How to be Profitable Owning a Truck
W. Joel Baker
David sent me a message that is all to common for new truck owners. His concern is how to be profitable owning a truck.
"How did you manage to make a profit? It seems as though I find loads but they are so underpaid that it feels I'm only making money to cover the fuel. I would appreciate any input you have!"
In order to answer David's concern of how to be profitable owning a truck, “How did you manage to make a profit,” I am going to make a few assumptions.
1. There is a truck payment
2. There are no or few direct customers
3. “Agents” or “Professionals” are being used for some or all compliance
For me, initially profit did not come easy. In fact, in the very beginning it didn't come at all. In my first week of owning my first truck I suffered a major set back. My truck blew out the front rear end. To make matters worse, the mechanic discovered that the previous owner had custom machined gears made and put them in both rear ends. So I had a decision to make. Give up or fight back. I have a “Never Fail” mentality so giving up wasn't and isn't part of my vocabulary. So I took the harder path of fighting my way back from financial disaster. My key decisions that helped me overcome my setback and succeed were as follows.
1. Do the hardest and most demanding loads because they pay the best
2. Run the maximum amount of miles I possibly could
3. Improve my equipment to lower my operating costs
4. Stay as tight fisted with my money as possible
While all those sound easy they can be very difficult to implement and stay committed to. I'll take them one at a time.
Do the hardest and most demanding loads because they pay the best. For me this meant going back to LTL. To me LTL is some of the most aggravating freight there is especially with a refer. Fighting traffic to get all the pickups and deliveries completed on time, the unsavory atmosphere with most refrigerated freight shippers and receivers, the never ending “Wait” for the product and baby sitting the refer just to name a few. I point this out because I knew how much I hated it but it is what I knew had to be done to meet my self inflicted demand of “Never Fail.” You know what, it worked too! To learn how to locate direct customers and find out more about customers in general read my posts “Trucking Customers – Vital for truck owners,” “Meeting Potential New Customers” and “Find Customers that Need Trucks.”
Run the maximum amount of miles I possibly could. Along with recognizing the need to return to LTL freight I knew I had to maximizes my cash flow and profits. That meant keeping the left door closed and running as many miles as I possibly could. I knew what lane that meant I had to run. I gave up my modest Illinois to Florida and began LTL pickups in Indiana, Illinois and Iowa and delivering to cities throughout southern California. Then I chased produce up and down the coast with pickups and delivered it to Chicago. Yep, it worked as well!
Improve my equipment to lower my operating costs. This one takes the longest. My finances dictated what I could do and when I could do it. Bottom line is “Preventative” maintenance is vital. When you know something is going to need repairing, fix it on your terms not the truck or trailers terms! In doing so it won't cost you as much money, down time or lost revenue. So even if you need to borrow or use plastic, always do preventative maintenance! When you can, make modifications to your equipment to lower your operating costs. If you look closely at the pictures there are a lot more changes than just the paint job to my 1999 International. I have a great post detailing many of the successful modifications and another post on how to save money on parts.
Stay as tight fisted with my money as possible. I have been accused of being a “tight wad” more times than I can count. I proudly ware it as a badge of honor! That may seem to contradict what I said about preventative maintenance when in actuality it goes hand in hand. Paying for something that cost a lot on your own terms is being frugal to the max. You are ensuring that even though it does cost a lot today, it is a small percent of the cost if you waited for it to be a disaster. Even though I wasn't aware of my rear end issue, if I had, I could have gotten it fixed on my terms and not caused my financial crisis. So I learned two lessons from my first weeks owning a truck. First and most important, always have a financial back up plan and do better preventative maintenance.
As to my 3 assumptions to answer David's question.
There is a truck payment. If you discover that your truck payment is simply unrealistic you do have an option. Purchase a truck that will be within your budget and sell your current truck. While that may sound harsh, it is the best and most financially sound option available to you. You can learn more about my truck choices and what I recommend in my posts “Choosing the Right Truck” and “Avoid the FMCSA ELD Mandate.”
There are no or few direct customers. Read the section above “Do the hardest and most demanding loads because they pay the best.”
“Agents” or “Professionals” are being used for some or all compliance. In most all cases I have very little use for “Agents” or “Professionals” for most day to day compliance issues and in many other cases. I do my own IRP, IFTA, UCR, Canadian eManifest (yes, I go to Canada), MCS-150, Weight and Distance, Highway Use Tax, New York Highway Use Tax, Oregon Mileage Tax and everything I have failed to remember while typing. The reasons are simple. Once you do these for yourself you will become efficient (fast) at them, have a better understanding of your business and save in most cases thousands of dollars. All are a plus for you as a truck owner. If you'd like to learn more on how easy and low cost it is to get your own authority read my post “How to get an FMCSA Operating Authority.”
[caption id="attachment_139" align="alignleft" width="193"] TruckBytes[/caption]
Last, choose an easy to use software to help you manage your money. I designed TruckBytes and continue to use it today with my own trucking company.
I hope my experiences and lessons have helped you know How to be Profitable Owning a Truck. If you have questions or would like for me to expand on anything I discussed in this post please let me know! I'm happy to accommodate.