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How to go out of business


I am hesitant to write columns on how to succeed as a new, small trucking company. Everything I ever write is based on personal experiences. What worked for me may not work for you, so let’s try reverse psychology.

I’m going to tell you how to fail, or at least drastically slow your growth and success. In random order, here are the basic business killers:

Desperation-driven decisions: Maybe you’re only able to find undesirable drivers. I still insist that fewer trucks – properly and safely operated – are a more lucrative business model.

Hauling cheap freight just to get the truck moving is another guaranteed disaster. The truck will break even just as easily parked as moving.

Usually those with high debt fall into these traps, assuming the wheels must turn every day, unwittingly encouraging stagnant freight rates.

Back-soliciting: Even long established, and/or larger carriers periodically haul each others’ freight.

Nobody has the perfect balance of the exact amount of their own freight to haul to keep every truck loaded both directions and nobody can haul all their own freight without help.

Nothing good comes when you back-solicit a customer whose freight you’ve hauled for another carrier. Guaranteed, they’ll find out.

Depending on their size, or their principles, the best outcome is to never be offered freight from that carrier or others they associate with again. Next choices are legal action, or non-payment of outstanding invoices.

If they’re really large, they may even put every effort into crushing you like a bug. Is a bigger piece of one pie worth it?

Arrogance: Don’t assume every established carrier you compete with is an idiot.

You can disagree with their business practices, but if you’re smart, you’ll realize no two businesses succeed identically. It’s foolishly overconfident to assume they’re entirely wrong, and you, conversely, are brilliant and flawless.

They’ve survived a recession and have a longer history than you, so they aren’t completely wrong.

Set rates without proper knowledge: Freight that’s brokered to you from other carriers is rarely their best-paying freight, so don’t base negotiations with your customers on those rates. Also, you’re usually only receiving 80-90% of the actual freight bill. Further, gaining work by simply beating competitors’ existing freight rates is obvious suicide.

The best advice here, too often ignored, comes from the Owner-Operators’ Business Association of Canada (OBAC): Know your costs.

Travel to any destination willingly: Several carriers may excel in geographical areas where you will subsequently flop and vice-versa.

Some states and provinces are heavily involved in certain commodities, so properly equipped carriers succeed while everybody else struggles. Canadian-based reefers and food grade tankers rarely leave Florida empty, for instance. The rest of us head to Georgia or Alabama.

Recruit based on future goals, rather than current reality: You’ll end up with drivers that no other company really wants anyway. Anybody can fantasize about future growth but, unfortunately, in this instance the cart must precede the horse.

Good drivers and owner-operators usually don’t join a company with no current financial track record to display or nothing but brokered freight on the trailers.

Stubbornly maintain a clientele that includes massive numbers of customers, all offering only occasional loads: Putting too many eggs in one basket is equally stupid, because you start to neglect other good customers. (I’ve been guilty of this).

In order to grow, without a dispatching nightmare where there’s no continuity, you need a portion of your customer base to include somewhat regular load offerings.

Regularity of freight translates to regularity of payment. Your receivables will be as unpredictable as a Canadian senator’s integrity if you are invoicing umpteen customers for a couple loads each. Your invoices will usually end up on the bottom of the stack.

***

Bill Cameron and his wife Nancy own and operate Parks Transportation. Bill can be reached at williamcameron.bc@gmail.com.


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1 Comment » for How to go out of business
  1. Great article Bill. I’d also like to add something we regularly see with new small trucking companies and that is taking a laissez-faire attitude to their fleets compliance. As we all know, carriers who apply for and receive a US DOT operating authority are audited with the first 18 months of business. If you are not adhering to the rules and regulations or do not have a safety system in place, your fleet could come to a screeching halt. And that is just one item of your fleets compliance, how about your IFTA reporting responsibilities, Weight Distance Tax, NY HUTs, customs transponders, Heavy Vehicle Use Tax filings or corporate business tax registrations in Quebec and New Jersey?

    Not doing your due-diligence and ignoring your regulatory compliance responsibilities can be detrimental to your fleets success as a new or existing carrier. Our company specializes in the set up and maintenance of compliant trucking operations, if you are not confident in your fleets regulatory compliance perhaps its time to seek outside professionals.

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