Leasing at Prime

Now some more general rambling...

I've been successful at leasing. A lot of folks according to the industry statistics (and the "Bad Company" folder) aren't - I suppose in some measure I'm lucky. But that isn't the story. In this thread I've attempted to write down some of the things I've done, some of the things I think are important. It's not just one thing. It's all of it. Do as much as you can to stack the odds in your favor before you begin.

The odds are stacked against us, so YOU have to do everything you can to lean things in your direction. You have to do the "hard work" up front. That means a couple of years on the company side seeing how things work, learning how to squeeze as much as you can out of your truck, running a shadow business on the loads you run, getting some business education. Make sure you have money in the bank... according to the SBA, that's the biggest reason that new businesses fail. Under capitalization.

Don't scrimp on any of this! The more you are prepared, the more likely you are to get to the far end of the lease. Next month I have to decide whether I'm going to order something special for my next truck, coast until June and grab whatever is available, or position myself to buy my '09 Cascadia. I've beaten the odds (knock on wood, rub lucky rabbits foot, etc!!!) You can too, but you'll never know unless you try. There are a zillion folks out there saying this can't be done, but there are plenty of folks pullin' for Prime who have and are now owner-operators. Seek out lease operators who are successful, and find out what they are doing to be successful.

Now the down side. If you don't make it...

Leasing is a business opportunity - it's not social welfare. I have run four businesses in my life - two successes, and two failures. I probably learned more from the failures - and that has helped me immensely in this endeavor. If you don't make it, it's not your fault and it's not Prime's fault. It's the way things turned out. If its going south on you... get out before it becomes a financial disaster. You must be into your numbers to know if this is happening, as much as to know if you're being a success. A businessman turns failure into success... learn from your mistakes, get back up and do something else.

Above all, do this because its something you want to do. The absolute worst reasons to lease are because you can have more hometime, because you are in a bind and think you can make more money, or something like that. Do it because its the right thing for you.

 

They usually show up over in the "Bad Company" folder.

 

Here's a screenshot of the basic weekly data capture page I use - its set up for a month. Hopefully you can read it... its a bit blurry when you zoom in. Basically the flow is set up to be exactly as I encounter the numbers in my settlement "Statement of Income and Expense." That's what I pay the $21.75 for.

I don't try to enter every number, just those that interest me. For example at the top, I enter the different fuel surcharge categories... but I'm not totaling anything to come up with the "Variable Expense" entry. The places where you see a zero in this shot is a location that does have a calculation entered. Everything that is blank is a field that would be data for one of the calculations. When I've entered the basic data from my settlement I do calculate the "Cash Flow" number... its basically Gross Revenue less Variable Costs plus Fixed Costs. That needs to be the same as my settlement - its a basic sanity check.

In lines 26 through 30 I do capture anything that I paid for using cash or a credit card - that won't appear in my settlement. That does effect the "Total Variable Cost" entry which is those expenses PLUS the Variable Cost entry from my settlement. I enter these numbers at this point, because that does affect the cash flow of the business.

From line 50 on down, I'm calculating business statistics. The most important is the operating ratio - it's your total costs (fixed and variable) divided by your gross revenue. Anything above 1.0 for any length of time, and you need to be considering throwing in the towel. Big companies shoot for 0.9 - in other words, they're keeping 10 cents out of every dollar as net profit before taxes. We want to be as far below 0.8 as possible... and 0.8 is about where you make what you would as a company driver.

Next is a metric that they teach in ACE-II, fuel cost per mile. Take the pump cost for fuel, and deduct all discounts, surcharges, etc., and divide by the miles run for the week. It tells you how you're doing both running the truck and buying fuel. Negative means your making money off of the fuel surcharge. When I started, 10cpm was considered excellent.

Everything else is pretty much self explanitory... just keeping track of my expenses, related to how the week went. Most things are measured in cost per mile in trucking. Just because you spent a lot in one category doesn't mean that you did poorly... it depends on how much trucking you did during the week. I total the categories across the sheet to come up with monthly totals as well. Again, it's a sanity check, and useful in other reports I generate. This is a page set for one month that may or may not have five weeks in it. We get paid on Fridays, so these "weeks" may cross proper months - what's important is WHEN you received the money. That first week in January may also include days from the previous year... again, we do cash accounting. It's WHEN the dead presidents arrived in your hand.

I have a worksheet in the same spread sheet for each month. Each one is set up the same way. My monthly and quarterly sheets are also set up this way so that everything for a year is in the same file. I link the weekly data out to the monthly and quarterly sheets so that I'm only doing data entry once, right here on these worksheets. For folks from tanker or flatbed divisions, obviously you'll have different things your interested in, and folks in reefer division may decide they want to track other stuff. One thing I don't show here are the lines I entered to track tolls... there's a weekly entry in my variable costs for EzPass tolls that I don't add into my Total Variable Costs, and a metric Toll Cost per Mile so I can track it.

All of this is peanuts compared to fuel. It's the 800-pound gorilla in the room.

 

A screen shot of the monthly report. It expands a little better. Basically this is just a recapitulation of the totals in the weekly sheet. I do the same metric... operational ratio, but I can see how the months stack up against each other. Data reduced over longer periods is a lot smoother than the jumps that you see week-to-week, so you can make more sense of your business when you look at it in this kind of format.

I look at how my major expense catagories relate to the total of my Gross Revenue here as a percentage. I keep track of my escrow accounts here as well. The "Days in Month" entry is a little spread sheet sleight-of-hand so that I can calculate some metrics based on cost per day later on. If I entered a number of miles for a week, I ran for a week - 7 days

=IF(loc>0;7;0)

where "loc" is the spread sheet cell containing the number of miles for the week, is greater than zero, then 7 days is the number of days in that week, or else its zero. That way I know if I had a 4 week month or a 5-week month. I can total the number of days for the month, and generate a fixed cost per day number from it.

 

Screen shot of the Quarterly Report. You can see the spread sheet structure at the bottom of the shot.

Its pretty hard to read, unfortunately. The categories are my cost categories taken pretty much from the weekly report expressed as costs per mile and costs as a percentage of gross revenue at the top.

Further down, I'm generating metrics like variable cost per mile, fixed costs per day, gross revenue generated per day, cost to run per day, cost to run with driver's daily salary per day. I also keep a running scoreboard in pen and ink in my dispatch book with each load for the week (Wednesday to Tuesday cutoff for Prime guys.) In that I record for the load and the week, total revenue, revenue per day, and revenue per mile. I can go back to my quarterly averages, and see how I'm doing for any given week. That also means I have an argument ready if I need to talk to management - at my fingertips. My FM knows that I keep track of my business this way, so there's never been a reason to have that discussion.

Estimated net profit for a load can be calculated like this...

Estimated net profit = Revenue - (days on load x fixed cost per day) - (miles run x variable cost per mile)

Having the fixed cost per day and variable cost per mile numbers available as a long-term historical average can give you an idea of where you'll be financially at the other end of the miles. It can also be used as a yard stick on which load to take if your in a situation that presents you with multiple loads to choose from.

At the very bottom, you'll notice that evil word, "tax." Don't forget you have to pay your quarterlies... 15% of net plus income tax. If you want to figure that to the cent, you have to do a tax form 4 times a year. I've been going back to my previous filing, and looking at taxes paid as a percentage of gross revenue for the year. You can then take that percentage and apply it forward to generate an estimate of what you owe for this quarter's payment - but not less than your payment from last year.

The monthly and quarterly reports are generated from data entered on the weekly sheet, and linked back to the monthly and quarterly reports. I do not enter anything on these two spread sheets, outside of the mathematical calculations and links to get there. The only real work is on that weekly sheet. It gets me "into" my settlement so that I really look at it, so that I see the debits and reimbursals, so I get a look at the fuel costs in detail, and I have that all important operating ratio to tell me how my business is doing. There's no guessing. I know where my money is going, and I understand my costs. I can look at a glance at my scoreboard, and know how my week is. If you're going to be a businessman leasing a truck and moving freight you just have to know how your biz is doing. In all of my business experience, the stuff that has worked the best has had my eyeballs right in those numbers - and the numbers are better if you're paying close attention, including that number called your personal bank account balance.