Own Authority. Freedom and risks involved.

TallJoe · Apr 15, 2016

RedForeman said: ↑

I'll probably catch some heat for encouraging this, but oh well. Won't be the first time. I hope all this helps you a little. Or someone else that happens to read it.

I think you have the experience for a fair crack at it. The additional costs of running your own authority is less than 20¢/mi on my business plan. However, when measuring that against the $1.35 you're getting now, don't forget that carrier has an established business. So you'll have to do much better than the 20¢ delta to pay for your lack of experience, at least for the first 2-3 years.

IMO the market conditions are about as low as they are gonna get, at least in the refrigerated sector. That said, I also don't expect to see much improvement until next spring after the presidential elections.

Most tiny carriers are running in survival mode right now. Slimmer profit margins in favor of maintaining cash flow. You will have the additional challenge (as you seem to already know) of establishing a new business. It's not a deal breaker, but puts a shade on the upside found in a better market.

I think where you'll struggle is dialing down your cost of living needs enough to weather a couple of years building your business. If you can manage that, then your chances of success will be better. As-in paying yourself less than half of what you're bottom line is today in order to build a hedge against bad weeks and off season. If this is a serious concern for you, then don't do it.

Regarding claims, I would venture to say that if you hauled Cali produce to the markets for 8 years, you probably know what a sketchy shipper or consignee smells like. You also know what products are more sensitive and risky to haul. So either avoid those, or be extra diligent with pulp and temp checks to prevent claims. Since it's your business on the line, it behooves you to get your tail out on the dock more and act like you care about product and handling. Once you get to know regular stops, then you can relax a little more after they've proven they won't tear up the equipment or damage the cargo.

Regarding rates, @fortycalglock is right about rates for the most part. Reefer freight pays a little better than dry van, but it's not like winning the lottery better. Barely enough to cover the cost of fuel and regular maintenance on the equipment. What you do get (in my opinion) is more solid market opportunity. Housing starts boom and bust, factories have periodic shutdowns and production moves, but people are always gonna eat. Another benefit, often considered an equal risk, is refrigerated also usually means perishable. In most cases everyone in the supply chain wants that product out to the end user as quickly as possible. So less likely that your equipment will get extensively delayed without a real good reason to risk product spoilage that they can't claim on you.

On the equipment, I could make the case for both new and used. I have two reefers, an '02 and an '06 both Great Dane 53' with TK SB210 units on them. They burn more fuel than new ones. About 1.6 gal/hour in the summer on high cool, or about 25-30 gallons a day. From what I've read from others, more like 1.2-1.3 g/h on a new one. A lot less in the winter for both. Of the top of my head, I spend the same on PM's tires and brakes as someone with a new one. Probably more, since I do engine PM at minimum 3 months, which is usually under 2,000 hrs. The published interval on mine is 3,000 hrs. I'm not comfortable without a second set of eyes under the hood at least 4 times a year. After that, probably around $2,000 a year each for miscellaneous repairs. Once in a while something exceptional. The old Carrier unit that was on my '02 went down for good last spring, just shy of 30,000 engine hours. I picked up a 5,000 hour '03 SB210 for $9,500 and have put another $2,500 into it to fix stuff that was mainly due to age in years not hours. That was extraordinary and it stung a little bit.

Funny thing is that my '02 has burned a lot of cash in the past year due to its age. Recent air springs, some tires, abs issues, and that reefer unit. On the other hand, it's been pretty trouble free the 5 yrs I've had it. So it was bound to happen. Even as it sits in the shop right now getting new landing gear installed, I'm planning to trade it in a few months. I haven't decided new or less used. It's just getting too tired for my comfort level. It will, however, be in 100% serviceable condition for the next owner and sell for top dollar for the year and unit hours on it. Probably even a few hundred dollars more than I paid for it in the first place in Nov '11 LOL. I don't visit California, so newer isn't really a requirement for me.

As for reefer breakdown claims, it's all about you staying on top of your equipment. In over 5 years, I have had several breakdowns and zero claims. When the unit dies, you have to catch it quickly, take no more than 15 minutes on the side of the road deciding whether it's a quick fix or not, then if not make tracks to the nearest dealer that can jump right on it and have your wallet ready. It's a cost of doing this work, and really becomes second nature after not too long.
Click to expand...

Thank you red

TallJoe · Apr 15, 2016

Thanks for all the replies. They mean a lot to me. I'll be perfectly honest with you, I feel more encouraged now. I won't deny the fact that the plan is, to a large extent based on the rates I hear from people I know. For instance, a buddy of mine (He has been on his own for a year working off loadboards, and still not everybody wants to talk to him, but already a few brokers called him rather than he called them) took last week a refrigerated load from Rochelle, IL to Ft. Worth Texas 920 miles for 1700. (1.88/m) . Anyway, what I see is that he utilizes his equipment better than I do. According to my calculations, assuming 100K miles per year my insurance would cost me 16c/mile, reefer payments 14c/m that is 30 cents a mile already. Let's throw in 5 cents/mile for reefer PM's and lumpers and bribing cooler loaders so they would stick around for 30 more minutes after 5pm in Yakima when you running late. Anyway ,let's look now at my YTD numbers:
fuel cost/mile: 33c/mile
maintenance: 16c/mile (so for his year doing all right but 3K for drive tires imminent)
plates/legal fees/parking/trailer lease : 08c/mile
-------------------------------------------------
so far: 57 c/mile
Currently my percentage 1st Qtr 2016 gives me 1.35 c/mile
so 1.35-57c = 78 cent/mile of profit
Now lets add insurance 16c, and reefer payments 14c + 5 whatever additional, we have a total of 92c/mile of operating cost. 1.88 - 92 = 90 cents a mile. (12 c/mile difference)

Now, you see when I play like this and take my buddy's 1.88 c a mile going to Texas, it does not seem that bad. But the critical question here is whether I am as a good at finding that freight as he is. I guess, the only way to find out is to go for it. Oh, by the way, it is not only money for me; I really miss that smell of rural California.
Thank you all.

DUNE-T · Apr 15, 2016

I would guess your insurance will be over $20k for the first year (if anybody even will want to take you with reefer). You also have to put money on a side, like if you had payments on truck.
1.88 might seem alright, but ask him to show you the rate confirmation from the Texas outbound load. If it only pays $1.3, then you are averaging $1.6.

Arnasme · Apr 15, 2016

TallJoe said: ↑

Now, you see when I play like this and take my buddy's 1.88 c a mile going to Texas, it does not seem that bad. But the critical question here is whether I am as a good at finding that freight as he is. I guess, the only way to find out is to go for it. Oh, by the way, it is not only money for me; I really miss that smell of rural California.
Thank you all.
Click to expand...

Don't forget that all loads coming from Chicago area pays more, but coming back you'll be going for less than $1/mile on average. Thats the average:
Reefer
Dallas X-Mkt to
Chicago X-Mkt
$1.07
But you'll be new with your own MC so don't expect to get average rate off of load board.

TallJoe · Apr 15, 2016

DUNE-T said: ↑

I would guess your insurance will be over $20k for the first year (if anybody even will want to take you with reefer). You also have to put money on a side, like if you had payments on truck.
1.88 might seem alright, but ask him to show you the rate confirmation from the Texas outbound load. If it only pays $1.3, then you are averaging $1.6.
Click to expand...

You are perfectly right. But to me running on my own is important to say the least. It is a next level and in a way ultimate level as I don't fancy building a fleet. See, the way I run now, leased that is, i feel incapacitated. I am pretty much told what to do. I hear and feel that it is rough times now , and better not to fool around, but I want to be right there when the cycle in is on the upswing. Having said that, being independent has a value in its own. Now, for me to break even, I mean living expenses, I need 50 K a year. So, if these are bad times, I hope to stay afloat and be first to the pie, when it is there. But this is a gamble anyway, I see a lot of risks. Mainly the reefer would be a liability in case I go under for too long. But i can't be convinced to buy a used reefer. I've dealt with those when it's 100F outside and you have strawberries, and the Las Vegas Thermo King is besieged by a dozen poor fellows like me. No sir! No money savings there. Unit has gotta be razor sharp.

TallJoe · Apr 15, 2016

Arnasme said: ↑

Don't forget that all loads coming from Chicago area pays more, but coming back you'll be going for less than $1/mile on average. Thats the average:
Reefer
Dallas X-Mkt to
Chicago X-Mkt
$1.07
But you'll be new with your own MC so don't expect to get average rate off of load board.
Click to expand...

So it sucks indeed. Perhaps I should go from Dallas to Phoenix for a few pennies, then deadhead to Nogalez (it should be nice there now) and come back up to Chicago. Hoping at least for 1.75?

DUNE-T · Apr 15, 2016

TallJoe said: ↑

You are perfectly right. But to me running on my own is important to say the least. It is a next level and in a way ultimate level as I don't fancy building a fleet. See, the way I run now, leased that is, i feel incapacitated. I am pretty much told what to do. I hear and feel that it is rough times now , and better not to fool around, but I want to be right there when the cycle in is on the upswing. Having said that, being independent has a value in its own. Now, for me to break even, I mean living expenses, I need 50 K a year. So, if these are bad times, I hope to stay afloat and be first for the pie, when it is there. But this is a gamble anyway, I see a lot of risks. Mainly the reefer would be a liability in case I go under for too long. But i can't be convinced to buy a used reefer. I've dealt with those when it's 100F outside and you have strawberries, and the Las Vegas Thermo King is besieged by a dozen poor fellows like me. No sir! No money savings there. Unit has gotta be razor sharp.
Click to expand...

I opened my authority not just for money, but for fun and moral satisfaction. Yes, tons of problems, stuff to do and maybe at the end of the year I make the same money what Walmart senior driver does, but I feel happy, proud and fulfilled I guess? I would be bored to death just driving. I feel like I am an adrenalin addict and this work just constantly keeps me pumped.
Anybody can do what they are told, but not anybody can manage a business. So good luck to you, I hope you succeed, I always had a sympathy for people who want to do stuff on their own.

gokiddogo · Apr 15, 2016

I have found that with reefer, you will almost always have a wide swing of excellent rates from a to b and very low rates b to a. I have found it is generally more profitable to do triangle runs where 2 of the legs are higher paying. Example, you can always get paid well when the produce is moving out of Nogales. Now try to even find a load going to somewhere near Nogales, you'll be lucky to find something for fuel money to go there. Don't fall into the trap of feeling like you will only make it if you run cali and Nogales and Texas and Florida. There is plenty of money to be made by not going to the edges of the country. There is also generally more stability rate wise when you avoid the edges. Everyone and their brother has a story of getting 10,000 from cali to NY. But in reality, most of the time they move for maybe 6000.

TallJoe · Apr 15, 2016

double yellow said: ↑

I'd also add @RedForeman 's thread:
http://www.thetruckersreport.com/tr...s/no-experience-but-getting-authority.134211/

...he kinda took it over around post 15
Click to expand...

Fantastic threads! They read like a good novel.

Arnasme · Apr 16, 2016

TallJoe said: ↑

So it sucks indeed. Perhaps I should go from Dallas to Phoenix for a few pennies, then deadhead to Nogalez (it should be nice there now) and come back up to Chicago. Hoping at least for 1.75?
Click to expand...

I see from Nogales to Chicago average is buck fifty. So penies to Pheonix, deadhead to Nogales, 1.50 to Chicago and you'll have average $1.35 total. Of course you'll be your own boss, you will choose if you feel like taking the load today or tomorrow and where you want to head out. So for the first year or two, you won't be making more than you are right now, but you'll have that feeling inside that it is worth it.

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