When it’s time to add another truck, and how to go about it

Nav Kanwar of Windsor, Ont., might be considered a small fleet success model. The 33 year old man arrived in Canada in 2010, started trucking in 2011 and became an owner-operator shortly after that. He currently has a fleet of four trucks and is on the verge of adding another one.

Kanwar’s units run dedicated lanes for an auto parts carrier and his strategy is fairly simple: “I ask my carrier to tell me in advance if any good lanes are coming up,” he says. “Then I’ll try out the run and find out what it’s all about. I want to know exactly how much money the run is going to make and exactly what is involved. If the math looks good I’ll go out and get a truck and hire a driver.”

Kanwar always buys used trucks, and budgets $20,000-$30,000 for each purchase. He’s tried both leasing and buying tractors outright, but thinks the most important thing is to aggressively pay off the unit as quickly as possible before buying another one. “That way I’ve only got one truck at a time that I’m making payments on,” he says. “If things go bad, I can always park the other tractors and drive that one myself until its paid off.”

Kanwar currently has four drivers and he admits finding good qualified operators is difficult. However, he can offer his drivers steady work and they can count on getting home every night or every other night. As well he provides a bit of a dividend program with cash bonus payments after six months and a year. “I always tell them the truth,” he says. “Some contractors make big promises they can’t keep, but I show them exactly what they are going to be making and what is expected of them.”

55 year old Roger Chapman has four trucks on with a couple of eastern Ontario carriers. “People think adding another truck is going to double your income,” he says. “But the reality is that it’s going to increase your expenses by 150%. And it’s always the unforeseen stuff that gets you.

“In my opinion, the only way to make money with multiple units is to have your own running rights and going on your own rather than working for a carrier,” says Chapman. “That way you can fix your own rates, get paid three or four dollars a mile rather than the $1.13 and fuel surcharge you make as a broker. As an owner operator I haven’t had a raise in seven years.”

Jack Zehr, owner of Zehr Transport Ltd., knows a thing or two about operating a small fleet. He started young. At 21 years of age he bought a trucking company comprised of two trucks “and one of them wasn’t any good,” he says. Thirty years later he’s got nine trucks, (one of them is a standby spare), about 100 customers, and a 40,000 sq ft warehouse in Ingersol, Ont.

“I was buying trucks when the interest rates were 21%,” he says. “I must have been crazy but I made it work.”

Zehr’s main business is transshipping agricultural products between a rail head in Ingersol, Ont and customers in Ontario and Quebec. He keeps his drivers working locally and regionally while giving the longer hauls to outside carriers.

Before adding another power unit, Zehr thinks you should have a pretty good idea of what your customer base is doing. Otherwise you could get stuck with hefty truck payments and an employee to look after if the work dries up.

“I’m in a position right now where I either get another truck and another driver, or hire a broker,” he says. “The advantage to hiring a broker is that you get the tuck and driver, but it’s also a disadvantage. If the broker decides to up and leave I’m stuck without a truck and driver, but if a driver quits on me I can hop in the truck myself for one or two weeks until I find someone.”

Zehr admits to getting a few years behind on new truck purchases, but he has been shopping around lately and running the numbers. “I didn’t want to take on any new truck purchases in 2008, 2009, 2010, because of the problems they were having.

“If you’re doing a trade-in it’s easier, in a sense, because you’re just swapping one truck for the other,” he says. “But when you add another truck, your down payment is out of pocket, and it’s 60 days before you show any return on your investment. The reason I keep some of the older trucks around is to help pay for the new ones,” he says.

When Zehr does buy another truck he applies a formula to each vehicle that’s served him well. “I discovered this long ago and always kept it in the back of my mind. 25% goes to payroll, 25% goes to fuel, and 50% goes towards the truck, because you never know when you’re going to need it.” Zehr explains that he takes his profit point out of the 50% that goes back into the truck. He suggests that you should be looking at profit margins of 15-20%, on the work you’re doing “If you can do that you can make a pretty good living.”

He also has some advice for would-be small fleet owners—don’t bite off more than you can chew! “Make sure you’re capable of doing the work that you’re bidding on. You’re not doing yourself or your customer any good by promising more than you can deliver. And once you commit to buying a truck and hiring a driver you’ve got to make it work for you. That can include eight day weeks and 28 hour days.”

Vince Macmillan of Acton, Ont., has a small fleet that specializes in service-oriented flat bed work. He advises caution when jumping from owner-operator status to fleet owner. However, staying small and adding another truck or two has its advantages. “Nothing is cheaper than working out of your own garage or basement. Once you add a shop and office and have to pay overhead and meet a payroll– everything changes,” he says.

But finding someone to drive that additional truck can be a challenge as well. Macmillan still has the first driver he hired, 22 years ago, but he admits finding personnel to fill driver vacancies in his service-oriented business can be a daunting task. “It’s a shrinking pool at best, My business is based on personal relationships and you need a driver that will be able to work with the customers and not ruin your equipment.”

Macmillan has even put a few drivers through the Humber College program. “It’ still 6 months until they’re half-way to learning the job. Six months and a winter,” he says. “You’re not a truck driver until you’ve driven through a winter.”

Roger Chapman concurs with Macmillan that finding good drivers is extremely difficult. “You might get a driver who likes to run lots of miles but doesn’t take care of the equipment, never checks the oil. And keeping the good ones is an ongoing problem, because they usually want to go on their own and get their own truck.”

Another aspect to consider is maintenance and repairs. If you’re adding one or two or three trucks, you’ll have to abide by a maintenance schedule, and soon discover that it’s much better to fix something yourself than send it to an outside shop for repairs. At some point in the growth cycle, thought has to be given to getting a shop and hiring a mechanic.

“You don’t want to pay someone $100 an hour to change wiper blades, which is what you’re doing when you go to a dealer,” he says. “I have three and half guys working for me and they’re always busy. Safety inspections, on trailers alone, takes up most of their time.”

When it comes to financing, Macmillan thinks the low interest rates offered by dealers are deceptive, especially if you’re a novice starting a trucking business. “You’re going to end up having to pay 10% in interest, anyway. And a lot of stuff is leased these days which can be even more,” he says. “Ours is considered a high risk business at the banks, and you’re unlikely to find any cheap money.”

Macmillan doesn’t like to see guys put their house up as collateral, “You do what you have to do, but make sure your business plan is viable,” he says. “I think it’s absolutely necessary to have a niche or something you specialize in and do well.

“Most of the successful owner-operators I know are about my age (60 years old) and they’ve been with one company for a long time,” says Macmillan. “They might have a few trucks on with the carrier, but they’ve picked a good company and stayed with it. That might be the key to success.”

Harry Rudolfs has worked as a dishwasher, apprentice mechanic, editor, trucker, foreign correspondent and taxi driver. He's written hundreds of articles for North American and European journals and newspapers, including features for the Ottawa Citizen, Toronto Life and CBC radio.

With over 30 years experience in the trucking industry he's hauled cars, steel, lumber, chemicals, auto parts and general freight as well as B-trains. He holds an honours BA in creative writing and humanities, summa cum laude.

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