You’ve been an owner/operator for a number of years. You’ve made a good living and your equipment is either all, or mostly, paid off. Perhaps you even own your own trailer. You have made the decision to make the leap from being an...
You’ve been an owner/operator for a number of years. You’ve made a good living and your equipment is either all, or mostly, paid off. Perhaps you even own your own trailer. You have made the decision to make the leap from being an owner/operator to being an actual company owner. You’ve approached a few potential customers, with favourable results. You’ve mentioned your plans to friends and co-workers, and several are interested in working for you once you are established.
You’ve calculated your cost of doing business, and your income and expense projections. You have prepared a business plan, including your projected growth plans. You could not be more prepared to make this lifestyle change. And you could not be more wrong.
If you want to set out on your own, your first task should be to honestly examine your reasons for wanting to run your own company. Do you have an entrepreneurial spirit? Have you, throughout your adult life, always had the urge to be your own boss, to enjoy the benefits of hard work and fight your way through the challenges? Or do you feel that you’ve been treated unfairly by your last couple employers and feel you could run a business better than they do?
If the latter is true, you should probably stop right now, before you initiate a huge mistake. If you have worked for other companies and you feel that more than one of them treated you poorly – either financially or personally – yet many of your co-workers were content with their treatment and earnings, it is time for some harsh self-assessment, because it would appear that the common denominator in this issue is you. Are you difficult, or just plain miserable to deal with? Do you argue with dispatch or refuse reasonable loads? Is management fully aware of your opinion that you could run this show better than they can? Small wonder then, that others were dispatched more generously than you were. If you are unable to change your attitude, you will find it difficult to retain employment. The same attitude will make it difficult to retain customers if you strike out on your own.
If you are a legitimate entrepreneur and still eager to be the boss, reassess your financial projections. Knowing your operating costs is only a fraction of the battle.
On your own, there will be no one to call at 9 p.m. for a cash advance for a roadside repair. Your paydays on the 15th and 30th are history. Your insurance company requires a payment of 10-20% before you ever turn a wheel. Your fuel costs will remain consistent, but they now come directly from your own pocket.
All of your usual expenses (fuel, tolls, repairs, faxes, etc.) will be unchanged, but your income changes drastically. Unless you find a rare quick paying customer, your receivables will start to trickle in 30-60 days after invoice.
Even if you do your own invoicing weekly, your expenses will accumulate for upwards of 45 days from the time you haul the first load until any of your receivables begin to arrive.
When starting a trucking business, you will need, either in cash or credit, close to $30,000 on-hand to survive until your receivables cycle into regularity. The same amount will be required when you hire your first owner/operator. A credit card is not to be considered a line of credit, either. Run up 45 days of fuel costs on a 28% credit card, and you are parked before you start.
Still with us? You are to be commended for your attitude, work ethic, and preparation. Now for the shopping list of other details that are commonly forgotten. Know the value of the services you offer. If you worked for percentage pay at your previous job, you know what they charged.
Is a single operator who’s able to offer a higher level of loyalty worth even more? Or does the fact that you have no availability of extra equipment make you worth less? Or, was your previous employer undercharging for its services?
You need to find other small carriers who will hopefully give you rough guidelines as to rate structure, and compare their suggestions to what you already had in mind. When inquiring to other carriers about brokered freight, keep in mind that most will be pocketing at least 10%, or a minimum of $100 per load. This will help to establish guidelines for your own rates.
On the subject of rates, don’t be lazy. More than one single-truck operator has taken the easy way out, and given their customers a rate per mile, letting the customer calculate their own freight costs.
This is fine if you only have a few destinations, and have found a rate that works for all of them. Doing this on the open board is business suicide. You will be guaranteed to be the first called for the 250-mile trips or US East Coast, where tolls are high and backhauls scarcely exist. Do you think the rate for Louisville, Ky. should be the same as to Boston?
In this scenario, it is. Also, don’t make the critical mistake of starting out with lower than realistic freight rates. Concentrate instead on offering very good customer service, thereby justifying higher rates.
Good service will eventually be rewarded, where low rates are nearly impossible to increase.
There is too much to cover in just one column. Next month, I’ll continue this theme, including essential tips on finding customers, setting rates and controlling operating costs.