An Idea Considered Ridiculous 50 Years Ago Has Become One of the Most Successful Businesses
By: Andrei Tapalaga
Tags: Entrepreneurship, Business, Marketing, History, Education

An Idea Considered Ridiculous 50 Years Ago Has Become One of the Most Successful Businesses

The history behind federal express

Frederick Smith next to the first Federal express delivery plane (Source: FedEx)

Most business ideas start from a customer’s need or a problem that a customer may have. However, this story is quite different. It takes a person with entrepreneurial skills to define a certain vision for the future needs of customers. In the 1960s, Frederick W. Smith known as the founder and CEO of Federal Express was only a student at Yale University in the business department.

He was given the assignment to come up with a successful business plan. Therefore he came up with an urgent delivery system, the main concept behind FedEx. Upon presenting the idea to his teachers, Smith was criticized that the idea did not seem feasible and he barely got a C grade for it. Despite what he had been told by his teachers who were considered “experts” in the field of business, he really believed in his idea.

High risk/High rewards

This is how Federal Express was formed. In the beginning, the company was made up of Smith and a few friends who also believed in his vision. The concept behind the company was to transport any object or item from one part of America to another urgently. This meant that the company would have to focus on the use of airplanes in order to achieve its main purpose.

Therefore, in 1971, once the company was created, Smith took all his money, both of his parent's savings, and a lot of small loans from various places that added up to the total sum of 80 million dollars. With this money, Smith bought eight planes (Dassault Falcon 20) and started doing business in 35 different cities across the United States.

Although the idea was great, the business was sluggish at first because it was still quite expensive at the time, even if it was the only service of such type. As the name got out in the 1970s, the business started picking up. During this period of time, Smith didn’t make much money as most of the profits were going towards paying back all the loans made.

For those who have studied business, you will learn that only 30% of new businesses survive, despite there being any competition on the market or not. Smith was faced with the problem of demand, there wasn't that much because people at the time preferred to purchase everything locally, and not from the other part of the world like today.

The business got so bad at the start of the 1980s that Smith was forced to take everything that he had left and play it all in the Casino on a game of blackjack to save the company from going bankrupt. By the 1990s, as online purchasing started to become more commonly used, the service started booming.

From only eight aircraft and 35 cities, FedEx now owns 691 modern aircraft and delivers to over 220 countries. This is the company with the largest divisions of cargo airplanes in the world. FedEx is also known to deliver over one billion parcels per year. The net worth of the company recorded in 2019 is 54.4 billion dollars, placing it quite high on the leaderboard besides other corporations.