Decide what you want to do. There are several factors into
choosing what industry you want to support and what equipment you
wish to use or will be required to have. Before choosing the industry
you wish to support you first have to ask several questions.
1. Do I have any physical limitations (bad back, afraid of
heights, limited mobility, etc.)?
2. What industries do I want to work with and are they located
where I live? If not, do I live in their shipping lanes?
3. Am I willing to be OTR, regional or local?
These are only 3. There are many more depending on your particular
situation. These questions will require some modifications and
additions for every individual wanting to operate their own trucking
business.
When it comes to selecting the equipment for the industry you
choose it comes down to nothing but good old common sense. Simply
put, if you wish to haul cattle it wouldn’t be wise to put a load of
cattle on a flatbed. You will also need to check with your customers
or potential customers prior to purchasing your equipment. In some
cases customers are known to have minimum requirements for their
carrier’s equipment such as weight, age, mileage, annual DOT
inspection from their preferred provider, etc.
Always do market (customer) research. Your research can be the
difference between a solid business relationship with your customers
and an absolute disaster. One of the first things you will want to
determine is how long has this potential customer been in business?
New businesses frequently rely on loans, investor capitol or personal
money to operate. Thus their financial stability could come into
question if they have any difficulties with their cash flow from slow
or no payment from their customers. I always urge caution when
working with a new business.
Next you will want to know if they have lost all their direct
carriers and have begun to rely on brokers. This is a clear warning
sign. Either the business needs to cut costs and believes using a
broker can help do that or the business has not been able to pay its
carriers or possibly both. Either way it could be a business you
would be better off to steer clear of.
Once you have decided to do business with a customer you will want
to determine the consistency of customer’s shipments. This will give
you an advance notice of the amount of work you can expect from your
new customer and if you will need to continue looking for additional
customers to fill in any gaps between their shipments.
The lanes of your new customers shipments are important to know as
early as possible. You can then determine the rate you will need to
haul the loads for as well as begin the search for a new customer at
the loads destination.
Finally, rates. Most all potential customers will ask you about
your rates before the conversation is allowed to go beyond the
standard meet and greet introductions. So be prepared with your rates
for all lanes prior to meeting any potential customer. Be flexible as
they will almost undoubtedly respond with a counter offer. Above all
during this negotiation remember you are attempting to enter into a
business agreement that will make the potential customer save more
and/or make more money while being profitable yourself. If you are
not able to come to terms it’s not because the customer is unwilling.
It’s because they are being financially responsible. Remember to be
professional, respectful and kind. They may call you back in a couple
of months!
Financing your truck is not as hard as you think. The hard part is
getting an interest rate you are comfortable with. Most used truck
dealerships have financing companies that are easy to work with and
will get you into a truck. However if it’s easy there will be a price
to pay for a long time to come. Their price you’ll pay is some of the
highest interest rates lenders will offer. That translates into
thousands of dollars more you’ll spend for your truck. There are
other options and a way to leverage used truck dealerships to your
advantage.
The best solution to financing your truck is to use a bank you
have been doing business with for many years. Preferably a small home
town bank where you have done business with before and know your loan
officer by name. Instead of simply looking at your loan application
and saying “yes” or “no,” that loan officer will more often
than not take the time to speak with you, review your business plan
and listen to your vision. This is important because they are already
giving you the benefit of the doubt that you know what you are doing
and you know how to succeed. What they want to see and hear from you
is the knowledge of the industry, your business plan and most
important the ability to repay the loan even during adversity. If you
are able to show them a solid business plan and that you are prepared
even when times are tough you are all but certain to be awarded the
funding you need. A deposit is always a good thing to have but it
isn’t always a requirement. Deposits will not only lower the amount
you are borrowing and your payments, it can also lower your interest
rate. Additionally it shows the lender you are willing to put “skin
in the game.” That speaks loudly to the loan officer as it
demonstrates you are willing to not only risk the banks money but
your own hard earned money as well. In other words the loan officer
knows you will dig in your heals to not loose your investment and
thus you’ll be fighting to not loose the banks investment either.
If your personal financial situation won’t allow you to use a home
town or local bank then the lenders offered by dealerships can offer
a respectable alternative to start your trucking business. There are
several keys in doing this the correct way. First plan to buy a short
term lower up front cost truck. Shopping for a truck with all the
chrome, lights, gadgets and niceties will only drive up the price and
your payments. Shop for a truck that you believe has a good 12 to 24
months to operate. After which you can go back to your local home
town bank and put not only your business plan in front of him to talk
about but now you can show him your income, expenses and profit
reports. Nothing speaks louder to a loan officer than a solid
financial track record (and most important) provable success! So
using a finance company from a used truck dealership may not be your
end game, but it can be a way to get off the ground with a truck and
begin a successful truck owning career.
If you want to learn more about a business plan watch for my
upcoming posts in the Business
of Trucking category.
Great! You’re are ready to shop for your first truck. Securing
financing is easier than you think and you can learn more in my post
“Financing Your Truck.” If you have saved the money to purchase a
truck, should you use that money to buy your truck? Recently a reader
shared their intent to use their savings so I will discuss that in
further detail shortly. When shopping for your truck, the most
important thing to know is you should focus your efforts on choosing
the right truck and not any “Rooster Cruiser,” “Chicken
Truck” or “Large Car” that catches your eye. Your
first responsibility with owning a truck is to be successful.
Choosing the right truck the first time will help you do just that.
There is an old saying in business, “use someone else’s money.”
There are times to use someone else’s money and there are times to
use your own money. Make no mistake, I believe in being debt free.
However, to become debt free you should always exercise wise
financial planning. When it comes to choosing the right truck and
buying that truck, more often than not you should finance that truck.
Here is why. If you buy your truck with your savings, frequently you
will not enough remaining in savings for a back up plan when a
disaster strikes. After 33 years in the business I have seen more
than my share of disasters and set backs. So don’t think for a second
that they won’t happen to you. Without doubt they will. If you have
used your savings to buy your truck and need to borrow money later
for repairs, the lender is less likely to lend money when your
business is struggling. Additionally if you do not have good credit
or established credit, the lender is more reluctant to approve a loan
when you have not yet demonstrated your can successfully operate your
business. In other words, obtaining financing for the truck when
everything looks good on paper to a lender is better than trying to
get financing when times are tough for you financially.
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 to replace 2 rear
ends, no core refund since the gears were custom made and 2 weeks
lost work. I was an additional $30,000.00 (+ or -) in the hole and I
was only in my first week of business. Thankfully, when I financed my
truck I had establish a back up plan with my bank. Because my lender
and I made and agreed to the plan, he was thankful I had planned
ahead and gladly implemented our back up plan. After 6 months I was
back on track. I had successfully overcome a major break down,
established excellent business relationships and had gotten ahead of
paying off my debt.
Choosing the right truck has many considerations you must first
evaluate. Most of which you will already have an answer for, some you
think you have an answer for and others you didn’t realize needed
consideration. Personal taste and needs are the majority of your
considerations when choosing the right truck. I’ll cover the ones
that are more focused on succeeding with owning a truck as well as
some industry considerations.
The drive line (engine, transmission and rear ends) are mostly
personal choice. However there are considerations to be made. The
most important is the engine. Since the EPA has begun tightening the
emission standards for truck engines, the life span of truck engines
has been reduced dramatically. There are countless reports of engines
failing and requiring to be rebuilt with 300,000 miles. Truck engines
manufactured before 2003 would often last in excess of 1,000,000
miles before needing to be rebuilt. For that reason I always shop for
a truck manufactured before 2003. If you are considering choosing the
right truck from 2002, be sure to check the model year date of the
truck and the engines manufactured and model year date. It is
possible that a truck built in 2002 has model year 2003 engine even
though the truck was built in 2002.
Next is the transmission and rear ends. While I am not a gear
expert, this is what I know from my own experience with my trucks. If
you have gears that are lower for pulling hills better, you do not
enjoy the best fuel mileage on the relatively flat roads. For that
reason I look for a general purpose gear ratio. I will not purchase
automatic transmissions. They need repairs more often and are more
expensive to fix.
Industry considerations are a must. For example if you are going
to pull dry van freight, you will not want a heavy truck or a truck
with a front axle differential. But if you are going to haul logs out
of the mountains a heavy duty frame and a front differential are
probably required. The list is long for all the different industry
considerations. If you have a specific industry you’d like my opinion
on please leave a comment. I’ll be happy to answer.
What region you plan to operate in should also be considered.
While it may not impact your decision when choosing the right truck,
it will allow you to shop more wisely. For example if you are only
planning to operate from Phoenix, AZ to Los Angeles, CA you will want
a truck with the most fuel efficient all position tires instead of
the general purpose lug tires. If you are planning to operate in the
north, having a good fuel system to prevent fuel gelling or freezing
is a must.
If you are looking for that show truck or “Large Car” with all
the extra chrome, filters and lights, you’ll find it. But normally it
isn’t the best truck to guarantee or maximize your financial success.
The more that hangs on the outside of the truck or is not
aerodynamically designed the lower your fuel mileage. Read my post
“How Does IFTA Work” to learn more details to save money when it
comes to fuel and IFTA. Additionally the fancier the truck the higher
your insurance rate will be.
Lastly, don’t be afraid to buy something that doesn’t look like
much at the time. When I bought the truck I own and drive now, very
few others saw what I did. What they saw was that the body was junk,
windows leaked, tires were all bad, the hood was falling off, the 5th
wheel needed replaced and the seats needed replaced. What I saw was a
1999 International 9900i Eagle truck that just had the engine rebuilt
less than 10,000 miles earlier, an engine warranty with unlimited
mileage for 2 ½ more years, a newly replaced front differential, no
outside filters or extra chrome, reasonably aerodynamic and endless
potential if I was willing to put work into it. I spent less on the
truck than the rebuild cost of 1999 9900ithe engine. Then I paid to
have the body, hood and window leaks repaired and did the remaining
work on my own. I found a truck that was 90% what I was looking for.
It has been the most reliable and financially rewarding truck I have
ever owned. If you’d like to learn more about how I improved and
modified my truck read my posts “Junk Yard truck Parts” and
“After Market Truck Parts.”
“We need to acquire 3 trucks and trailers, we are looking at used and need to know if it would be better to buy or lease. Thanks for you help.”
There are pros and cons to each. Buying vs Leasing has been debated for as long as I can remember. There are many factors when deciding between buying vs leasing including taxes, maintenance, length the equipment is expected to be in the fleet, leasing companies driver requirements and many more. The fast answer is buying used equipment is best. In the long run it gives you more profitability and versatility. In the short term you may (but not always) have a greater out of pocket expense. However, many companies choose leasing over buying to operate new equipment for a lower cost.
Pros when considering Buying vs Leasing:
Buying Used
Leasing
1999 and older exempt from ELD mandate
New (or newer) equipment
Ability to modify truck to improve profitability
Maintenance support from leasing company
When paid for, no more payments
Lease payments tax deductible
Lower insurance costs
Loaner equipment during major repairs
Ability to resale when replacing equipment
Cons when considering Buying vs Leasing:
Buying Used
Leasing
Tax deduction for only 3 years
Higher long term cost
No warranty or maintenance support
Leasing company may require to approve drivers
Hard to locate the equipment to meet your needs
Will be required to meet ELD mandate
No recovery of investment (resale or trade in)
At the end of the
day, the question of Buying vs Leasing has always been an easy
decision for me. I choose to buy. Being in trucking for the long run
means planning long term. The best way to be profitable in trucking
is to plan to succeed. That includes everything from making your
truck as profitable as possible with modifications or after market
truck parts, taxes, fuel and so much more.
As I frequently do,
I have learned another lesson the hard way. All oil By-Pass filters
are NOT equal. About 8 years ago I purchased the FS2500 oil By-Pass
filter from Filtration Solutions. It did and excellent job! All my
oil contaminates remained consistently low. On a couple of occasions
certain contaminants began to climb. Both times my oil analysis
company identified the failing parts correctly and I made the repairs
for minimal cost, on my terms and in my shop. The combination of the
FS2500 and oil sampling saved me thousands of dollars in repairs and
maintenance on 1 truck.
I parked my truck for 1 year while I was deployed to the middle east with the Indiana Army National Guard. When I returned I prepared to put my truck back on the road. I was introduced to the AmsOil BMK30. I was enticed by the spin on filter and the 20,000 miles between filter changes. Believing the AmsOil BMK30 was the way to go, I elected to replace the Filtration Solutions FS2500 with the AmsOil BMK30. It didn’t take long for me to discover I had made a terrible mistake. With the AmsOil BMK30 all my metal contaminants began to increase. While using the AmsOil BMK30 the metal contaminants in my engine the far exceeded any level of contaminants I had experienced with the Filtration Solutions FS2500. I removed the AmsOil BMK30 and put the Filtration Solutions FS2500 back on my truck. The results were immediate. My contaminant levels dropped and returned to the same low levels I had enjoyed from the first time I installed the Filtration Solutions FS2500.
While using the
AmsOil BMK30 I discovered significant differences between the filters
I had not considered before making the change.
Changing the Oil By-Pass filter using the FS2500 is a far cleaner than any spin on filter… especially while on the road.
When sampling your oil every 10,000 miles instead of every 20,000 miles you are far more likely to identify engine issues and repair them before they become an expensive repair or even unaffordable break down on the road.
The FS2500 doesn’t cost a single penny more and provides the very best protection for any diesel engine.
The FS2500 filter element holds a nominal 1 quart. The AmsOil EABP120-EA replacement filter holds an unnecessary and expensive 1 gallon of oil.
FS2500 AmsOil
Filter Element: $32.95 EABP120-EA: $45.80
Shell Rotella T6: $5.50 (1 qt) Shell Rotella T6: $21.99 (1 gal)
Total Cost: $38.45 or 004cpm Total Cost: $67.79 or 004cpm
I will never make the mistake again of trying a different oil By-Pass filter. I am a Filtration Solutions customer for life. I would encourage all truck owners to give very serious consideration to purchasing the Filtration Solutions FS2500. For maximum results and profitability always perform regular oil testing to reduce repairs and maintenance costs while extending the life of your equipment.
Use honest and ethical practices when you write a carrier rate agreement or carrier contract and it will result in more long term satisfied customers. This carrier rate agreement or carrier contract will be be your template for creating a formal proposal for every customer you negotiate your services with. Many times the customer will provide you with a counter proposal and you will need to make adjustments. This is to be expected as their number one concern is to be competitive in the market and to be profitable. A good way to view the negotiating process is that it is a desire by you and the customer to enter into a long term business relationship that provides dependable residual income both of you are able to profit from. While solid, consistent, reasonable, profits may be hard to accept they are far better than a few high paying loads that only come once in a while. Successful trucking is all about consistency.
Base
rate in most cases will not be the same from one customer to
another. Therefor we will leave this blank for your contract
template. Once you begin a formal proposal you will then establish
and enter your base rate.
Detention
pay is always a delicate topic to discuss with any potential
customer. It requires the utmost in tact while at the same time
being a little cunning. Before you talk to any customer about
detention pay you need to predetermine an expected rate of pay.
Then use the following formula….
gross rate (miles x base rate) = G miles = M
national average of fuel = A hours = H
cost = C fuel = F
mpg = P detention = D
M ÷ 60 = H
M ÷ P = F
F x A = C
(G ÷ H) – C = D
In most cases the customer will undoubtedly begin pointing out how “it’s not costing you anything to sit there.” We both know that’s not true and if the customer is completely honest they know it’s not true either. To negotiate with your customer you must be prepared to answer with accurate facts and figures. Using the formula above be prepared to negotiate with the following figures…
Rate per hour this load will generate while in transit.
Rate per hour less fuel cost.
Now it gets a bit more complicated and the real negotiations begin. The reality is the truck must generate revenue for you to pay the bills and to be profitable. On top of the customers desire to minimize their total transportation cost we have the DOT and FMCSA restricting our hours of service. The customer will not like hearing it but according to the FMCSA the truck is on the clock while waiting to load or unload, while loading or unloading and while in transit (14 hour rule). Therefor the longer it takes to load or unload reduces our overall billable rate if we have not agreed to detention pay. Familiarize yourself with the following facts and be prepared to discuss them honestly and tactfully while remembering the first rule of trucking. “Getting your customers product to market so they can succeed and in turn make you successful.”
Limited
number of hours in a day you are allowed from the time you begin
“On duty not driving” or “On duty driving.”
More
time than scheduled on any one load reduces your overall revenue.
No
matter if moving or sitting you must still cover your operating
costs such as insurance, IRP, highway use tax, facility expenses,
etc.
3. Labor (unloading, tarp, etc.) is generally far easier to negotiate with a customer than detention pay. For example in the perishable foods business most customers wish to keep unloading costs below a set amount per case or weight (most commonly referred to as “hundred weight”). Customers know and accept that there are charges for labor no matter if it as a grocery warehouse or protecting their product with the tarping they have required.
4. Fuel surcharge tables have become second nature for both carriers and their customers. Customers realize that they will not get their product to market with a reliable carrier if they fail to provide a fair rate that includes a fuel surcharge.
Your
ability to find customers that need trucks will put you on the right
path to success. Establishing your own direct customers is the best
way to guarantee a dependable cash flow. When you provide a direct
customer with dedicated reliable trucking services they will be more
apt to pay you on time and keep you loaded with their product. Both
of which help make an excellent business relationship for years to
come.
The
most effective way I found my customers is by keeping my eyes and
ears open when making pickups and deliveries. Look at the product on
the docks or at the locations and gather all the information you can.
Look for company names and address on boxes, product or anywhere
else. Ask questions of the shipper or receiver like…
Do
you get that product every week?
Does
the same truck bring it or pick it up each week?
Could
you use a reliable dedicated truck?
Who
can I talk to?
Ask
the drivers making pickups and deliveries questions to like…
Do
you haul this load every week?
Did
you get it from a broker?
Do
they have other loads every week?
You
will be surprised at how much information you can gain just by
politely talking to people at the shippers and receivers. It is
important to point out to be respectful, polite and above all
cautious. If they don’t want to discuss it with you thank them for
their time and if you think an apology is in order to keep the peace
then by all means apologize! Don’t be offended if a shipper or
receiver doesn’t want to discuss their product shipments because they
are most likely an employee that is not responsible for locating
trucks. That is why you politely ask “who can I talk to?” If a
driver doesn’t want to discuss his load it’s most likely because he
owns his truck, he’s feeling threatened and wants to protect his
relationship with his customer. Very understandable of a fellow truck
owner. A sincere apology, congratulating them for acquiring such a
valued customer and asking them for advice from their success would
be the best response. They still may not talk to you but you have
taken the high road and defused the situation.
Potential
customers that need trucks are located everywhere. I have been known
to stop as soon as I notice a business with trucks that are pulling
the same trailer that I am pulling or that I am considering pulling
(dry van, refer, step deck, dry bulk, etc.). There is nothing wrong
with stopping, introducing yourself and meeting a potential new
customer face to face. Business parks and business districts are a
treasure-trove of potential new customers. Search them out and
introduce yourself to as many businesses who will allow you the
opportunity. In fact I have enjoyed more successful negotiations when
I meet the customer in person even when walking in unannounced. They
are able to read my body language, look into my eyes and see my
confidence and commitment to their success. That is more valuable
than anything you could put in a written contract or express over the
phone. If at all possible meet with your potential and existing
customers as often as possible. The rewards of a successful business
relationship are increased immeasurably!
