Question for Prime Solo Lease Ops

Thank you for the insight. As a 60 yr old, broke school bus driver, I plan on getting my A-CDL this summer. Need to bank some bucks! I deffinately will go company for a while if not longer. Seems to me, the company guys do about as well, and with gas going thru the roof. Playing is safe is the way for me!

From what I have gleaned over the Net, Prime is no worse, and possibly better than the "other guys" who train drivers. Mainly, it seems it's 1:1 driver to trainer. I know. I know. I may get stuck with a guy with less than a year, but that's more than I have so, if I'm a sponge, I will learn and live!

 

Nice advice... from the numbers I know you don't pull for Prime.

Not much you can do about deadhead since we are dispatched on our loads. You can decline, but I usually save that for overall dogs of loads.

That's one of the keys on making money here.

Quite a bit of that will get your lease voided here. You need your own truck for that.

Yup. If you really baby your tires, the tire escrow will take care of you nicely. Another reason to separate personal from business finances. If you can't afford a three-axle alignment because your SO needs to spend that money at the mall, you are hosed.

That'll get your lease voided. You don't have the equipment to change fuel filters on an engine with a high-pressure fuel rail.

We pull reefer which pays quite a bit more. As a solo lease operator in reefer division I averaged $1.73 per mile last year, but if I were doing a due dilligence study I'd assume something like $1.50 per mile. Average miles here would be more like 2300 per week. $4 per gallon is a safe assumption with demand from India and China growing. 6.5 mpg? That would be a freakin' disaster for a week - I'm not kidding when I tell these guys that they need to be in the upper 7's to be profitable.

Way bad on the fuel. You'll go broke.

6 mpg, but our fuel surcharge is based on the fleet average including corporate discount - it ain't $4 per gallon this week. 42cpm is about right though.

Our leases are nearly covered for the life of the contract under Freightliner warranty. Some things start going uncovered at 350,000 miles, which I'll hit early next year, with about 6 months left to go. For example, when my turbo blew last year, it cost me $113 in shop supplies, everything else was covered. However, setting aside about 10 cpm in your emergency fund is prudent - that'd be about $100 per week. Now that money doesn't just sit there. Prime pays interest on that at one of the higher fed rates, compounded weekly. Last year I earned $225 in interest payments on my emergency fund, and I didn't need to touch any of the principle to cover maintenance needs.

Dealer down-time pay after the first 24-hours. It won't make up for lost revenue, but it covers the fixed expenses.

Theivin' basturds! I set aside 5% of my gross for tax purposes, paid via the IRS electronic filing service. You don't want to get behind on that.

If one had any brains about this at all, you shelled out for the APU all along.

Thanks for your input...

Re: Paying the driver... that'd be YOU. This is one of the reasons that I really advise separating your business and personal finances at the outset through separate bank accounts. Much easier to track cash payments for tax purposes, and easier to deal with if you get audited. YOUR SETTLEMENT CHECK IS NOT A PAYCHECK when you are running a business. The settlement check is cashflow into your business, and you don't get to blow it every week at the truckstop buying crap. Your salary as a driver is an expense that must be paid out of your business account.

Re: Advances... if you are adequately funded when you start a Prime lease, you'll never need to take one to finance your personal needs. This is one of the reasons why many of these guys don't know if they are making money. They took advances at every fuel stop, and blew it on junk and fast food. By the time they get to the next fuel stop there is no money in the pocket, the road bounced the memory of that right out of their head, and its time for another advance. By the time the settlement check arrives, minus many advances, there is nothing left - BINGO! I ain't makin' no money and the carrier is screwing me! NOT!! I use advances to cover the costs of lumpers only. I also track those costs very closely.

Re: LLCs. I see no particular advantage for setting up an LLC. Its just more money out the door - unless you are making enough to incorporate as an S-corp. There is no particular tax advantage for most of us since the IRS does not recognize an LLC as anything other than a guy running a sole proprietorship. There is no legal protection if you get sued either - they can reach right through an LLC to your personal assets. The CPA that talks to the guys at lease orientation does push the LLC, but he'll tell you the same things that I wrote here if you ask him. The advantage is it does get people to start thinking about separating their personal and business finances.

 

The rason for setting up an LLC is not tax purposes but goes further to seperate your personal property from your business property..example..

Joe schmo truck driver hits litle bit's 91 camaro killin the little twerp on her way home from school..Joe didn't form an LLC..little bit's parents can now come after all property and liquid assets in Joe's name

Flip that a bit and Joe did form an LLC..its a seperate entity..from Joe's personal finances..they can still come after him as the driver of the truck but there is a seperation and legal limitations to that.

Also, having the LLC gives Joe a corporate credit rating, and a personal credit rating..he may not pay his cable bill on time but his fuel bills, truck payments, and insurance are always paid on time.so his corporate credit rating will be better than his personal. As such his corporate persona can buy a new truck when the old one is wore out.

Tel help with the taxes on the LLC..each year before dec 3sts move the business account balance to an untaxable retirement or pension fund..as an LLC you can do that through the same companies that major corporations use because you are a company with an employee of 1

As far as the numbers I used..I purposely used low ones..getting above.that..just means you can pay you the driver more D or pt t into one of the other accounts

Petey

 

Unfortunately using a LLC as a corporate structure does none of that for one person - despite what the LLC-R-Us DOT COM types put on their splash page, or the midnight infomercials tell you. Go speak to an attorney specializing in corporate law. A good personal injury attorney will not have any trouble getting at Mr Schmo's personal assets. He will be held personally liable for squashing Ms Twerp the same way any employee-driver of any large corporation is held liable. The LLC doesn't shield personal assets in a one-person-LLC/owner structure.

It does provide a legal entity to help out an owner-operator with a corporate credit history. However, a lease-operator is not making payments to a bank. Your tractor rental payment is automatically deducted from your settlement, so there is no corporate credit history.

Nothing that an individual can't do on his own. However, the IRS will tax you the same way whether you do it as a sole-proprietor or through an LLC. Unless... you elect to be taxed as a S-corp. You will be paying for that privilege until your AGI is above $60,000 or $70,000 - and that is unrealistic as a lease operator.

By the way... you're much better off paying taxes on your contributions to a retirement plan up front. I'd rather pay just on my contributions, rather than the contributions AND earnings on the back end.

Low ain't quite the word I had in mind! The thing is, unless you want the ego-boost that having a registered corporate name (Joe Schmo's Excellent Trucking Concern LLC) might give you, plunking down $300 for that privilege does little more at this stage. LLCs have a place, and can do useful things in corporate law - but there is little benefit for one guy and one truck - that doesn't belong to him.

Keep the $300 in your pocket and do something useful with it - like buy a pair of Centramatics for your steers. Your wrists will thank you.

 

So the question usually is, "Will I make money?"

IMO, its hard not to. You really have to work at that. Leash that right foot (Heh! Got the correct foot that time!!) and you're well on your way. Be stingy with the truckstops, buy your food at WallyWorld, and you'll have some jack left over.

The usual problem is that the lease operator has absolutely no idea if he is indeed, making money.

You have to look at your settlements every week. Its not enough to think that the folks that do your taxes are in any way looking out for your financial future - they are just massaging numbers for the IRS. If you aren't prepared to do this, stay company - and even the company guys should be reviewing their settlements.

The usual thing you are looking for is making sure your reefer fuel charges get credited properly on a trailer you picked-up. That's mostly to ensure that in the foggy state you're in after you get off of the road, that YOU remembered to send a macro 52 documenting that fact. However, people make mistakes, and some of the third-parties you deal with don't have a problem ripping you off. I haven't had a problem with Prime - and any mistakes that I've found on their side were ALWAYS corrected on the next settlement. Recently, I had some warranty work done at a TA - they didn't code it out as warranty (since they eat the shop charges) - and it got charged directly to me. A call to Road Assist got that corrected, but if you aren't looking at your settlements you will be leaving money on the table.

Its not enough to just look at your settlements. You have to get inside the numbers. The settlement itself is just a rehash of what went down last week. Income, reimbursements, charges, and a reconcilliation that lets you know if you are in or out of the hole. And this friends can be confusing. Prime offers a "Basic Accounting Service" for $21 plus change per week. Take advantage of it. It really isn't much, but its worth the buck since it organizes your numbers for you and saves you a lot of headaches and calculator punching time. You'd rather be trying to talk that truckstop waitress into some extra curricular activity wouldn't ya??!!!

Looking at your numbers not just for this week, but for the year-to-date and lease inception-to-date will tell you a lot about whether you are having success or not. It will also make you aware of where your money is going. If you're taking advances and wondering what happened when you get a $30 settlement check - this is where you'll find out about that. You must have the discipline to either use a spreadsheet to generate a weekly, monthly, quarterly AND yearly profit/loss statement OR enter the numbers into a software package or use an online service to do that. Your fianancial numbers will tell you where your business is headed, and it will generate the information you MUST have to be successful.

There are some numbers you have to know in order to be successful... and its not what the last load paid in cents per mile. None of your bills are paid in cents per mile. Your tractor rental payment is a chunk of money paid weekly. Its easy to use cpm statistics to see into how things are working, to calculate amounts to set aside for long-term escrow (like your tire fund,) but all of the major bills are paid in increments based on time. These numbers you have to calculate. Thank the software god for the manna of the spreadsheet! So get good with MS Excel, or the OpenOffice product, or whatever accounting program you might want to use.

How do you know if you are going to make it this week if you are being paid on a percentage basis?

You must know your average daily gross income, your daily fixed costs, and your variable cost per mile to determine whether a given load is worth taking... and one of your costs is what you are going to pay yourself. Get used to this idea... even if you are running solo, you have an employee and that's YOU. You must plan on paying yourself. Set a number for your weekly salary and stick to it. You may be the president of your trucking enterprise, but you are also its employee-driver. Being the president means you get to treat that schlub employee like the schmuck he his - so give him a number. Being the driver-employee means you get to flip yourself (el-CEO) off too! Doncha just love the advantages in all of this!

Expected income = (Days on load) x (Daily Fixed Cost) + (Miles on load) x (variable cost per mile)

That's how you judge whether that load just offered to you is worth taking - well that and where you're going, and how much you want outta there! Look at that daily fixed cost number. That's what it costs you to sit all day at the truckstop (or at home doing the honey-do's) - and its a cost that you will have to pay tomorrow if you turn down today's load. So you really want your loads to pay more than it costs you to run them.

It's all about gross income when you are being paid on a percentage basis. Cents per mile figures don't convey a lot in this discussion, so don't get hung up on them. Part of what this exercise will do is let you know what that gross income number needs to be. From your spreadsheet (or accounting package) you need to be able to generate...

- Actual gross income per day
- Actual costs per day (fixed plus variable)
- Actual costs per day with salary

Knowing these numbers, and comparing them to what will come in on the next load will tell you how you are doing as the week progress. If you don't know this information, you are only guessing. Its also good to know what these numbers are per mile. Yup, we're back to that. If you keep these statistics divided by the number of dispatched miles loaded and empty, you can quickly look to see if your next load is a winner or looser - but you have to know the numbers. Especially the actual costs per day with and without your salary.

The backside of those load sheets that you can buy at the company store have a really good purpose - not only do you have a record of your load, but it's very useful for a couple of other things. Write down where you last spent money that can be reimbursed... like the data for your reefer fuel purchases. But... keep a "scoreboard" as well. A running total of the gross income per day for the load, the total gross income for the week, and the total gross income per day so far. You can just do this with a calculator as the numbers come in with the load assignment. But it's going to tell you how you are doing on a daily basis.

If you get inside of your numbers, you're going to know how you're doing - but YOU have to do it. Having someone else do your basic accounting sounds good, but then you have to know what that piece of paper is trying to tell you. Its like driving a truck. Do you remember that driving instructor hollerin' at you about move your steering wheel, back over here, do that, and do it now? Did you really understand what you were doing trying to do those first alley dock backups? Not until you got your hands dirty and did it yourself for awhile. Its the same thing here - do you want to be a successful lease operator? If you really want to understand what's going on with your business, you have to get your hands dirty and do the numbers.

 

Thanks IP. You have once again provided invaluable advice. I have worked your idea above into my spreadsheet and now can look at each load from both perspectives.

 

Don't worry, there's more coming - IYEEEEE! Its that brassdonkey guy doing a brain vomit... er dump!

 

As long as it's your brain doing the dumping.....

 

Just to clarify, the $1.73 would be the gross, for all miles, including FSC, pre-tax?