Advice Needed From 3 to 5 Truck Fleet Owners

If your truck(s) are leased to one of the major carriers getting paid mileage plus FSC, and you are paying .40 cpm, you will be broke within a month. The employers portion of the tax bill runs about 13.5-14% of what you pay them. So that means that the .40 cpm in the example would really cost .45-.46 cpm. That does not include unemployment taxes, or workers comp. So, you are looking at approximately .50 cpm in employee costs without supplying any sort of benefits if you are looking to pay that number.

Trust me, .40 cpm base pay WILL NOT work if leased to a large carrier making .95 plus FSC.

The original poster's margins, based on the two scenarios(Conway and Panther) that he provided, are way too slim, in my opinion. I will also tell you that just looking at what you make after fuel is deducted, and thinking that that information will be very useful to you, is asking for trouble. You need to do detailed and itemized bookkeeping, even in the planning stages, or you are setting yourself up for some major surprises that you don't want. Good bookkeeping will also prove useful so that you can read your P&L's regularly to identify problem areas that you can improve upon.

The one thing that I haven't seen you talk about is truck replacement. You may be inheriting that truck to start with but you need to plan to replace it. I personally bank a truck payment on every truck, every month, even if it is paid for. If you don't, you will wake up one day with a paid for truck that is falling apart and no money to replace it, or more common, you will be in the position that you must finance the replacement truck. If you think about it from a purely financial perspective, if you had the first truck paid for when you started and have to finance ANY of the truck that replaces it, you went backwards.

Above and beyond replacement, you are talking about expansion. You should be putting as much back for fleet expansion as you are for replacement if you want to do it as aggressively as you indicated. Expanding from one truck to two and then to three is a very long process if done right.

Yes, this entire post can be taken as negative. You asked for realistic and that is what I have given you. Can it be done? Yes, it can. I've done it. Is it anywhere near as easy as you think it is? Absolutely not.

My wife is bugging me wanting to know who I'm talking to and getting a bit jealous that I'm writing a "book" on a forum. Guess that means, since I am smarter than I look, I best wrap this up.LOL

Good Luck to you.

 

First off, to the above posters, thank you for sharing your hard earned wisdom with such insightful posts. You generously share your thoughtful advice on this public forum and we very much appreciate it.

David, as one who has gone broke with my own trucks, I would like to keep you from repeating my painful mistakes. Here is an analogy for you to consider:

"Bob just inherited a van full of tools, so he will become an electrician."

Do you not think that Bob would be better to sell the van and tools and keep doing what he's doing?

My friend, if you are doing this to honor the memory of the person who left you the truck, might it honor him as well to sell the truck to somebody who will successfully use it to support his family?

Many good and honorable options, and I'm sure you will consider carefully.

 

I don't have a whole lot of time right now. I'm just sitting here wiping the sleep from my eyes and getting ready to get to work finding loads and doing my daily truck related chores. I just wanted to take a second to address maintenance.

It has been my experience over the years that unless you do a considerable amount of work on the truck yourself, your maintenance costs are going to run right around .10 cpm. That number is just for your run of the mill preventative breakdowns, tires, and preventative maintenance. That number does not include the eventual rebuild costs for the engine and drive line.

Secondly, I believe you said that your truck is a 2006. If that is correct, that is an EGR motor. Due to inflation and the newer EGR equipment on trucks, it is pretty unrealistic to have a motor rebuilt at a dealer or reputable shop for that $8-10k number. You might be able to get it done at a small mom and pop for that price, but I sure hope you know and trust the folks. The rebuild kit(parts) will cost you nearly that much if you use the OEM parts. A rebuild at a dealer nowadays is more in the $13-15k range for an egr motor.

I will try to get on here later and help in any other way that I can. Have a great day.

 

Con-Way
$1.36/mile loaded and unloaded - Incl FSC
Approx 2000-2500mi/week (or so they say)
I average 5.5mpg loaded so at $4.10/gal that's about .75/mile
After gas cpm = .61
3 weeks out = 6,000-7,500
Monthly Earnings = $3,600-$4,500 b4 taxes and other expenses
Yearly = $43k-$54k

Panther Expedited
$1.82/mile loaded (.68 unloaded) - Incl FSC
Approx 1200-1700mi/week (or so they say)
I average 5.5mpg loaded so at $4.10/gal that's about .75/mile
After gas cpm = 1.07
3 weeks out = 3,600-5,100
Monthly Earnings = $3,800-$5,400 b4 taxes and other expenses
Yearly = $45k-$65k

Lets assume you pay a driver .40 cents per mile figure another .08 in employment taxes .10 mile in maintnence. .03 per mile left over using Conways model. Which I promise you will make more there than at Panther Expedited. I dont see you growing a fleet with those numbers.

You drive the truck yourself I promise you will see that 5.5 mpg increase very quickly.

"but I'm hoping that we get some feedback from those that either failed or succeeded at establishing their own fleet."


I have 23 trucks please feel free to ask any question you might have. I run 50% regional out to 600 miles and 50% local.

 

I hear that a lot LOL. Although now she knows what TTR looks like at a glance and never complains about all I've learned here.

 

Where to start. I guess maybe the problem I am having is that my mind works a little different than yours. I like to see all the fixed costs upfront, break that down to a CPM based on a conservative miles per week. Then break down all the mileage costs, including what is going into reserves, and come up with a complete CPM. I think you will see that even before you add an employee into the mix you are going to be well above $1.10/mile.
Then you add $.60/mile (minimum) for an employee and all the related taxes.
As you can see, you will be going into the hole.
Back to your issue on insurance. If all you are talking about is time and no accidents or DUI's then you may be able to get a reasonable rate if you find the right agent. PM me and I will connect you with my guy. Handful of companies look at a year clean as being very hard to do and rate based on that.
But your other issue in being O/O is the area. You can find a decent rate going home but you are going to have to give it away coming out. If getting your own authority I would start prospecting now for some dedicated accounts.

 

OK that paints a better picture. With your experience as a Small Business Development Consultant, you would know that you're higher insurance premiums will impact your cpm by about 5-6¢ give or take, compared to a rate another o/o with more experience gets. In my case, I consider it a cost of business development and it's a sure encouragement to hustle better rates and not just take the first offer. The sticker shock will wear off just the same as Class 8 truck numbers on a fuel pump. It's not as big a deal as it's made out to be when looked at in perspective. I'm not saying ignore it, but add it to the list of risks and have reasonable expectations, and quantify it appropriately. That is, the insurance benefit obtained by leasing on is offset by other things like less control over your operation.

That part about not having enough experience on how to establish relationships with shippers/brokers is another risk. How's your negotiation skills? Are you comfortable with doing a rate workup (decision model) and sticking to it? Talking to a broker is just like selling a car. If you're comfortable with and good at talking people out of their money, this business may work for you. It's intimidating as hell starting out, but in my case it wasn't so bad after the first few. In my business background I have experience dealing with numbers in the millions and tens of millions. It actually works against me some times. I have to consciously make an effort to be careful and patient when negotiating deals (load rates) in the hundreds and thousands.

I'm not the fleet owner you're looking for, and with less experience in the industry than you and I'm making a go of it. The circumstances are not the norm, nor is my approach. Regardless, the numbers all add up the same as everyone else's. With authority and a paid driver (a family member), my expected profit is zero. Personally, I've invested a huge amount of time and effort besides the money that has not directly paid me a penny. That's what I meant by "working for free." Sounds funny but consider any business can be above or below forecast no matter what the target is. After three months in business I have a grasp on the upside that I could never have predicted when I started. I am also working on expanding the business in a similar fashion as you describe. It is a plan that covers months and years and not something that will fully develop even this year. It has been a trial by fire and I couldn't tell you how far I will take it. It's funny when I look back only to March when I picked up the phone and started working on that first paying load compared to today. I'd say I had my forecast about 80% right and I'm improving it every day. Predict costs high, and revenue/miles below average and the rest depends on your talent at hustling business.

Last but not least, about that zero profit part. The ROI figure in my business model did not evaporate. It's on the road. When I do a walk-around on our truck and trailer, I can see the improvements. The rig I'm depending on to make it to the next stop today is easily 50% more reliable than it was on day 1. That's that $5-10k I was telling you about earlier. I guessed that number low. Actually not low, but expected it to be spread out more. That spread doesn't happen for a few months. On my next truck I will plan better for that and have a better start.

 

Nootherids, Eskimo6804 is one of the fleet owners I was talking about. I've only been on this forum for about five weeks but I have been soaking up the knowledge like a sponge. I've learned the most by reading. I was not aware of Cominghomesc. If I were you I would pick these guys brains as much as they could tolerate.

But IMHO, first you need to put some realistic numbers together that reflect true cost of operations, in the manner that BigBadBill explained. Then you need to run the truck yourself to generate the revenue for expansion. I don't believe you can do that running 3 weeks a month. You need to experience this firsthand. Once you run that truck you will have a much better feel for the possibility of what you want to do.

My take on your idea. Is it possible? Yes. Is it likely? Hell no. The first hurdle to overcome is can you even stay in business with you running a paid-off truck? Can you put enough money away to replace it? Once you have spent a year or two doing this, then you can begin to formulate a plan for expansion. If you don't want to invest many years and lots of energy to make it work, you should probably look for something else.

Once again I want to say I am not an expert at anything. There are many more owner/operators and fleet owners on here that have forgotten more than I'll ever know. I'm sharing my thoughts based on my research for the purchase of another truck after being out for years. I have always been willing to take more risk than the average Joe. But only when I have all the facts.