There has never been a better time to own a truck and operate your own authority! Most truck owners would strongly disagree with me. Most all of my detractors would cite the high cost of fuel, the ever increasing maintenance costs and most of all the ELD mandate.
Lets
start with the biggest obstacle to profitability. The ELD mandate.
To be clear, I do NOT support the ELD mandate. However, if you are
using an ELD there are a few nominal positives that have came with
the FMCSA forced ELD mandate. Since the April 1st date of
full enforcement the truck availability has dramatically decreased
creating a vacuum of trucks and an increased volume in available
freight. This has led to 2 very positive circumstances for truck
owners. Rates are significantly increasing and load availability is
excellent. So higher margins per mile and less down time between
loads.
If high fuel costs are cutting into your profits then I strongly recommend you read my posts “How Does IFTA Work,” “Fuel Surcharge” and “Carrier Rate Agreement or Carrier Contract.” You should never loose profits due to the fluctuation of fuel prices. Likewise and equally important, neither should your customers. If you demonstrate fairness to your customers in your “Carrier Rate Agreement” and utilize a “Fuel Surcharge,” you will earn their respect and enjoy a long term business relationship together.
There is no doubt maintenance costs are on the rise for everyone. You can and should use all available resources to minimize your maintenance costs. Such as installing a quality “Oil By-Pass Filter” on your truck, locate “Junk Yard Truck Parts” and utilize “After Market Truck Parts.” All 3 of these will decrease your maintenance costs and down time while simultaneously increasing your profitability.
Without any doubt at all, the best way to fully maximize the current opportunities in the trucking industry is to own a 1990’s model year truck or older. In doing so your operating costs will be less (lower or no truck payment, lower insurance rates and no DPF or DEF down time / repairs / costs) and you will not be hamstrung with the ELD mandate. You will enjoy operating a higher quality of service and reliability for your customers and they will appreciate you for it. Anyone with a 1990’s or older model year truck will always be more profitable than a model year truck requiring an ELD.
David sent me a
message that is all to common for new truck owners. His concern is
how to be profitable owning a truck.
“How did you manage to make a profit? It seems as though I find loads but they are so underpaid that it feels I’m only making money to cover the fuel. I would appreciate any input you have!”
In order to answer
David’s concern of how to be profitable owning a truck, “How did
you manage to make a profit,” I am going to make a few assumptions.
1. There is a truck
payment
2. There are no or
few direct customers
3. “Agents” or
“Professionals” are being used for some or all compliance
For me, initially
profit did not come easy. In fact, in the very beginning it didn’t
come at all. In my first week of owning my first truck I suffered a
major set back. My truck blew out the front rear end. To make matters
worse, the mechanic discovered that the previous owner had custom
machined gears made and put them in both rear ends. So I had a
decision to make. Give up or fight back. I have a “Never Fail”
mentality so giving up wasn’t and isn’t part of my vocabulary. So I
took the harder path of fighting my way back from financial disaster.
My key decisions that helped me overcome my setback and succeed were
as follows.
1. Do the hardest
and most demanding loads because they pay the best
2. Run the maximum
amount of miles I possibly could
3. Improve my
equipment to lower my operating costs
4. Stay as tight
fisted with my money as possible
While all those
sound easy they can be very difficult to implement and stay committed
to. I’ll take them one at a time.
Do the hardest and most demanding loads because they pay the best. For me this meant going back to LTL. To me LTL is some of the most aggravating freight there is especially with a refer. Fighting traffic to get all the pickups and deliveries completed on time, the unsavory atmosphere with most refrigerated freight shippers and receivers, the never ending “Wait” for the product and baby sitting the refer just to name a few. I point this out because I knew how much I hated it but it is what I knew had to be done to meet my self inflicted demand of “Never Fail.” So I reached out to a broker I knew who specialized in refer LTL and I verified with my direct produce customer that he could buy produce and load me out of California. You know what, it worked too! To learn how to locate direct customers and find out more about customers in general read my posts “Trucking Customers – Vital for truck owners,” “Meeting Potential New Customers” and “Find Customers Who Need Your Truck.”
Run the maximum
amount of miles I possibly could.
Along with recognizing the
need to return to LTL freight I knew I had to maximizes my cash flow
and profits. That meant keeping the left door closed and running as
many miles as I possibly could. I knew what lane that meant I had to
run. I gave up my modest Illinois to Florida and began LTL pickups in
Indiana, Illinois and Iowa and delivering to cities throughout
southern California. Then I chased produce up and down the coast with
pickups and delivered it to Chicago. Yep, it worked as well!
Improve my
equipment to lower my operating costs.
This one takes the longest.
My finances dictated what I could do and when I could do it. Bottom
line is “Preventative” maintenance is vital. When you know
something is going to need repairing, fix it on your terms not the
truck or trailers terms! In doing so it won’t cost you as much money,
down time or lost revenue. So even if you need to borrow or use
plastic, always do preventative maintenance! When you can, make
modifications to your equipment to lower your operating costs. If you
look closely at the pictures there are a lot more changes than just
the paint job to my 1999 International. I have a great post detailing
many of the successful modifications and another post on how to save
money on parts.
Stay as tight
fisted with my money as possible.
I have been accused of being
a “tight wad” more times than I can count. I proudly ware it as a
badge of honor! That may seem to contradict what I said about
preventative maintenance when
in actuality it goes hand in hand. Paying for something that cost a
lot on your own terms is being frugal to the max. You are ensuring
that even though it does cost a lot today, it is a small percent of
the cost if you waited for it to be a disaster. Even though I wasn’t
aware of my rear end issue, if I had, I could have gotten it fixed on
my terms and not caused my financial crisis. So I learned two lessons
from my first weeks owning a truck. First and most important, always
have a financial back up plan and do better preventative maintenance.
As to my 3 assumptions to answer David’s question.
There is a truck
payment. If you discover that
your truck payment is simply unrealistic you do have an option.
Purchase a truck that will be within your budget and sell your
current truck. While that may sound harsh, it is the best and most
financially sound option available to you. You can learn more about
my truck choices and what I recommend in my posts “Choosing the
Right Truck” and “Avoid the FMCSA ELD Mandate.”
There are no or
few direct customers. Read
the section above “Do the hardest and most demanding
loads because they pay the best.”
“Agents” or
“Professionals” are being used for some or all compliance.
In most all cases I have
very little use for “Agents” or “Professionals” for most day
to day compliance issues and in many other cases. I do my own IRP,
IFTA, UCR, Canadian eManifest (yes, I go to Canada), MCS-150, Weight
and Distance, Highway Use Tax, New York Highway Use Tax, Oregon
Mileage Tax and everything I have failed to remember while typing.
The reasons are simple. Once you do these for yourself you will
become efficient (fast) at them, have a better understanding of your
business and save in most cases thousands of dollars. All are a plus
for you as a truck owner. If you’d like to learn more on how easy and
low cost it is to get your own authority read my post “How to get
an FMCSA Operating Authority.”
Last,
choose an easy to use software to help you manage your money. I
designed TruckBytes and continue to use it today with my own trucking
company.
I hope my experiences and lessons have helped you know How to be
Profitable Owning a Truck. If you have questions or would like for me
to expand on anything I discussed in this post please let me know!
I’m happy to accommodate.
