please explain Owner Operator why lease to a company?

Very simply if you don't have direct freight and have to use load boards and brokers, you make less money than pulling under a good percentage lease with a carrier that has direct freight. Using myself as an example, when I had my own authority, I brokered so much stuff from mercer admiral merchant and landstar, for just a little bit more than what the guys leased to them got. That lil bit barely covered the extra expenses of running under my own mc number.

 

And being leased you have the benefits of pre loaded trailers at no extra expense. You'll have a shop that works on your truck at cost. Free parking in a secured gated area which allows me to drive to my job. . Cheaper insurance. I had access to air tools when I chose to do some work myself. Free truck wash. No need to buy a trailer. Got home almost every day and every weekend. Lots of other drivers to run with. Higher percentage freight then brokered junk. Lots of benefits doing the lease deal. I'm not talking about leasing on with one of those milage based crooks you read about in the trucking advertising books.

 

Also normally the carrier pays cargo insurance which is a very large expense.
The bigger a carrier is, the more fuel discount and tire discounts they can get you.
They take care of lot of the red tape (government paperwork) for you at almost no cost including drug test.
Usually only more profitable to have own authority is if you have lot of your own customers and or you have several trucks.

 

I'm the one that made $2.50 per ODOMETER mile. That's real miles, not fantasy miles on an IFTA or carrier report. I had my authority with multiple trucks and an o/o leased to me before the crash and did very well. I lost my main outbound FL customer due to them being bought out. I have very little responsibility compliance wise now, have 1,000 sales people working for me finding customers and freight, and a lot less headaches. Having the salespeople is really the key. I can't drive and call on new customers at the same time. Plus with the niche I've gone into, a major carrier's resources are required to pull the loads. Most guys that end up getting authority bounce from broker to broker and the only ones making money are the brokers. It's much easier to get authority versus getting direct freight customers. The majority of these large trucking companies that you see today were started and prospered during the ICC and regulation days. It was much more difficult, near impossible without a lot of $$$, to get your authority, so customers were far easier to get.

 

It really comes down to the level of risk that you are willing to take. And the amount of work that you want to do. Leasing to a good company that dispatches is like being a company driver. Biggest risk is not getting the miles if you are on mileage pay or if you are on percentage that rate isn't high enough to let you make money. One of the bigger O/O only carriers that pays percentage is seeing dry van driver getting less than $1.50/mile gross.

The advantages of running under you own numbers vs. for a carrier that is percentage is that if you work hard and develop a relationship with better companies you can take advantage of freight they have going into bad markets for them (should pay better) and grab something from someone else that is strong in that market. If you are leased to a carrier then that has to be brokered to your carrier then your percentage comes out. I was extremely successful running this model and grew it into a decent company with drivers making more gross than most percentage company.

Now the advantage in leasing to a company vs your own numbers is reduced expenses. In evaluating this I recommend creating an adjusted gross that will equal out the advantages (if you are honest with yourself) of leasing vs running your own numbers or comparing different leases.

Now it is no secret that I am a strong believer in more of the hybrid model. About two years ago I wrote about how an independent or small carrier can take advantage of all the changes that are happening in the industry around what it cost for a larger carrier to operate and now the pitfalls of shippers picking their own carriers.

The other item that I talked about was how capacity will be tighter than we have seen in the past.

But no one way is best for anyone. It is a matter of taking an honest look at what you are good at. Someone that can't figure out lanes shouldn't lease to LS and needs to look at a dispatch model. If you have a low tolerance for risk you shouldn't lease to a small carrier or get your own numbers.

If you can't think past miles, miles, miles you shouldn't be an O/O. When you buy a truck you become a business owner. Driving the truck is a task. And not everyone should be business owners. Just because you can make a sandwich doesn't mean you should open a Subway.

 

40 is a great example of what I was saying about miles. I believe he said he made that money on less that 60,000 miles. And he can correct me if I am wrong but I would suspect that if he ran twice the miles he probably wouldn't have made that number and likely netted close to the same money.

He also makes a good point about changes. He and I disagree a little on this (I think) but I believe we have seen as big a change from 2006 to today as we saw from Regulation to 2006. But the differences is now we have seen a lot of little subtle changes.

A great example of a big change. In 2006 the big three automakers had very little need for ad hoc freight and what they did use they had contracts for. If anyone delivered transmissions to Chrysler back in the day they will remember the huge warehouse across the street from them. Football fields long and over 15' tall with months worth of inventory. If Chrysler got a bad batch of transmissions or wanted ramp up another shift it was less than an hour between making the call and the transmissions being delivered.

Now, the trailer is being delivered today that will be backed into the door tomorrow and the transmission will be pulled off the trailer and installed.

Then, if they did need to get something from the supplier they have carriers under contract. Now, they have contracts with approved carriers but the contracts are managed by Expediters, Ryder and XPO/NLM. The need for ad hoc shipping has increased dramatically.

40 talks about specializing. I agree 100%. Understanding the segment that you operate in and being the best is a must these days.

 

Ok...Truth Up....

As L/O's....Not exact figures but ballpark....

Gross numbers annually.....

 

I have a whole thread on mine. $2.50 on 59,844 odometer miles. Those are exact number to the truck for 2013. 2012 was 2.10 on roughly 70,000 miles and 2011 was 2.12 on 80,000 miles. All odometer miles and all after Landstar's "cut"

 

Who were you with? Or who are you with? Thanks