Prime INC Lease/Owner trainers .. where you at?

Whys it matter what your cost is? cheap freight is still cheap freight

 

Very much wrong! If you're going to run a trucking business you have to start thinking like a businessman.

The only cheap freight there is, is the air in an empty trailer. You get paid squat most days for pulling that. Wipper has been running down dollar dry van freight plus fuel surcharge...

REVENUE - COST = PROFIT

If you don't know what your costs are before you accept a load, how can you possibly judge whether the deal is profitable? Running open-loop with no ideas about what your numbers are is about as stupid as you can get. Let's say wippers cheap freight is $1.35 per mile, your costs are $0.80 per mile (not unreasonable) and you get 3,500 miles worth of this cheapo freight for the week. Then...

3500 x ($1.35 - $0.80) = $1975

Not great, but not all that bad either. $0.55 per mile on a fixed rate contract is better than many company guys do. Go ask Werner's Weenies if they'd like to be making 55-cpm...

I'm paid percentage, fuel surcharge and accessorials. Knowing my costs is the only way I can judge whether a load is worth accepting. Let's take a northeast example that many folks would turn down. $800 for 100 miles overnight. $100 in daily fixed costs, and $0.80 per mile in operational costs...

$800 - $100 x (1 day) - 100 miles x (80-cpm) = $620 net

A week of loads like that puts you at $4340 net profit before taxes. Not a bad haul... one that I see routinely turned down because it's "cheap freight."

Ain't no sech thing as "cheap freight." There's just loads based on whether or not your costs are low enough to run it profitably. That's why you have to know your numbers.

In the first example I assumed an o/o with a paid off truck... the second guy still has payments. Let's run the fixed rate freight with the second guys numbers 2500 miles, 5 days...

2500 mi x ($1.35/mi) - 5 days x ($100/day) - 2500 mi x ($0.80/mi) = $875 net...

That's pretty bad, only $175 per day in net revenue, well below my daily target. I'd turn that one down. It doesn't mean it's "cheap freight," it means guy number 2's cost structure puts that one below what he should be looking at.

 

No one pulls for $1 per mile. At least be realistic about this. There's a point here that you're missing, and it's that there is no cheap freight... only freight that either earns you profit or not. The fact is that if you run a tight operation using equipment you've already paid for, you have tremendous flexibility in what you can do. The guy with a huge truck payment, aerodynamics approaching the broad side of a barn and a lead foot is constrained to only finding very expensive freight... and usually spends a lot of time biotching about fuel prices and "cheap freight."

Its all relative to what your operating costs are... and how much of an economic trap you've locked yourself into. Florida is a great example of this... you get great rates going in, but the vast surplus of empty trucks that always persists down there means very little pays well on the way out. High cost guys biotch about it and deadhead out, which only increases their costs more. Someone with more moderate costs has the flexibility to chose to load something that pays for the trip out. The bottom line is what you net, and from what I've seen, the high cost guys don't necessarily do all that much better only letting $3 a mile freight touch their trailers... they also get lower utilization and higher fuel costs letting freight age on the dock until they have to drive at warp 9 to get it delivered only a little late.

I don't pull for $1.35 a mile... not even coming out of Florida. But there are a lot of guys a Prime who pull the same freight I do... much of it well above $2 a mile who go bankrupt really fast. A common thread is they never read their settlements, don't do the least bit of financial analysis on their statements, have no clue about their costs, drive like company guys with no thought about what it costs them... and biotch a lot about cheap freight until they're so far in the hole that Prime pulls the plug on them.

 

Yep, and no clue about running a business. Most of these guys have never run a business, and treat their settments like a paycheck on steroids. No credit, no cash in the bank... just that big, shiny, new truck luring them into letting their greed push them into signing a lease they haven't read, with no idea of the reality of what they're getting themselves into. When the inevitable breakdown occurs, need tires... there's no money to pay it with, so they finance it, take a week or two off, hit a bad patch of freight while still in the hole...

They only let you get in so far before pulling the plug on it.

Fully 3 out of 4 never complete their first lease at Prime for a multitude of reasons. Financial mismanagement accounts for a good portion in the first year. It all goes back to knowing your costs, containing those costs, paying your employee (yourself) a salary... in other words running a business.

 

very helpful information right there. And I have never looked at it that way