I think this is what a good leasing on opportunity looks like... but educate me.

Recently landed a national account. Seems like the best way to work it would be with dedicated equipment, as the customer has astronomical amounts of freight (like 1000 loads a day nationwide) and is mostly setup to deal with larger asset based operations.

A lot of the people in this industry I look up to run blended trucking and brokerage operations with lots of leased on owner ops. I'm exploring going this direction.

Please tell me where my numbers are off:
Revenue-
4950 in gross revenue per week per truck. Will actually be 5200 first week and 4700 second week and so on running flexible pickup/drop loads around the midwest.
2100 miles driven
Costs:
My company: 990 at 20%. We'd be settling up for the previous week every friday.
Driver: 1485 at 30%
Leaving 2475 to the truck owner
Fuel at .29 per mile (this week... main customer pays FSC so our rates should move with this) 609 dollars
Truck & Trailer at .24 per mile 504 dollars
Insurance at 375 per week. This is intentionally high, my company has a very old MC and should be able to get fair market insurance. It's also based on the truck only moving 48 weeks a year. I could also theoretically lower the cargo insurance level to 50k assuming the back hauls are compatible.
Maintenance at .20 per mile 420 dollars
Permits and tolls at .02 per mile 42 dollars. I realize that this is probably really high or really low. I can't really get an accurate number from you guys without talking about my routes and my customer and I can't do that.
Stuff happens at .02 per mile 42 dollars per week in random BS happening. Probably low... But I know my model is already cracked out because of the insurance.

When that's all over assuming the owner contributed 65.5k in capital his gross profit is 20k a year for a ~32% ROI. Not too shabby. If the driver is an owner operator he's right under 100k a year depending on how many weeks he drove. At the same time me and my brokerage are cutting out the office staff of the truck we're dealing with. Their cut becomes our cut and it gives us the ability to sell bigger blocks of trucks to our customer.

I'm guessing this math is exactly why so many of you are leased on. What am I missing?

@BoyWander , @rollin coal , @wichris I know you're all involved in this game to one degree or another. Help a guy out?

 

An important thing to note here is that I'm basing my revenue numbers on reality for the long term. Obviously under current market conditions I wouldn't even haul this customers freight... But current market conditions are temporary. This customers freight can be setup on contract at rates that are very favorable for years to come because of today's market. I think that locking that up is the smart play. Some may disagree.

I'm getting 1900 from the customer on a 700 mile front haul (this rate is stable and constant going forward) and then taking whatever I need to take to get back. I'm building it into the numbers at 2 bucks a mile, but the current market rate is closer to 2.50. Obviously we'll make more when making more is possible, but I wanted to build the model around what I can be sure of.

 

I landed the account as a broker. It's good for 20-30 loads a week for me currently. But if I want to do more than pick up the crumbs that fall off the table I need regular trucks. Leasing on owner ops is what I'm exploring.

I'm consciously choosing to divide the revenue to the owner op into two categories 'driving' and 'owning'. I think that most owner ops would be much better off if they split the two things when figuring out whether owning the equipment is even worth doing. I also suspect that this freight is good enough for fleet owners... So figuring out what their numbers look like was important to model as well.

 

Yeah that's included. I'm expecting to average 2 bucks a mile long term because I'll be optimizing around getting the truck back to the primary freight as efficiently as possible. Obviously in this current market we'll get as much as we can get. I'm also fully planning to get direct freight back ASAP, but I can't even start looking for that until I know where to look.

EDIT: Now all I have to do is sell my brokerage on it. But I really truly want to be 100% certain I'm not going to look stupid proposing this. This is not a small change in how the company operates. This is a BIG move. The first of my career really. But I have a sneaking suspicion that the whole reason this job fell to me is that they knew where it was going. Smart people my brokerage.

 

Thankfully this freight isn't time sensitive enough to create a line down situation. It also loads and unloads really fast. The risk of it is really important to making all of this work actually, in that there is none.

I was making sure the numbers are close to right because I'm looking to lease on owner operators. I care quite a lot about whether or not it's a good business decision for them or not. Happy drivers don't turn over. Unhappy drivers turn over and cause service disruptions that I have to paper over with the brokerage. Doable, but annoying.

You're certainly right that the contract would get renegotiated every year. That's fine with me. I'm used to negotiating the price on every single load both ways. This would be a wonderful change. The customer isn't going to be going cheap in the future. Cheaper perhaps but they have a long way to go before they are anything approximating cheap freight.