just being. What did you.
- [25:56]
Avery Tomek
Giving it. Awarding it.
- [25:57]
Will Smith
Awarding it. Yeah. You were just being awarded it. Yeah. Well, no wonder you kind of. I don't mean this to denigrate you, but you got greedy. It's like I just paid a million dollars, and here they're giving me something for free that I just spent, you know, just six months earlier. Spent a million bucks for. Right. Is that. That was your logic?
- [26:13]
Avery Tomek
Yeah. And there wasn't, like, there wasn't that much competition for it either, because people were getting burned left and right and a lot of failure. And so it became easier to get these. And so at that point, it was just a function of the truck, you know, which is a function of debt, really, because, you know, you only have so much cash. So at the same time, I was reaching out to as many lenders as I could, filling out applications, trying to get as many trucks as I could, because the more trucks, the more revenue. And so it's just like a constant cycle of more routes, more trucks. Just keep. As soon as I got a truck ready, it was like, you know, on the road, going, delivering.
- [26:54]
Will Smith
So your bottleneck was trucks and, by the way, not people, because that. This was also at a time when the labor shortage was still most acute.
- [27:02]
Avery Tomek
Yeah, that. Yeah, labor. There was a labor shortage, and there still is. I think, at least for this kind of work. It's hard. I have three recruiters, and I'm using a recruiting agency as well, so. But you can find the people, you can hire them. It. You know, buying the trucks, it's not that easy. Just come up with a million dollars to buy a group of trucks. So, you know, I had to go and, like, essentially sell myself to lenders, you know, sell my background, show them the revenue growth, explain the business concept. And then there was one point where there was a. A big leasing company that was pulling out of FedEx because they got burned really bad during COVID too. You know, everyone just thought the package count was just going to keep going up and so they bought, you know, a couple thousand trucks, thinking, you know, there was some niche with FedEx contractors and they would do short term, long term leases. And so they went in in a very big way. And, you know, like, a lot of people got burned and package volume went down. And so they had all these underutilized assets, just trucks sitting with little to no miles. Some of them that I bought from them literally had 200 miles, which is just the miles from, you know, the factory to, you know, the FedEx yard never even went on a route. And so they. They basically liquidated their FedEx fleet at a time when I had tapped, you know, all my lenders, and they were all ready to lend me a couple hundred thousand dollars, a million dollars. So, you know, I just went in every week, was buying trucks. Some weeks, you know, I just buy a whole million dollars worth of trucks.
- [28:46]
Will Smith
So this, this leasing company is liquidating. You're talking to every lender to scare up credit to finance these trucks.
- [28:56]
Avery Tomek
And.
- [28:56]
Will Smith
And you got FedEx, other FedEx route owner operators going out of business everywhere. So are you the only one in the. In the FedEx network that sees this opportunity, or are other established, savvy operators similarly kind of trying to grab. Grab land here? Grab market share. Land share?
- [29:17]
Avery Tomek
Yeah. Well, I mean, every area there's a contractor there was. So, like, other people are. They were taking these areas. I don't talk to a whole lot of contractors, so I don't know what the consensus was, but it was very obvious. There's a lot of failure with contractors in the network. So I don't feel like there was a. A ton of haste and urgency with some of them. And I. But I do think a lot of contractors, they saw, oh, you know, just like me, I paid a million bucks. And that's like, you know, you can go and get this one for free. Hopefully it's worth something. Was, you know, grab a couple, see how it goes. But our rates were still, I believe, kind of low. And so even taking these contracts, it was still difficult. And to.
- [30:02]
Will Smith
To make the business work, to make the whole operation.
- [30:04]
Avery Tomek
Pencil just cost pressures, you know, labor rates going up, price of diesel, the price of, you know, it was very hard to get parts. So your trucks would break down and they'd go sit at a shop for months. So what do you do, you know, go get a rental truck. It's very expensive. Or you go buy another truck. Now you have two truck payments for one route.
- [30:27]
Will Smith
Do you think, Avery, if you hadn't just gotten in so recently, and just spent a million dollars on a contract or on a route that you're now seeing FedEx give away for free that you would have been, that you would have tried to accumulate so many. Because I imagine, because there's all this negative signal. You know, shipments are coming down, fuel costs are going up, owner operators are going out of business everywhere. So you can imagine the psychological reaction to that for somebody in your seat or other FedEx owner operators who, who could have accumulated a bunch of routes in that time just being bearish on FedEx. It's like this was like a blood in the streets moment. And you, to your credit, really were hungry while everybody. What is it? Well, hungry where everybody else was scared or, and, and yet, and yet I wonder did you have the vision of how, how smart what you were doing was, or you just kind of like had this other psychology phenomenon where I just spent a million bucks on this and now they're giving me one for free. I'm gonna grab, grab as many of these as I can just for that sort of thing.
- [31:42]
Avery Tomek
Yeah, I mean, there were about three times where I thought maybe I was going to lose it all. But you know, when other people are bearish, like I said, there's, there's a bull market in every market cycle and you know, you got to be a cyclical player and you know, a lot of times do the opposite of what other people are doing. So when this leasing company that I was telling you about was going out of business, they had like 2,000 of these step bands and Ford and Freight Learner are the only manufacturers and they had stopped because no one was buying any and they had lost a lot of money too. So I knew there was no production, but yet this company was just fir sailing their fleet. And I, yeah, you know, I was getting a truck that knew was 65, $70,000. I'd get it with like 20,000 miles for about 30,000. Yeah, like, well, dang, I can put, you know, 20,000 miles in like, you know, two months. So it's not really that big of a deal. These things will go over 200,000 miles. So it's not really that depreciated. And for half price or even less than half price, it's like just a no brainer. You know, sometimes in life you'll, you'll get a couple opportunities where things just really work out and you gotta have the courage and discipline. Discipline to go for it.
- [33:05]
Will Smith
To your credit, this was a scary moment where everything, all the, all the arrows are red and you recognize that in the moment and, and scramble to kind of go all in and then some. Talk to every lender, borrow everything you can to accumulate this, the, these trucks at this, you know, once in a, once in lifetime window to get this scar. Very scarce resource at a very good price to build your empire. It's really, it's really, you know, you could imagine a Hollywood scene of like, you know, the investor making serious aggressive moves, you know, in a mad scramble and by the way, almost losing it a few times. So, so there must have been moments of doubt where you were like, oops, I got a little too aggressive. What were these other moments where you thought you were going to lose it all?
- [33:58]
Avery Tomek
One of them was with FedEx. You can do, it's called pickup and delivery, which is what we've been talking about. It's like a, a step van, a small truck. You pick up packages, you deliver packages. And then the other one is, it's called line haul, it's a tractor trailer. So you move trailers from hub to hub. And so I got into that and that, that really fell off. And So I had five tractors. My payments were like 15,000amonth on those and I was not getting by and it basically, it was just eating me up. You know, my revenue was not that high at the time and so $15,000 a month was pretty significant. And I had a couple sleepless nights during that period, but I, I ended up getting out of it. I still have a tractor that I'm paying on, but yeah, it's like 3,500amonth or something. And even now that market is still very depressed and it's not a good time to get in. Not yet. Maybe, maybe it will be soon. But I know they're moving a lot of packages rail. So I think until we see something, some sort of shift there, it's not yet the time, but it will be, you know, at some point.
- [35:13]
Will Smith
And, and so what did you do to survive that?
- [35:16]
Avery Tomek
I switched from an operating lease on these tractors, which was actually 20,000amonth for four and, and bottom outright. So I used debt and so, and then things were going good for a little bit, so I bought a fifth tractor which was not, you know, in retrospect the good, a good decision there. And so those debt payments were about 15,000 for, for five tractors and we were going good for a while and then it just fell off completely and I ended up selling it to someone who's more courageous than me and they took it and you know, they basically just bought the trucks like, all right. It's all yours. Just get me out of these payments. You know, I don't know how it's doing for them, but I think they, they pay cash. So, you know, at least they don't have like too big of a cash flow concern.
- [35:59]
Will Smith
Any other sketchy times, Just, you know.
- [36:04]
Avery Tomek
Kind of early on when things were a bit hectic and I took on a lot of debt, a lot of high interest debt with truck prices that were expensive then. It was before the truck market just kind of fell out and I just had a lot of payments and it was just kind of uneasy. But since then, I mean, it's been good.
- [36:26]
Will Smith
Did just volumes come back with FedEx?
- [36:29]
Avery Tomek
Volumes came back. Express merged with Ground, which expresses like the high priority, you know, one, two day packages. There's time commitments. You got to get there at a certain time. That was a standalone branch that they would use their own employees to run. It's part of their drive initiative I was telling you about. To cut cost, they merged it with Ground and now we, we take it. It's not a, it's not fully integrated, but it's getting there. And so that was like a, I don't know, about a 30% increase in volume. So right there, if you had any underutilized assets, you know, you had a use form right there. And then I think FedEx, they started, I, I can't speak for FedEx, but I've the, the rates improved. I think they, they might have been paying a lot of contingency and they decided, well, maybe this isn't the right move. Or maybe they just saw that, you know, inflation was, was still high, at least for our input costs and our rates have improved since then. You know, nothing stays low forever. Nothing stays bad forever. You know, when things are good, people forget that they'll be bad again. And when things are bad, people forget that they'll be good again. So if you can be patient and last, you can weather just about any storm.
- [37:52]
Connor Gross
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- [38:06]
Will Smith
Into CEO and owner of the business you bought.
- [38:09]
Connor Gross
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- [38:32]
Will Smith
A fraction of the cost.
- [38:34]
Connor Gross
Go to aspenhr.com or contact Mark directly@markspenhr.com.
- [38:43]
Will Smith
You have a really, a really kind of Warren Buffett esque ability to control your psychology. You don't get carried away when the times are good and you don't get scared when times are bad. In fact, you go to work and, and make bets. And we all know that this is all the conventional wisdom, the conventional wisdom of investing. But as Buffett always points out, it is, it is surprisingly difficult for even smart people to control their own emotions in the ups and downs of market. But you seem to be able to.
- [39:14]
Avery Tomek
Well, I think the best investors were prior business people, which was Warren Buffett as well. And I, I also believe that the earlier you can start like I was talking about earlier, the better. You know, you have a longer Runway to learn from your mistakes.
- [39:31]
Will Smith
Yeah.
- [39:31]
Avery Tomek
And I'd kind of always been a business person, so I'd gotten burned a few times and I, I, you know, the best lessons are learned from experience.
- [39:41]
Will Smith
Yeah.
- [39:41]
Avery Tomek
And so I knew, you know, I know what it's like to take a big loss and you don't want to repeat it and you learn from those mistakes and so it just makes you, you better. And that's, that's why I think a lot of business people, after a while they turn to investing because it's the same psychology. And probably by that time they have more capital and so it's less about your time that you're inputting more of your capital.
- [40:09]
Will Smith
So I think that, I think that's, that's why most people end up as investors.
- [40:13]
Avery Tomek
Yeah.
- [40:14]
Will Smith
If they don't get sick of operating and if they have enough capital to make it interesting, they'd prefer to point and click their way to more wealth or think their way and not have to get their hands very dirty. Let's get on the same page. Story wise, what year are we, I guess when things kind of start to settle out after all of those scares? 22.
- [40:39]
Avery Tomek
When things started settling out was like last year. 20. 24. Yeah.
- [40:45]
Will Smith
Oh, sorry. You bought in. When did you buy that first route?
- [40:49]
Avery Tomek
22.
- [40:51]
Will Smith
Oh. And you bought in. 22.
- [40:52]
Avery Tomek
Okay.
- [40:53]
Will Smith
And so things finally started settling down. It by about basically two years into your tenure.
- [40:59]
Avery Tomek
Yeah, roughly. Yeah. And then it's. Yeah, maybe a little over a year. It's been turning around and then it's like each month since then has just been better and better and better. Yeah. Me and my team, we're, we're starting to figure things out and we're, I feel like we're getting a reputation with FedEx. And I bought so many trucks and it took a while to, you know, all these used trucks, they got something wrong with them. I had to know, go through and fix whatever needed to be fixed on them and get them approved to be used with FedEx. So it took time. And now I have most of those trucks deployed. And so, you know, things are, they're, they're running pretty good. And I'm now trying, you know, always kind of thinking 612 months ahead. I've got about 50 trucks on reserve. Just bought 10 last week. Just trying to keep the pipeline full. So when trucks were cheap, I knew they were going to get very expensive. And now they are. They're about 50% more than they were before. But I also knew that we need trucks no matter what the price is. And so even if they go from 60 to $90,000, I'm still going to need them. And I knew there was going to be a shortage. So I, you know, about six months ago, I started working to get these new trucks that are very expensive. And I've got a lot reserved. And everyone that I talk to, they don't have any trucks in the pipeline. And so this peak, I'll be pretty deep with resources. So I hope we'll. We'll do good when I. We'll have trucks when no one else will.
- [42:42]
Will Smith
Exactly. You just bought 10. You have 50 more on. What did you say? On order?
- [42:47]
Avery Tomek
Yeah, that'll come prior to September.
- [42:50]
Will Smith
And then what is your fleet today?
- [42:53]
Avery Tomek
The size, like the number?
- [42:55]
Will Smith
How many trucks do you have?
- [42:56]
Avery Tomek
Like 240 trucks.
- [42:58]
Will Smith
So 240 trucks deployed across your FedEx empire. And so what, what percentile does that push you in across all FedEx route operators, do you think? 99 percentile.
- [43:12]
Avery Tomek
They don't publish that kind of stuff, as far as I know. And I don't talk to a whole lot of contractors, but I'm pretty sure I've got to be one of the largest. I've not met anyone larger. I know there was a, there was a contractor. There was, you know, he had like a brokerage kind of high profile in the, in the industry. And I think he was pretty big. I don't, I don't know what he was, how many routes he was running.
- [43:38]
Will Smith
Is this the guy that I mentioned, having heard about? What's his name?
- [43:44]
Avery Tomek
Spencer Patton?
- [43:45]
Will Smith
Yeah, yeah, yeah, exactly.
- [43:46]
Avery Tomek
Yeah, yeah. He still has a brokerage. I don't know how, how active he is anymore. I mean, he's not a contractor.
- [43:53]
Will Smith
How in the world of FedEx do you measure, scale, is it number of trucks deployed, number of what? Did you have kind of revenue per week, packages delivered? What are the key metrics in this world?
- [44:08]
Avery Tomek
Yeah, I would say those three, like number of trucks, number of routes that you're running, maybe number of packages or stops that you do. And then probably, you know, revenue, at least on the PND side. Pickup and delivery side of the business.
- [44:24]
Will Smith
Can you give us all those numbers in your case today, July 2025?
- [44:29]
Avery Tomek
Yeah, well, I've got 240 trucks. Not all of them are active. We're running about 152 of those today. I mean, you got to have plenty of, of extra. So it sounds like I have a lot of extra trucks and I do, but they go down all the time. So you have to, you know, take to the shop, get another one out there, just keep it going. We're running 15,000 stops today and last week did $550,000 in revenue. So 500 difference, 21,000 three years ago.
- [45:06]
Will Smith
50 $550,000 in revenue last week. And that revenue is your business's top line revenue?
- [45:16]
Avery Tomek
Yeah, correct. Yeah.
- [45:17]
Will Smith
And the way that works is FedEx corporate deposits that money in your account on a weekly basis.
- [45:24]
Avery Tomek
Yeah. Each Friday. It's like achievement deposit. So we see the numbers on Tuesday night, like what will be deposited on Friday. And those weekly deposits are just the lifeline of everything. If it wasn't weekly, this would be a very different operation. And if we weren't able to rely on that weekly deposit, it would be very different. So FedEx is very smart with paying every Friday and never missing a payment. And that's one of the biggest benefits of doing this. You have, you know, you have no accounts receivable, no bad debt write off, no collections, no marketing, no sales. It's just pure operations. And so if you're a good operator, FedEx, I. I don't speak for them, but I'm pretty sure they're very hungry for good operators. So if you're dedicated and you can do a good job, you can be very successful with this. FedEx is such a big corporation. Their little crumbs they leave behind are gold nuggets to individuals.
- [46:31]
Will Smith
And what do you mean by that? What do you mean what crumbs like you.
- [46:35]
Avery Tomek
Like I was saying, with contingency, you know, they need someone to get in there. Someone has to deliver those packages. They can't get two, three, four days behind. It's not acceptable. So there's a point where they will just about pay you whatever it's going to take, especially in peak season, to get those packages delivered. And if you can run it successfully and hold it down and it's not easy to do, but if you can do that, you can make good money with it more than a lot of other businesses. And they will pay you. They will actually pay you.
- [47:10]
Will Smith
And that weekly deposit is for the prior weeks.
- [47:15]
Avery Tomek
Yeah, the prior activity.
- [47:16]
Will Smith
So it's not from four weeks ago. So really there is no, there's very little in terms of accounts receivable. It's, it's days.
- [47:24]
Avery Tomek
Yeah.
- [47:25]
Will Smith
From, from when you do the work to win. When FedEx pays you.
- [47:27]
Avery Tomek
Yeah, correct.
- [47:29]
Will Smith
Yeah. You don't have to bill on the money. Just shows up. That's, that's enticing. One, one thing in our world that comes as a rude awakening to almost every business buyer who's never run a business before is the working capital realities in small business and how counterintuitively difficult it is and, and, and how easy it is anyway, the pitfalls there. How easy it is to get caught and barely be able to make payroll, what, what have you. So, yeah, what you're saying here is really going to resonate with the audience.
- [48:01]
Avery Tomek
Well, and with this business, you actually don't need that much working capital because they pay every Friday. And as long as you're, you're somewhat profitable, you'll be okay with not a whole lot of working capital. And I wouldn't advocate that, you know, someone come into this with like, no cushion, no money. You gotta have some. But I've had times where I didn't really have, like, hardly anything in the checking account. I had like some savings that if I needed to tap it, I could. And then I would just do that week after week when I was buying a lot of trucks, you know, just barely make payroll and spend the rest for trucks because they were so cheap. And I knew I honestly, I could have flipped those trucks for a decent return. And I wasn't just buying them directly from the, the seller of it, that this leasing company. I was buying them at auction where they were selling them even cheaper. So I had an auction friend and I pay them a fee and I'd go buy them, you know, as cheap as I could get them. And, you know, just the more trucks, the better. Very crappy.
- [49:05]
Will Smith
Yeah, yeah, you had, you had a contact, you had an in.
- [49:09]
Avery Tomek
Yeah. And that's what you got to look for with anything. I believe you can be successful with anything. You know, you could have a really good garbage collection company. You could be a great Painter of, you know, houses or whatever. If you're, if you're good, the world will compensate you. But you gotta, you gotta be well above average.
- [49:32]
Will Smith
Well, it helps to be in a growing industry, which you, you are. I, I guess, I mean we're all ordering more and more stuff online. I guess that's where the growth is coming from. But you did actually experience retraction in the industry in your first six months. As in fact there was, there was shrinkage or contraction in the industry, but that was momentary. And we're all back now to probably buying incrementally more things online. Just to, just to underline what you've built here, $550,000 a week, let's call that $2 million a month or 24, $25 million a year enterprise run rate. Is that 550. Was last week a special week or is that really, are you hitting that number regularly for the last couple months.
- [50:24]
Avery Tomek
We'Ve been around there like 450 to 600. Last week was high, I think a bit above average. But it, I think we can hold that for a little bit longer. I think that the trend for the rest of the year should be up. You know, people, they go back to school in like August and things. You know, right now we're having a lot of sales and then it's back to school and then shortly after that is peak. The slowest time of the year is Q1 of the calendar year. So if you can get through January to March, you'll be good the rest of the year. And really it's just January, February, that's slow.
- [51:06]
Will Smith
And so indeed this, this business, FedEx, the, the biggest trend that it tracks are consumer shopping patterns.
- [51:16]
Avery Tomek
Yeah.
- [51:17]
Will Smith
As opposed to business needs and I don't know, businesses sending each other stuff. I think that's where FedEx started, wasn't it? The overnighting between businesses.
- [51:25]
Avery Tomek
But that's I think so got to.
- [51:26]
Will Smith
Be a, just a, a niche play at this point.
- [51:30]
Avery Tomek
Yeah. I don't know what percentage. I feel like it's maybe like 25 to 33 or so. I, I don't know. That's kind of what I see on the businesses, the routes that I run.
- [51:43]
Will Smith
Okay. And so Avery, this, let's just say for easy math and approximate math, 25, you're got a business with $25 million a year run rate margins in this business. For a high performing operator, EBITDA margins, Net EBITDA margins would be what I.
- [52:05]
Avery Tomek
Think right now my Eidot, because I'm running a lot of contingency. It's like 35, 40% EBITDA. I do have a lot of debt, but that's very high ebitda. I wouldn't, I don't think someone new is going to come in and hit those margins. They're going to have to work at it and get a reputation and get some of these higher value routes. And you know, I've obviously been trying to get as many of those as I can and we've been holding those down for a while. So it, that's, that's high. Those are high revenue routes, high margin routes.
- [52:43]
Will Smith
Well, I'll let people do their own math, but two and a half, $25 million a year if you actually can get 35, 40% margins on that 40% EBITDA margins. Now you've got all these finance payments and debt payments, but that is an impressive amount of money. And even if to your point that you know, you, you've got these contingency, you're, you're experienced operator, so your margins are, let's call it twice what somebody who's more, who's newer to this world, who's less experienced could get at 20%, even 20% margins on a $25 million business is still a whole lot of money to be generating for oneself every year. Yes.
- [53:29]
Avery Tomek
A lot of ebitda.
- [53:29]
Will Smith
Yeah, it's a lot of ebitda. Right. Thank you for making that point. Because, because in fact, a lot of this, a big operation like yours is always going to have a lot of debt with it. Right. Because you're constantly financing this equipment, all this capex, all these trucks. Thank you for pushing back every. Because this is a case where ebitda, the difference between EBITDA and cash flow is enormous. So, so EBITDA is a less helpful number in the case of your business because there's always going to be a ton of EBITDA because you're always to grow, always going to be financing a bunch of trucks.
- [54:02]
Avery Tomek
Yeah, I bought a lot cash too.
- [54:06]
Will Smith
Oh.
- [54:06]
Avery Tomek
When I was, when things were really picking up and you know, I was buying all those used trucks, a lot of them, I bought cash just, you know, all my cash flow. I just go and buy two, three trucks a week. And that made a big difference because instead of a fourteen hundred dollar a month payment, I have like eighty trucks that I don't have a payment. So that helps your cash flow tremendously.
- [54:33]
Will Smith
Right. But of course it was at the, at the expense of the cash flow in the time when you bought it.
- [54:38]
Avery Tomek
All of It. Yeah, right.
- [54:40]
Will Smith
All of it. So, so when you kind of spread that out, maybe it looks something like, you know, finance payment or something.
- [54:48]
Avery Tomek
Yeah, yeah.
- [54:49]
Will Smith
Am I, Am I understanding the picture of your business here, Avery, and communicating it to the audience? Well, I mean, it's, it's. It seems incredibly lucrative and impressive.
- [55:03]
Avery Tomek
Yeah, I, I think anyone could get into this business and do exactly what I'm doing. I'm not doing anything special. I think FedEx has it set up in a way where it's almost like anyone can achieve the American dream. You can come in, you can run a successful business. It's not easy. It's a lot of work, and you, you know, it'll change very quickly, but if you can hold it together, you can make a lot of money. But you, you have to. Do. You have to be a good operator. There's no way around it.
- [55:34]
Will Smith
Let's hear a little bit about. More about how hard you're working, what your lifestyle looks like, because that is an important point here. Enough that we just need to be explicit about it. And then let's, let's use what you just said as a segue to really understanding these FedEx route businesses kind of broadly and, and generalize. You're working your tail off like you're working like crazy. Tell. Tell us more.
- [56:00]
Avery Tomek
Yeah, but, I mean, that's my nature. I, you know, I've always been a very hard worker. I'm not lazy. I would rather work on something and grow it rather than, you know, go watch tv. You know, I don't play golf. I don't play video games. I don't smoke weed. So, you know, I devote my time and energy to building stuff. And, you know, I'm still active in real estate. This takes a lot of time. It takes as much time as I allow it to take. I've got a really, really good management team. I think the best in, in the industry. I know I'm biased, but I really believe that. And so we do a really great job. And we do put in a lot of hours. Art. Several of our stations that we're in are seven days. So, you know, the packages go out seven days a week. There's only like five holidays that we don't operate. So someone has to be there to take a phone call to dispatch these drivers to make sure everything's good. And, you know, trucks don't break down. You need a tow and you got someone who can come in when someone else doesn't show up. It's, it's all the time.
- [57:06]
Will Smith
And and is it all the time for you? So if you have somebody at that station on a Sunday and a crisis happens, can they handle it? Or are you, are you basically personally also on 24, seven or seven days a week?
- [57:20]
Avery Tomek
Yeah, I am on all the time, but I don't need to be. But I do think it helps, you know, I think getting this high growth rate, you know, the owner has to be very attentive. And I, I don't mind because it's like, what else am I going to do? So, so I might as well. And I, and I know things will run smoother and better when I am. And I'm the, the owner, so a hundred percent owner. If something goes wrong, it's. It's me that's paying for it. You know, if there's some inefficiency, it's like, you know, I, I could go, I could not be there. And, you know, there's like a $3,000 mistake. And so what's your time worth? If you, if you're attentive and, you know what, you're watching tv, maybe just have your phone, just make sure everything's going good, you can prevent that mistake. Like, is, is that worth your Sunday evening to be paying attention a little bit, to save a couple thousand dollars? For me, it is because I'm. Yeah, you know, I save a lot more than that on other things. So, you know.
- [58:25]
Will Smith
Well, and, and don't get me wrong, I'm not. We're talking to an audience here of people who are not scared of hard work. I just so in, in, in also with an ownership mentality. So people will understand wanting to be very involved in their businesses and aren't, again, aren't going to be scared by that. But the nature of FedEx this, you know, that everything, it's kind of a ticking clock business. You know, we've all seen Cast Away, by the way, I have to ask, I'm sure this is what, you know, the question you get at every cocktail party. Is it like that? Are you Tom Hanks and Castaway?
- [59:00]
Avery Tomek
I am not Tom Hanks, but I empathize with Tom Hanks when he's on a route, not on an island.
- [59:09]
Will Smith
Okay. It just, it feels like this business would be more frenetic than others. And so to achieve what you've achieved, is it something where it just is completely all consuming? It's just kind of what I'm trying to drive at. Because I will say, despite the fact that I just said that listeners are not scared of hard work at the Same time, a big part of the reason for becoming an entrepreneur or an owner is to control your own time. And is this a business model where it actually, you're not very in control because the demands of this, of the, of this business?
- [59:49]
Avery Tomek
Yeah, it is very demanding. I don't know if someone would be able to take it as far as I have without being very involved in it to a degree. Sacrifices have to be made and I don't feel like it's really like negatively affected my lifestyle, but I do put a lot of hours in, but I'd put a lot of hours into anything, so.
- [60:10]
Will Smith
Well, right. It's right.
- [60:12]
Avery Tomek
And I do think some people, they say, oh yeah, you know, I'm gonna, I don't mind working hard, I'll work hard. It's, you know, I want the reward. But I think a lot of them, they're saying, I want to work hard for a little bit. And then when I don't want to work hard, I don't want to work hard. And really you have to work hard all the time because once you get the momentum, you have to at least maintain it, if not continue growing, if that's your goal. So you can't let off the gas. You can't just be like, well, I'm going to take a week off. So not, you know, unless you've got like something set up where you don't have to do anything. And I think you might as well just be an investor at that point. I don't.
- [60:50]
Will Smith
But, but let's do, let's explore that. Let your again, $25 million run rate business. Let's say you were cool with that level and wanted to hang out there, you didn't want to retire, you didn't want to just go to the beach, but you weren't necessarily trying to grow so aggressively. What could could that lifestyle be?
- [61:12]
Avery Tomek
I don't think we'd maintain where we're at because we're doing so much of that short term high revenue work I was telling you about. And that is really like owner involved. Like I'm communicating with FedEx and finding these routes and these opportunities. And then we're acting, you know, very quickly to make sure we get them. I think we could probably run about half that without me being very involved.
- [61:35]
Will Smith
Okay.
- [61:36]
Avery Tomek
But you know, that's obviously not what I want.
- [61:41]
Will Smith
Yep, well, let's. Okay, so let, let's formally now pivot into, into even more about the, the FedEx routes businesses. What you're describing, I guess you could say is a con of this business depends on, like, like you said, your personality, what, what else you might want to do with your time, if anything. You've talked. We've talked about the pros of this business, certainly how cash flow works and the, the regularity of it. You also early on said you can have as much revenue basically as you want as you're willing to work for.
- [62:18]
Avery Tomek
Yeah.
- [62:19]
Will Smith
Any other pros and con. Pro or con that you want to say about this opportunity for outsiders looking in?
- [62:27]
Avery Tomek
Yeah, I. I would say if I could. If I could go back in time and do it all over again, I would. It'd be great to know what I know now. So it's like, you know, if people are listening, I hope this is helpful, and, you know, if people want to reach out, I'm willing to help them. But I think the cons are we. I. I have a very demanding customer. The nature of the work is very intense. These packages have to go out. They have to get it delivered. You know, FedEx is very protective of their brand. You have to do a good job. You can't bend the rules. And doing all of that well is not easy. It's not rocket science. You know, we're not curing cancer. It's nothing novel, but sometimes it feels like it's as hard as rocket science. Not that I know what that is, but it's very difficult at times. So it's not a walk in the park. This is not. I'm gonna get SBA loan, put a hundred thousand, hopefully make that back in a year. Everything else is gravy, and it'll probably fall apart if you're not involved. I think it's gonna be a rude awakening for you. So I, I wouldn't want someone to come in, be like, just throw it in the portfolio. But I think you can get, you know, outsized, you know, rewards and returns doing this the right way, where you don't want to put it in the portfolio, you want to run it and do a good job. Yeah, because no one's going to pay you what you have the potential to make.
- [63:58]
Will Smith
Although, Avery, I do know of somebody who has a W2 and a FedEx route. Now, he's not doing your volumes anywhere close, but it's a legitimately sized route or business. Probably 3 million in. In top line for his business. So I, I guess it. And maybe. I don't know, maybe he's not running it very well.
- [64:24]
Avery Tomek
Yeah, that's. It's probably one contract in one area, and you can definitely do that. You could do two with a job I don't think you can do eight with a job I think I'm running 10. It's that. That is a bit more. And I don't think you'd be able to afford the managerial overhead that I have. You know, the GNA expense if you didn't have as many routes running.
- [64:52]
Will Smith
And what is your, what is your GNA layer look like?
- [64:56]
Avery Tomek
Like roughly, basically three, like general managers, VPs, whatever you want to call them. And they're, you know, full time, you know, they've, they've made a lot more money with me over the years when I found them to, you know, the last two years. So we've all been winning together and you know, they're very dedicated and do an amazing job. You have to find people like that. If you want to scale and you grow, you have to find really good people. That's the key. And that will make it way more manageable. And otherwise it's just, it, it'll be hard, really hard. And I don't think you'll take it as far. Yeah, I mean, pay up for good people. It's worth it.
- [65:40]
Will Smith
Yeah. Yeah. And These managers or VPs are, are up, are operational. I mean, you've already made clear that the whole business is operational. There's no sales function, there's no marketing function, there's no collections function. So everybody in the business up and down the stack is pretty much operational in one way or another.
- [66:01]
Avery Tomek
Yeah. Yeah. I mean, even the mechanics, they're. They're on our, our timeline. They need to get there when we need them to get there.
- [66:09]
Will Smith
Yeah. Yeah.
- [66:12]
Connor Gross
And what about.
- [66:15]
Will Smith
I know you're resisting this, but I'm going to press you on it anyway. You replacing yourself if you, if you, if you didn't need to grow as aggressively. So you weren't always kind of trying to be clever and with FedEx and talking to FedEx about what oper. Other opportun. Raising your hand for opportunities and so on and trying to find, find opportunities to buy, you know, build your fleet. But you needed somebody good to just keep things where they are but super tight. Could you, couldn't you do that? If you. In theory, yeah.
- [66:49]
Avery Tomek
Not to the extent I'm running it now. It wouldn't be running as hot as we are now, but for sure. And I've, I've spoken to my managers about that, you know, a, A plant, you know, upon my demise or whatever, they could hold it together. I, They. I don't think they would be able to get the contingency work that we're getting. But the long term contracts, they could run without me, or at least me, just mostly out of the picture.
- [67:19]
Will Smith
And what is so hard about getting these contingency contracts?
- [67:22]
Avery Tomek
You just gotta, you gotta be out there hunting for em all the time and then you gotta have resources lined up. They can get there maybe the next day and then having the trucks ready. A lot of my time is, you know, looking for the opportunities and getting trucks for the next six months. And so those are things that it'd be kind of hard to delegate right now. I think it could definitely be done. I don't think I really need to be here all the time if I'm okay at achieving a lower level of revenue or success. And I think other people could do that.
- [68:07]
Will Smith
Great.
- [68:07]
Avery Tomek
I just, you got to find the right people.
- [68:11]
Will Smith
And say more about the remote nature of this. So, so where. First of all, tell us what the geographic footprint of your empire is today.
- [68:23]
Avery Tomek
Yeah, I'll give you the states. So Texas, Louisiana, Alabama, Tennessee, Missouri, Kentucky, Ohio.
- [68:34]
Will Smith
Wow.
- [68:35]
Avery Tomek
And I don't go to the stations. I mean, just maybe.
- [68:38]
Will Smith
What do you mean by station? What's the station?
- [68:40]
Avery Tomek
The FedEx like warehouse. They call it a terminal where the trucks are domiciled and where we dispatch and return back to each day.
- [68:50]
Will Smith
Hub. Or is that, am I using the wrong nomenclature?
- [68:52]
Avery Tomek
The hub is like, I think it's typical, a larger facility.
- [68:56]
Will Smith
Yeah. Yeah. Okay.
- [68:58]
Avery Tomek
So, yeah, I don't, I don't visit them too often. I mean, I, I spent all my time in this little cubby hole of an office here and take phone calls and monitor the routes and have my computer pulled up. And that's a big chunk of my day.
- [69:13]
Will Smith
And so when you're managing operations, but it's all from your computer, give us an example of like dealing with an operational headache. Is it? Basically, I guess, I don't know, one of your drivers crashes into a stop sign or one of the trucks. Needs, needs a mechanic to look at it. Is it basically just lots of phone calls, scrambling, calling people to fix the problem sort of thing?
- [69:37]
Avery Tomek
Yeah, yeah. Scrambling is a great way to explain it. You know, a driver doesn't show up for work, who's going to run the route? Okay, you put your manager on it. Now you got two people not showing up. Well, now you have a route sitting. You're going to pull a driver from another state. You know, they're three hours away. You can get up, they can maybe run half the route, two thirds of the route. Now you have a truck breakdown Your manager can't make the phone call because they're running a route. You got to get a tow truck, then you got to get that driver a new truck to finish the route because you can't just fail. And then someone gets sick the next day and then there's a workers comp claim and on and on and on.
- [70:17]
Will Smith
Yeah, that was good.
- [70:18]
Avery Tomek
Very, very interesting a taste. Are you interested now?
- [70:23]
Will Smith
No, that was good because that, that does not sound, it just sounds like things are very brittle. Like these systems are very brittle.
- [70:32]
Avery Tomek
Yeah.
- [70:32]
Will Smith
And some little thing breaks and there's this horrible domino effect.
- [70:36]
Avery Tomek
Yeah. And that's, that's pretty much it.
- [70:40]
Will Smith
Okay, okay, okay. But if somebody wanted, still wanted to get in to this, they don't need to. There's got to be some geographic, there's got to be some benefit to being close or close ish to your routes. No, like if I wanted to buy route, would I literally just look at the entire U.S. i'm in Virginia.
- [71:06]
Avery Tomek
Yeah. I mean, I think if you could get there in like a half day, there'd be benefit to that. You know, something disastrous happens, you could hop in the car and be there that day, but you could also be there if you catch a flight too. So. And really, if you go there, what are you going to do? Are you going to hop on a route and go, go deliver the packages? Maybe. But what are you going to do the next day? You're going to go run a route again. Your time is better spent on the business rather rather than in the business. If you can, if you can foresee problems and shift resources over there ahead of time to prevent that from happening. Now you're being proactive rather than reactive. And if you're out there running a route yourself, you're not going to scale.
- [71:53]
Will Smith
Yeah. So sure, sure. So let's turn our attention to what makes a good route or, or in a resale opportunity or a route for sale that somebody might see on biz Buy. Sell. What. What are we looking for? I know that's a big question, but try to, try to distill it for us.
- [72:11]
Avery Tomek
Yeah, I mean, I, I think the way the network is designed with these contracts, there's no right route to own. I think they're all designed to produce the same margins. I think some areas might have some, like unique characteristics that make it harder than others. And some might be a little better where, you know, maybe the labor rate for that market is lower. There's more access to mechanics and cheaper mechanics and cheaper toes. And I think there's some benefit there. But I don't think really there's a wrong business to buy. I think a lot of people, they don't want to, like, take the really rural routes because they think, you know, go for, like, an urban city center where maybe it looks like there's a whole lot of packages to deliver. The problem is you get paid less per package, so it's a wash. And then, you know, in an urban center, you're going to have, like, high traffic, maybe it's going to be hard to access buildings. So there's not really a right or wrong area. I mean, I've. I've come across some that I think are more difficult than others where it's really hard to hire and it's really hard to find a mechanic to work on your trucks. And those are cons. But I think look at the business. Look at the revenue. Try and get as big of a revenue business as you can afford. Oh, and. And then just keep buying trucks. The more trucks, the more revenue. Even if your area is not growing, there's going to be something that pops up elsewhere that you can run contingency or you can pick up a whole nother contract. But if you don't have the trucks, you can't take it. So that's part of being proactive. Just be ahead of the demand.
- [74:07]
Will Smith
Yeah. So that's. Once you're in a tip is to continue buying trucks. Always be looking for the opportunity to build a fleet in advance as a leading indicator of where you're taking your business.
- [74:18]
Avery Tomek
Yeah, And I've never been in a circumstance where I had enough trucks. It's crazy. You know, I thought when I was buying trucks every week it would take me two years to use all of them. But we were pretty much deploying them as soon as we got them approved to drive, and it's still like that.
- [74:37]
Will Smith
And.
- [74:37]
Connor Gross
And so, Avery, I'm seeing on like.
- [74:39]
Will Smith
Biz by sell right now, I'm looking at this 12 FedEx ground routes, Stafford, Virginia, which is kind of central Virginia, a couple hours from me. And I feel like I've seen this listing sit here. I could be wrong, but I feel like I've been. I've seen it for sitting here for a long, long time. What do you think? Even if I'm wrong about that, I. I know I've seen. Anyway there. I know I've seen some listing on biz by sell for FedEx routes. Sit. What do you think might be wrong with that? Just over. I mean, I guess the easy answer is it's overpriced. But what anything substantive to the business that might scare off would be buyers.
- [75:19]
Avery Tomek
Well, the first thing I think about, if it's been sitting there, what is like the net income showing on it? Is it like are they able to produce anything on it? If they're not, what's it really worth? Unless you, you know, you pay very little, basically chuck value or something and just try and turn it around. And that might be the best way for a new person to get into it. Really all you need to do is buy one, then you have your foot in the door, then from there be a good operator and, and they'll keep giving you routes if that's the case.
- [75:48]
Will Smith
Where such, such a tip and insight here that if you just got to get in the system and demonstrate yourself to FedEx as a good operator, they'll give you more businesses. Why buy big? Why not try to buy basically small to make your initial equity into this project as as little as possible?
- [76:09]
Avery Tomek
Yeah, I think the problem with small is there's just not enough meat on the bone that you're going to take on this operation. And maybe it's just to get your foot in the door and maybe that's the right thing to do. But your absolute dollar income won't be that high.
- [76:25]
Will Smith
Yeah.
- [76:26]
Avery Tomek
And so it might feel like you're kind of just wasting your time. You know, if you could get a 3 million dollar business like what your friend has 3 million in revenue. If you get a 10% margin, it's pretty good for a lot of people. And you got your foot in the door.
- [76:44]
Will Smith
Yeah.
- [76:44]
Avery Tomek
And it'll probably keep growing.
- [76:48]
Will Smith
And you thought you overpaid for your route. Is there a sense of where multiples should be for these? Is there a band for FedEx routes or is it kind of the same as all small businesses and.
- [77:03]
Avery Tomek
Yeah, well, I don't know what other small businesses are selling for, but I think high threes, low fours is kind of where it's trading at these businesses for like a good operation. And I think you could buy some like failing operations for the price of the trucks. Roughly just someone to get out. You know, maybe they have a bad safety score or something and they're like going to lose it. So rather than losing it, they can just sell their trucks and maybe a small amount on top or something. I think that happens quite often.
- [77:33]
Will Smith
I want to understand why it would be hard because it seems like, you know, this is a proven model. So if somebody is some route or operator contractor is failing, I gotta Believe it's their fault and not the fault of something like, you know, with the market or Otherwise. Because the FedEx model works and FedEx will pay route operators whatever is necessary to make it commercially viable for those operators. So if somebody's failing. So it feels like it's a great system to go in and buy underperforming operators because you can. There's almost kind of like a certainty like that, that there's a business there. The current operator's just doing it wrong.
- [78:20]
Avery Tomek
Yeah. And I think that's the case in majority of the failing operations. But it's such a big network that it's. You're going to have areas that the, the rates probably don't make sense. You know, like, I don't. Maybe San Francisco or like the labor rates. Really. I heard that was like a rough area where just. It's just really hard to get people to show up, do the job and they want a lot of money and that, you know, the package rates just weren't there. I don't know a whole lot about it, but I think there are niches like that where it. It's really hard and it's kind of skewed against you. So if you can find something that's skewed towards you, you know, obviously that's better. But I mean, you could. You'd come in and buy these cheap and turn them around and probably do well. But why buy more than one if you can get in, buy a good one, you know, show some success and then just get them awarded to you for nothing.
- [79:14]
Will Smith
Yeah, yeah. And to this point about San Francisco, we can abstract the away like what a good market is based on the inputs and outputs. And so you want your inputs to be low, your outputs to be high. So what you're looking, what you're looking at in those two columns, inputs is what the labor rate is, how easy it is to find people. And what else? Because. Because it's not truck price, because that's. That's across the country. Doesn't.
- [79:49]
Avery Tomek
It's. It's really people and maintaining your trucks. That's. That's majority probably 80% of it.
- [79:56]
Will Smith
And then on the outputs, it's what. It's what FedEx pays in that market.
- [80:02]
Avery Tomek
Yeah.
- [80:02]
Will Smith
So you want them to pay kind of more more. And you want labor and mechanics to cost to be less.
- [80:09]
Avery Tomek
Low. Yeah, that's your spread between efficient, where, you know, running the fewest number of miles, so you're burning less fuel, less tires, less depreciation on the trucks, and then Building the routes such that they're profitable to begin with. So like, you know, run full trucks. You want the truck to be full of packages and you know, try and run as many of those full trucks as you can. You don't want to, you know, go out half full. It's going to be hard to make anything on that. You probably lose. So you got to engineer it correctly and then you got to make sure the workload is manageable for the driver. You can't just. Yeah, yeah, well, I'm gonna make sure that all these trucks are just completely full and you know, I'm gonna make a lot of money on. Well, drivers will probably quit, bring the truck back. Now you're in like an endless cycle of recruiting, hiring, training. They quit again. So you got to find a balance. So there's a, there's a lot of variables here.
- [81:05]
Will Smith
Yeah, yeah, no, there, there are. It's definitely not those three or four inputs and outputs. I said, good. This is so educational, Avery. And then I heard you say at the top with your first acquisition that it was the only SBA eligible one in Texas. So, so what is this point about SBA eligibility? Why are some eligible and some not?
- [81:27]
Avery Tomek
I think it's the amount of time that the business has been around and then the profitability of. Has to be a profitable business that can support the debt payment. And SBA lenders want it to be, they don't want it to be brand new. I don't know what the minimum is. Probably at least a year. I think they like to see two years. So it can't be a brand new business. Someone just spun up, you know, got it for free, staffed it and flipping it for a lot. They want to see some like, trend of profitability and profitable enough to support the debt payment.
- [82:01]
Will Smith
Great. You mentioned the demanding customer. So you do. So this is a business with, I mean 100% customer concentration as we talk about, which is, that would be a big con of this business. So your prices are all set. It sounds like maybe sometimes you can kind of negotiate with FedEx, depending on how desperate they are to get some packages delivered in a contingency situation. But they can take your route away from you, I guess.
- [82:38]
Connor Gross
And you might say that there are.
- [82:39]
Will Smith
A lot of businesses like this, franchises might kind of, you might say are similar where the franchisor can, can take your licensing away, take your franchise, your franchises away. Don't, don't quote me everybody. Don't know how that would work, but this feels more one sided in FedEx's favor than it feels. I could be wrong. More one sided in FedEx's favor that way. And FedEx is the one paying you, that's important. While they pay you with these incredible terms. They are paying you in a, you know, franchise concept. Your customers pay you and then you pay the franchisor after, you know, monthly the licensing fee or whatever. So the way the money flows is very different into the disadvantage of the FedEx operators. Would you agree with that assessment?
- [83:31]
Avery Tomek
Well, I don't know if it'd be a disadvantage to the FedEx operators. I mean it is different from a franchise. I know FedEx would, would. They definitely would not consider this a franchise. Yeah, that, that, yeah, I don't, I don't know. We just get, we get paid for the work we produce. So you know, there's not a whole lot of negotiating. Once a year our rates renew and you know, they try and keep up with inflation. But for the most part this is FedEx's game. We play by their rules. But they're engineered to make money. They're not guaranteed to make money, but they're supposed to. There's a difference there. Not everyone makes money. FedEx can remove you from the area, you know, for safety, poor service. But most of the time what I've seen is the contractor walks away from it. Rather, you know, they just start losing money and it's just too much and they just, just let it be. And then, you know, they, they call someone like me and we come run it and keep it covered.
- [84:35]
Will Smith
Well, I think I'm just, this is just now crystallizing for me. The fact that you refer to yourself and others in the network as contractors.
- [84:44]
Connor Gross
Says a lot because in some ways.
- [84:46]
Will Smith
You really are subcontractors. FedEx has the customer and who's ever paying to shift the package and then they're farming that work out, subcontracting that, contracting that work out to this network of subcontractors, the contractors. You. So that is a, that is a different, that, that's definitely kind of a different relationship than, than franchisors to franchisees.
- [85:11]
Avery Tomek
Yeah, yeah. We are definitely by definition contractors for FedEx. Yeah, that's how they want to keep it.
- [85:20]
Will Smith
And then if somebody, what do you think the. Well, maybe you've already answered when I was asking what the going rate for these businesses are, but resale value. So if somebody didn't want to do this forever, or let's take you, maybe you don't want to do this forever and maybe you also don't want to try to put somebody in to replace you. You want to just, you know, exit this business fully. What, what, what are. What is the resale? What is the appetite for resale here? Because especially. Cause. Especially at your size, who's going to buy you?
- [85:54]
Avery Tomek
Well, you know, I think I'd break it up into pieces. Just sell each individual station. It seems like there's pretty high demand for these. You know, a lot of people, they want to be their own boss. They. They want to break away from their job. It's not fulfilling to them. So they want to do something, and they want the opportunity to make more money than they. They would at their job or doing something else. So it seems like there's no shortage of demand for people getting into this business. And, you know, and that's how FedEx designed it, where there. There are constantly people coming in to do this work because they need someone to do it. They're not. They don't want to do it.
- [86:31]
Will Smith
Yeah.
- [86:31]
Avery Tomek
So they have to make it lucrative enough for someone else to do it.
- [86:35]
Will Smith
Anything that we didn't mention, Avery, that you think the audience should hear?
- [86:40]
Avery Tomek
I don't think so. I think that's about it. I mean, I just. I think if anyone's driven and willing to put in the time and effort and get a little creative, you can take a lot of things a long ways, including these FedEx routes. I think this is a really good opportunity for not everyone, but a lot of people such as myself. You know, if you want the ability to really grow your revenue, it's there. I mean, it's right in front of you. You just play by the rules, and. And you can have pretty much as much as you want for. For a small business. So if you want the ability to grow and. And produce a lot of revenue, it. You know, this might be a good opportunity for you.
- [87:24]
Will Smith
At $25 million run rate, do you have a goal of getting to 50 and 100?
- [87:31]
Avery Tomek
Probably not 100. I don't know about 50 either, but I don't. We'll see. I mean, I'll keep going for a while. I don't know about forever. You know, it's. I don't. I don't know if FedEx would allow me to do 100. They might allow me to do 50. They haven't said anything to me yet. I think I could. I could definitely do 30.
- [87:56]
Will Smith
Well, you're almost.
- [87:57]
Avery Tomek
See how I'm enjoying it. And. And we'll go from there. For the foreseeable future, I'll be doing this.
- [88:04]
Will Smith
It's great. Well, congratulations on it, Avery. It's, it's really Shane or some former guest of Acquiring Minds and somebody that everybody in ETA or a lot of people in ETA know recommended that we talk and it was such a good recommendation. This has been a great education on these businesses and so much fun to hear about kind of what, what the the outside success could look like in the form of what you built. So thank you very much. Thanks for your transparency and time.
- [88:33]
Avery Tomek
Avery to thanks Will.
- [88:36]
Will Smith
Hope you enjoyed that interview.
- [88:37]
Connor Gross
Don't forget to subscribe to the Acquiring Minds newsletter. We send an email for every episode.
- [88:43]
Will Smith
With an introduction to the interview, a link to the video version on YouTube.
- [88:48]
Connor Gross
And soon key takeaways, numbers and more.
- [88:52]
Will Smith
Essentials from the interview.
- [88:54]
Connor Gross
For those of you who don't have time to listen or watch it, subscribe at Acquire. You'll also find all our webinars there.
- [89:03]
Will Smith
On the website, both those we have coming up and recordings of past webinars.
- [89:09]
Connor Gross
At this point, There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business.
- [89:18]
Will Smith
Acquiring Minds co.