saying NO to cheap freight

JB Hunt dont ask drivers what it cost them to make a living, When you fill out a job app theres nothing on there that ask how much it cost you to live each week and we will pay you 35% more that that. So why is it O/O always figuring out their operating cost and say well I'll charge 35% more. This is where all the cheap haulers come from figuring well my operating cost is $1.20 a mile so I can do it for $1.62 a mile and still be profitable. Well most drivers don't know their real world operating cost. And this is understandable to a point because of all the variables in this business. You have factor in new equipment replacement cost every 3-5 years even if you can make you equipment last 8 years or more that's just more profit on you investment. And just because BigJohn, G/Man and Bill can get 425K miles out of their tires don't mean you can too unless Goodyear or Firestone gives you a written grantee or your money back. Another mistake O/O make is when paying them self the pay them self as a driver well what about dispatcher, load coordinator and all the other jobs you take on in operating the company and if you are factoring this in that 35% ROE then you have no ROE. If you are taking on several jobs you pay yourself for them jobs and whats left is you profits but if you don't figure in all those cost then you are working for free and you can come to work for me heck I would love to have someone doing all my leg work for free and I can just drive. The way I look at it now if BigJohn operating cost is $1.20 a mile and my operating cost is $1.40 a mile that means BigJohn is a bit smarter and if we both set rates at $2.25+ a mile his profits will pay off from him being a wiser business owner. I wouldn't say that since BigJohn was smarter when buying equipment and smarter operating his business that he shouldn't make more profits than me. Thats what has happen to this industry as drivers figure out ways to cut operating cost to increase profits the settle for lower rates. I don't haul freight under $2.00 a mile and I am operating in the red because I cant afford to pay myself for all the hours I put in searching for loads, hours put in researching, doing all the paperwork hours sitting while work is being done on the truck, not to include my wife don't get paid for her work keeping all the finances up writing all the checks and balancing the accounts. So if you just paying yourself to drive there is a lot of work you are doing for free

 

When calculating break even costs I would imagine that most owner operators forget to pay themselves. They may also not figure taxes. When I hear some talk about what it costs to operate their truck, many will only consider the cost of fuel. With fuel at $4/gallon it is probably going to be your biggest expense, but by no means is the only cost of operating your equipment. I find that new people get very frustrated when they try to look at operating costs. It seems that most of them want a canned anser with everyone having different operating costs. For instance, if one owner gets 6 mpg and another averages 5 mpg, then one will have a higher cost factor for fuel than the other. If one buys a new truck and another spends $20,000 then the operating costs for equipment will be different. The same with maintenance. Some maintenance issues will be the same, such as pm's. But, on average older trucks may need more maintenance than a new truck. Nothing is carved in stone. No matter how well you plan, something will always happen that will change your plans and costs. Understanding your operating costs is a must.

 

I don't understand why anyone would run a truck for fuel money. Some see it as doing better than deadheading 300 miles to a HIGH $ load for free and eating the $ of fuel or sitting for 5 days hoping things pickup in that area $ wise.

You guys spout a lot of theory and how it should be done , but in reality a lot of O/O's as well as companies depend on CASH FLOW to keep theit heads above water.

The least amount you can operate for and hope to be in business is 26.5% over your COSTS regardless of what business your in.

 

You need cash flow to stay in business, but unless you have some profit in that cash flow, you won't be in business very long.

As to your percentage of profit in order to stay in business, it depends on your expenses. I don't think that you can throw an arbitrary percentage that will determine whether someone can survive in any business. Theoretically, if you cover all of your operating costs which should include fuel, payments, driver, maintenance, replacement costs, etc., you could survive without any additional profit, at least until something happens which would change your operating costs. A business could survive as long as you cover your labor costs and you pay yourself. But, why bother? If I can't make more owning the business than I can as a company driver then I don't see the need to own the company and have all the headaches and expenses.

 

As to your percentage of profit in order to stay in business, it depends on your expenses The 26.5% over your COSTS ( exspenses ) I posted sort of covered that. Too bad you do not actually UNDERSTAND a lot of whats posted on here.

 

I understand exactly what has been posted but I am not a mind reader. I don't know where you got your percentage, but that is more of your opinion or someone else rather than reality. The percentage of profit will not necessarily determine whether someone will be successful or not. Perhaps I didn't make myself clear with my last post or perhaps it is YOU who don't seem to understand. Some people don't include everything that pertains to running their truck when it comes to expenses, such as replacement costs, maintenance costs, driver pay and taxes. Major carriers will have a net profit of around 3% according to some with whom I have spoken. Perhaps you care to explain how you came up with 26.5%?

 

Red Foreman, that's a pretty good overview. From a rookie, no less.

It is a constant process of assessing your daily decisions with the amount of risk involved. New entrants,think too much like lease O/O's and are stuck in a mindset that shoots for a "consistent rate per mile".

 

You hit the nail write on the head Gman. The profit margin in trucking is very thin and with rates being down about 13% since the 07 its even tougher the next few years trucking is going to be a very tough buisness with CSA, new drug testing procedures, hours of service changes, high fuel prices. If you dont have the cash flow and buisness skills to weather the storm buisness you will go out of buisness by choice or by force.

 

supply and demand....
a sht load of trucks with hungry truckers behind the wheel = people who need money.
this isnt going to change....its only going to get worse. A lot more people are getting trucks then people going out of business and freight volumes are not growing.

 

The percentage of profit will not necessarily determine whether someone will be successful or not You have no clue about business do you with comments like that.

Thats ok G/MAN no use trying to explain anything to you , good thing you have the inexperienced hanging on your every word.