Leased to a company vs. Own Authority?

QUOTE:>(Even Landstar would disagree with this sentiment, their business model is set up to be a clearinghouse between drivers (BCOs) and brokers (agents) and they are more than glad to explain that they work for us and not the other way around.)


We'll agree to disagree and I'm a Landstar fan. But their whole 'We work for you' is a very warm and fuzzy marketing statement.

Good luck Preacher Man

 

No. Unless you get your own direct customers and that's not going to happen. You can do better then Landstar by getting your own authority and hauling off the load boards. I have access to a BCO's account and can see what a load is paying their people. In one case they were paying $2,800 and a broker from another company was paying $3,500.

And good luck with finding good drivers. You'll be in the same boat as everyone else with complete dead beats and drivers beating the S*** out of your trucks. It's not up to you who you hire. It's up to the insurance company. Workman's comp is expensive also. Your also going to have to hire a dispatcher to find loads and keep track of drivers.

Your going to need to pay your drivers every week while you want 30 to 45 days to get paid so your going to need one Hell of a line of credit.

 

The way you are asking this, I would say no, you won't be better off. At least in the short term.

Adding trucks and drivers to a lease is just that. You're assuming that the carrier has substantial enough business to support that investment and risk of yours. Probably a non-issue at LS, since you're still gonna be a tiny spoke in a really big wheel. However, under your own authority, it's all you. Either you have the work to support the expansion or you don't.

Another thing you've probably already considered is that buying trucks and hiring drivers, whether you add them to your LS lease or your own motor carrier, does not equal a multiple of what you're producing to begin with. It's less. Setting all the bad driver war stories aside, even the very best company driver has no ownership stake and therefore little incentive to improve the bottom line. Yeah you can offer all the perks and bonuses, but at the end of the day an employee will always just be that. They will look out for #1, and if the company does better for it, that's just a great coincidence.

If you had asked this question in a way that sounded more like, "my hands are tied at LS because of -X- and I think I can improve profit by running my own business better" then I might believe you're in a better place to consider getting authority and building a new business.

 

It's funny preacher man, I'm kinda in this same boat, I'm not frustrated with LS per say, but the stress of the whole operation with times dealing with Agents and such.

What I'm possible looking at doing is becoming a logger. I come from a family full of log drivers and I've felt like I've ran my course running regional/OTR the last 6 years. I know that I will take a hit in revenue and the DOT will be on my rear end Iike flies to poop but things just sometimes run its course


With that being said, running the road I wouldn't lease on to anybody else but LS or Schneider Choice. LS is pretty good company, it has it flaws but as far as running your own show with no outside interference, I don't know any other company that does that.

 

I am not sure there is a good answer for everyone. Some people do very well leased to a carrier. Some do better leasing on than running their authority. Landstar and any other carrier who utilizes owner operators will take a cut off the top. Think of Landstar as a big brokerage who happens to own the bank. They have direct customers, but also use brokers and 3pls. Everyone takes a cut off the rate. The 3pl, broker and carrier all take a cut. Having direct shipper may give you a better rate or may not. Sometimes, when the broker is out of the picture and you deal direct with a shipper, they sometimes try to cut the rate to a point where it is less than what a broker offers. Leasing to a carrier puts all the costs of compliance and insurance on the carrier. If you run your own authority you pay for the insurance and all compliance costs. When you lease to a carrier they often help you find and book loads. Running your authority you do it all. When you lease the carrier assumes the risk of collecting their money. Running your authority, you assume all the risk.

I have not had major collection issues. Some have had a lot of issues with collections. Running your own authority, you could use factors or take advantage of quick pay that is offered by most major brokers. In some respects, there isn't much difference between running your own authority and leasing to a carrier. But, I still prefer being on my own. It has worked for me. It is difficult to advise anyone which way they should go without getting to know them. Whether you lease to a carrier or run your own authority, you can do well either way. It really comes down to what you want to do and your objectives for your business.

 

Leasing can be a good thing, but it's all a matter of preference. I am not a fan of leasing, I would rather retain 100% of the work I put in. With that being said leasing provides a service just like a broker. So if they can cut down the amount of legwork you have to do then it's worth a price. If you can come to terms with that price and its a fair deal then the lease or broker is a good fit.

 

In my opinion it is not worth the headache even if it is just one truck. But for some people they have their systems down and don't mind. For me the most aggravating part of all with authority would have to be collections so that's the crutch I lean on and how I look at it. Another would be screening and setting up with new brokers. Some people manage just fine and don't mind the extra work.

With regards to hired help one thing you may not have considered mixing things up with brokered freight is the affect it might have on turnover. Depends on how well your wife can book the truck's to keep them busy though. Drivers just don't care to sit around and wait on anything. The flip side they better be able to get rest breaks too. And not having any idea what goes on with the dispatch side of it they'really just going to sit there grumbling, complaining about every conspiracy in the world. Which can happen with direct also. That's trucking and just how things go sometimes. But more so I think with brokered as there is a lot of excess garbage out here that everyone direct made excuses why they didn't have a truck.

 

I have a friend who went the small fleet way with 5 trucks. He did good but just for a short period of time. Then it was one thing after another and I listened to it all. He wanted to get out and back to one truck but he had loans to pay on the other trucks and had to keep them running while trying to sell them. It was awful.

I do have another friend who has 15 trucks now leased to a large carrier and is doing really really really really well. He doesn't have to do anything at all. The company dispatches his drivers and all the paperwork.

 

There is a lot to learn. How do you know those people are VERY successful? How do they know? They told you? I know many folks that think they are successful as carriers that make less than me. These guys think $2 is a great paying load. I averaged $2.40 per odometer mile last year, and they're talking $2 on loaded miles.
Playing the spot market can be great, it can also be a nightmare when truck capacity is not in a favorable position. We haven't seen this in the last few years because of the purge from 07-10, which eliminated a tremendous amount of truck capacity. The spot market (brokers) was unsustainable during those years. Every call on a load is a negotiation when dealing with brokers. It can get pretty tiresome trying to get the rate you want or know is available in that market. The whole knowing what you can run for mentality prevalent in carriers that run the broker boards is crap. I want to make the most possible on every load I can. That helps when supply and demand is not on your side or in areas that are just crap.

As far as increased revenue for going your authority route, from what I've seen, most end up making less when the P&L statements are tallied. There are many exceptions to this rule, but generally they run a niche market. Ruthless is a good example. Home nearly every night and provides SERVICE the big guys can't. To do better than leased on, you'll have to find shippers that value service over price, and personal attention over talking to someone on the phone two time zones away.

How much sales experience do you have? Do you recognize the quote "coffee is for closers"? Even if you stay BCO, some sales training investment for you and your wife would benefit your bottom line if you don't have any. It's pretty much required to be more successful as a carrier.

Are you going to factor or use quick pay?There goes 1.5-5% of your gross, right of the top, plus fees. 5% of $2 a mile is 10 cpm. That's a used truck payment for every 12,000 miles a month. Can you afford to give that away?

You'll need a cost plus fuel card like NASTC otherwise you're throwing .30 a gallon average away.

Extending credit to brokers and shippers will be one of your biggest liabilities, even if factor. There is cost involved there.

How much is your wife's time worth? Making 30-50 calls to book 3 trucks a day will get to her, especially after using the Landstar online where everything is there, especially price.