Advice Needed From 3 to 5 Truck Fleet Owners

I have no problem sharing what happened. We farmed and were doing okay. Not great but okay. I bought 3 trucks to use on our farm and it seemed natural to hire them out to supplement the farm income.

The rest of the story is all too familiar to many folks on here. Clutch replacement and downtime-- $ 1800 burned out PTO pump and downtime -- $ 3600. Tires and downtime-- I don't even want to remember it. This just went on and on until all my savings was gone and credit cards were maxed out.

On a happier note, I finally gave up on running my own show and Dick Simon hired me as a company driver (see my avatar). I stayed with them and paid down all my debts and even left with a few pennies in a savings account.

The day that I knew this was the best decision for me was the day the following happened:

Coming down I80 in Simon's truck my steer tire blew. After running with no savings for so long I got that sickening feeling in my stomach, and many others know EXACTLY what I was thinking:

"Oh, no! How am I going to make my house payment now that this happened?"

A half second later I remembered I was now a company driver. This tire and downtime wouldn't have to be put on my maxed out credit card and would not result in my missing a house payment. What a feeling of relief!

As I was waiting for the tire truck, I realized just how bad things had gotten with my own trucks. Could a blown steer tire REALLY make the difference between making my house payment or not? Yes. And many others on here have been in the same situation and know exactly what I mean.

I have no problem sharing this with you, as many people on this board have met me in person and know that I am a solid, hard working person and my failed small fleet is just one event that makes me who I am.

 

Of the two companies that you listed, from my research, only one is a good choice. Remember, if it sounds too good to be true - RUN.

I would not run expedited myself. If this is what you think you want to do try it first, as a driver. From my research, it is a horse of a different color. Go to the expediters forum and see how much they sit and deadhead.

 

I'm going to share the numbers I worked up for my decision process. First I will cover the assumptions used for the calculations. I have tried to keep things that involve income low and things that involve expense high. The unexpected will always remain the unexpected.

I can't guarantee how accurate these numbers are. I have found many who share their break-even numbers, but few examples with line item costs. I feel these numbers are in the ballpark but I welcome any constructive criticism to help me hone my decision process and others who may be looking at this too.


Assumptions

I planned this for me running the truck and a 53X102x110 vented dry van with my own authority. I planned running 48 weeks of the year, with most/many weekends at home and four weeks off for repairs and vacation. I am centrally located in Missouri. I don't plan to run either coast. I plan to stay in the better freight lanes.

My insurance quotes are coming in high because it has been more than 10 years since I've done any serious OTR driving. I have nothing on my DVR in almost 5 years, no alcohol or drugs charges ever and 35 years with a CDL. One quote has a lower down, higher payments and a mileage limit. The other has higher down, lower payments and no mileage limit. The cost is about $7600.

I planned to buy a 6 - 8 year old truck with a fresh overhaul and 3-year/300,000 mile warranty from a local reputable name brand engine shop. Several are available at any given time in my area. The trailer would be 5 - 7 years old. Financing, not lease purchase, with a 24 - 30 month payoff. The equipment is sold with a fresh DOT inspection. Most of the trucks have new virgin rubber and many have new brakes and some new drums. Trailers have at least 80% rubber and 60% brakes.

With these numbers I would run about 500,000 miles in 4.5 years. Once the equipment is paid off at 2.5 years the payment money would be banked to replace the equipment. At the end of the 4.5 years I would have about $ 48,000 to replace the equipment. This means the truck would be about 11.5 years old and the trailer about 10.5 years old. This may be pushing the age limit a little.

Fuel calculated at $4.10 per gallon and mileage at 6.2 MPG loaded and 7.0 MPG empty. Paid miles per week at 2000 with 15% deadhead for a total of 2300 miles per week, 9200 miles per month or 110,400 per year.

I will have to utilize broker quick pay as much as possible. I may be forced into factoring but will avoid this if possible and wean myself quickly if I do.

There are 30.42 days per month (365/12=30.41666...) and 4.333 weeks per month (52/12=4.333...). However since we plan to run 48 weeks per year we can figure 4 weeks per month on average. Now I realize these are tidy little calculations and will not prevail in the real world. However, I believe it is important to have some realistic numbers to use in our calculations.


Initial Investment

$4000 Truck down payment
$2000 Trailer down payment
$2000 Insurance down payment
$2000 License plates
$1400 Miscellaneous
$600 Authority and filings

$3000 Fuel fund
$2000 Repair fund

$17,000 Total Startup

Note: I could possibly get initial costs down to truck 2500, trailer 1500, insurance 1400, license (half year) 900, other 1000, fuel 1500 and repair 1000 for a total of $9,800. On the other hand $25,000 would be a much better number to work with. That would allow me to double my fuel and repair funds and have 3000 for personal bills.
The facts: I have $13,000 to work with, good credit; no debt besides house payment and my wife has a good job (for now).


Cost of Operation - CPM

Variable Costs - Equipment & Operations

.75 Fuel - $1725. per week
.14 Repair, Maintenance and Tires - $322 per week
.01 Miscellaneous supplies - $23 per week

Variable Costs - Driver & Benefits

.38 Driver's wages (me) - $874 per week (day $175)
.09 Driver's Insurance, Workmen's Comp and Social Security - $207 per week (day $41)
.05 Driver's Per Diem - $115 per week (day $23)

Fixed Costs - Equipment & Operations

.16 Truck payment - $1472 per month (day $48 )
.06 Trailer payment - $552 per month (day $18 )
.08 Insurance payment - $736 per month (day $24)
.03 License and Permits - $276 per month (day $9)
.01 Fuel taxes - $92 per month (day $3)
.04 ROI (Return on Investment) - $368 per month (day $12)

1.80 Per Mile - Cost of Operation


Note: This leaves me paying the same amount of social security and income taxes as I would on any job. I would gross about $42,000 before taxes. ROI is on $17,000 at 10% interest for 5 years to pay back my initial investment. If you subtract the benefits, per diem and ROI you will get the 1.62 that I spoke of before.

Obviously you would use different numbers to put a driver on the truck. I just feel that many owners are not realistically analyzing their cost of operations.


Facts for Load Selection

Minimum Costs

$115 per day to set and wait on a load - Fixed costs (no driver pay)
.60 CPM (fuel at 7 MPG) to deadhead to a better lane - 300 miles = $180

Realistic Costs

$353 per day to set and wait for a load - Driver and Fixed costs
1.47 CPM (1.62 - .15 DH fuel) to dead head to a better lane - 300 miles = $441

Actual Costs

$353 per day to set and wait for a load - Driver and Fixed costs
1.65 CPM (1.80 - .15 DH fuel) to dead head to a better lane - 300 miles = $495

Remember I have 300 (15%) deadhead miles weekly built into my business model. You need to know the numbers in this last section, for your operation, to make a sound decision on whether to take a load. In addition, you need to know what loads pay where you are and in nearby cities and lanes. If you went into a know area of cheap freight you should have received a premium going in (to cover deadhead) and have a plan for getting out in advance. This plan should most likely be turn and burn to a better lane. If you know that is what you are going to do, you can have the next load set up by the time you unload.

Unless you know there are good loads in an area, setting is a bad plan regardless of any other data. For me setting has seldom, if ever, paid off. I think it only makes sense when it is a matter of timing such as too late in the day or it is the weekend. Sometimes it may make sense if freight is slow but needs to be analyzed carefully. It will never make sense in a cheap freight lane. As simple as this sounds, I lost a lot of revenue learning this. I did the same thing over and over, lacking the courage to turn and burn, getting the same results repeatedly. Can you say insanity? Finally the light bulb came on. Have the courage to just say no to cheap freight and for heaven's sake don't sit and wait for the price to come up. Just avoid that area and let some other poor slob running on a hope and a prayer pull the cheap freight on his way to the bankruptcy attorney.


Rant

You should have a minimum that you will run for and never go lower. I have run empty from NJ to home in MO. The load I turned down was .85 per mile in 1992. I was leased to Ligon and it was sit the weekend waiting for something better on Monday or spend it at home. My minimum was $1.00 then. So now you see why these owner/operators laugh at .90 CPM leases at today's fuel prices. With today's costs, I would run across the United States and park at home before I would haul freight for less than $1.50 - $1.60. I can go broke running empty or sitting at home. Why would anyone not cover his or her cost of operation while making a profit for someone else?


Looking for Profit

Let's say you can increase your miles by 20% to 2760 per week, of which 2400 is paid, and 360 is deadhead. Now your weekly variable costs increase by 20% - read more cash needed for day-to-day operation. Your wages increase by 20% bringing your gross to $50,000. Your cost per mile on fixed expenses decreases by about 16% from .38 to .32 CPM. This leaves you about $6600 profit per year to bank. In addition, when your ROI is paid off in 5 years that will be $4400 profit per year to bank. This is in a perfect world and I wouldn't count on it.

Obviously if you are going to put a driver on the truck then the wages and benefits would probably have to be cut. We know this based on what Eskimo said and does and on what drivers are being paid. This is a sad thing, but true. So there may be a little room there.

I'm not seeing how owners are making it on leases. Let's cut .04 from variable - equip & ops, .13 from variable - driver and .11 from fixed that is paid by the company. Now we end up with a driver that doesn't probably make enough to be happy and a cost of operation of 1.52 CPM. Of course increasing the miles by 20% would leave some breathing room. One thing that should be obvious by now, if you are going to lease your trucks and pay drivers, you better run a lean mean operation. If you are going to own 3 -5 trucks, you are going to have somewhere between $120,000 and $300,000 invested in equipment. If you can make that paid off truck buy your way there then that is a plus. You still need a return on investment or at least a mighty good living to make it worthwhile.

 

I'll tell you what I would like to see. However, it would be asking for some financial information that many may not be willing to share. If this is the case I fully understand.

What I would like to see is Eskimo, Cominghomesc or any other fleet owner post what they made at the end of the year, in round numbers, after taxes and expenses per truck and whether they paid themselves and/or spouse wages in a company capacity before those numbers. It would be helpful to know if they are leased or running thier own authority. Like I said, I understand that owners may not want to share thier personal financial information. You never get what you don't ask for.

 

I doubt that would help you much as their business model is likely a lot different than yours. The big one is that you are basing your business on brokered freight. Not knocking that as I am doing that too. While plentiful, it has that limitation of the middleman taking a cut plus market pressure. I guarantee you that the successful small fleets are doing some sort of direct contracting and dedicated hauls. That boosts the revenue, reduces risk, and pays the hired driver.

 

You are in over your head... big trucks use diesel not gas.

$100K PROFIT driving it yourself? You have got to be kidding... that's a pipedream. more like $15-20K.

Inherit the truck and sell it.

 

We've been waiting on you Krooser. You always help keep what small, tiny bit of optimism I have in check.

 

Well, I am glad I am living the dream. I am just finishing my first 6-months and will have a profit of just over $42k before taxes. And that is with my first month being just under $6k and second being around $6.5k.
I have been doing a lot of thinking about what makes the difference between people in the business that are successful and ones that fail. And I am going to keep beating this drum because I have seen people in “how can they not fail” situations be wildly successful and one that have it all line-up fail.
ATTITUDE
Being positive, polite, professional, respectful, patient, sending thank you cards, notes to bosses when someone does something above and beyond, smiling, compliments ….
We all know the stories about the one last item that put a guy out of business.
What about that one little thing that can catapult your business to the next level.
What we need is more Tony Robins and less Oscar the Grouch.

 

BigJohn, One of the best run downs I have seen. I think I will use it in my Trucking MBA program.
And I agree, I look at what many of the leased on drivers are making and the only way they can make it is by driving more miles. But in all likely hood they do not have the temperament to make it in the independent environment. And I have run the numbers backwards and forwards. The little that is saved on insurance does not make-up the difference an O/O can make.