Leasing On Versus Operating Authority?

you are still paying all the same things. You are just giving someone else the money to use their authority.

Hence you only get 80% or 73% of the gross to the truck. Either way, you SHOULD get 100% of the FSC if there is any.

 

You mentioned something that is a huge red flag talking about your friend. Factoring at the level that he is doing it indicates his company does not have the capital to run every truck he has for 30-45 days.

MN is correct. Regardless you are paying for the service in one shape or form. What you need to be doing is placing a value on what is being offered. So if you are getting $90k on $100k in revenue is the company you are leased to going to give you $20-$30K in value? Most of the bigger companies don't even give you half of what they take.

But I also understand that "value" is not always about money. So factor that in when comparing independent vs. leasing. Just owning a truck regardless takes time when you are not driving.

But maybe the value to you being independent is more freedom. Only you can tell what that non-quantifiable value is.

The pencil to paper math is easy. Big company leases leave you short. Plenty of cool-aid drinkers will give you an "education" about the true costs of being independent vs. join their particular religion.

But making justifications about what you are doing is not what business people should do. Be honest. Say "I" make more money this way because I couldn't run effectively as an independent. Or that $X dollars a pay is worth it to not deal with billing, authority, insurance, etc.

Being new, new O/O and the area you are running out of are all challenges. Any single one could keep a driver from succeeding. But plenty with more strikes against them have soared.

The great thing about this business is that while you will find 100's that did what you did and failed there are just as many the succeeded.

 

Rick, you've got freight contacts to get direct from. If you run under your own authority you can only make money off what you haul from that direct customer. Unless you have the gumption to start up a brokerage and try dealing with that from the cab of your truck? If you lease on with your friend's company you can hold those contacts close, sit on them so to speak until you get your authority, or share them with him - if you did the latter what kind of sales commision will he give you off every load that ships from that customer? Most companies would likely give you an atta boy and that's about it. If you have a knack for sales you stand to make a lot of money off freight you're not even hauling leased on with BBB's company. He has trucks that can haul it or it will get brokered out to carriers who've been vetted.


That's what I'm shooting for but I haven't nailed down any direct just yet. Even if I don't I still think there is value in the cut he takes. I run my business as I please and if I book a bad load there is no-one to blame but #1. You mentioned getting some experience with a mega as a company driver and then maybe leasing on with them, for what I can promise you will be cheap $1.50 mile road to broke-dom or worse... I'll say again don't waste your time. You will be extra capacity for a carrier like that with no control whatsoever in the direction your business goes. You'll take whatever load assignment beeps over the qualcomm and maybe they will toss you a bone every once in a while and offer you a choice.. Nothing will grind you down and wear you out any quicker with owning a truck than being led around like a baby and running 3,000+ miles a week for peanuts...

 

As one that is not-so-new-anymore at this business in not very different circumstances than you coming in, here's another way of looking at your choice in non-trucking terms.

In many ways, leasing onto another carrier is a lot like starting a new franchise business versus doing it all from the ground up on your own. In exchange for a cut of the revenue, you start out on day 1 (ideally) with an established brand, method of operation, and customer base. You don't have to suffer months of learning as you go. And these learning moments are things that can potentially shut your business down and/or cost thousands of dollars at a time. Look at McDonalds - pretty spendy franchise to buy into and the books are pretty much solid from day 1. If you have about $3 mil laying around, you can buy one and be 100% predictably profitable straight away. Or you could do a Brusters Ice Cream shop for a lot less money, but then you accept more risk with a seasonal product and less franchisor support. So goes it with truck leases.

You can also do it on your own. You have a few contracts lined up, but that's just a start and you'll have to figure out how to leverage those into more profit. Which means developing more business on your newly minted authority. Rollin mentions doing that from the cab of your truck being risky. Understatement of the year right there. Nothing better than running hard all night and then having your phone blow up all day with business calls while you really need to be asleep. Better yet, try negotiating a load from the drivers seat going down the road. In the rain. During rush hour. You have to because that's your next load. It's just part of the business.

Just like the franchise, a lease comes down to how much risk you're willing to take on in pursuit of an expected reward. You evaluate what each offer costs you and measure that against value. Unfortunately for you, there is much you don't know about this business that will not rear it's ugly head until you step in it. I know this having come here about a year and a half ago with a very similar approach as you.

Your lack of experience will disqualify you for most lease opportunities. You're too risky of a prospect. On the other hand, even in my short tenure, I've seen an uptick of an outsourcing approach. More like an exclusive contract with another larger, more established carrier. You still own all the compliance, insurance and the rest and turn over dispatch of your equipment. JBH power-only is an example of this. I personally worked with an outfit that tried to get me on board with something like this and I resisted on the grounds of turning over driver/safety control to someone I don't know. I ended up setting up a more conventional carrier agreement with them for a trial. They didn't live up to expectations after a few weeks and I quit taking their calls over a relatively small detention payment after two loads. The loads were otherwise ok. Not great. Not going to make me wealthy. But there was enough in it for me to book them. Incidentally, that carrier went out of business last month.

Set your friendship aside and demand some hard answers from the guy you're considering leasing onto. It's a business. You should know by now that the first people to screw you in business deals are family, neighbors, and friends in that order. He should have no problems with sharing his a/r records with you to get an idea of what you can expect on a percentage deal. Do your own risk plan and set aside enough money to cover it. You aren't marrying the guy. Have a backup plan B to get out if it doesn't work like you expected. Talk to Bill and see what he has to offer. There's a hundred different ways to make a buck doing this and thousands of ways to lose money. You'll figure out what works for you. Or not. Just don't expect anyone to have your best interest in mind, and you will not be too disappointed.

 

In my opinion,i would lease on with one of the bigger carriers. You can get a trailer from them or get your own. You have an established system to work from as well as cash flow in the way of advances on the the loads you haul. Most carriers load the advance money onto a Com-Ck or T-Ck card and you can do whatever you want with the money. Along with this you usually get a $20-40 cent per gal. off pump price when using the card. They provide you with Cargo and Liability Ins. You would have to get Bobtail Ins. to cover you when you were deadheading. Plenty Cheap! If per chance you find and or have your own freight most carriers will pay you an additional commission on that freight. I think it's a little tough chasing loads,money,doing billing,getting the truck legal. Lots of legwork! Get your feet wet with a carrier,learn from them,then at a later date take the plunge.