Go Big or Go Home? Naw….


Here’s the conundrum that I and a friend of mine who also has a trucking company face.  Either we stay small, a one or two truck operation, or we go all out and just buy as many trucks as we can, as fast as we can, and turn our little one-horse outfits into mini-mega carriers.

At least that seems to be one of the most frequent topics of conversation between us lately.

My friend has been buying trucks at a brisk pace.  And she’s doing pretty well.  She seems to be able to keep her trucks moving most of the time and seems pretty motivated to continue expanding her business.  But she’s got growing pains that go along with the increased activity those trucks are generating, and one of the biggest pains is finding good employees.

Not to dis employees, having been one for the majority of my adult life myself, but the truth is that it is very, very difficult to find people who really want to do a good job at work.  It’s even harder to find folks with squeaky clean driving records, and harder still to find those qualities combined with a squeaky clean background.  Throw in trying to find all of the above that doesn’t come with drinking or drugging issues, and maybe, just maybe, you will have a good candidate as an employee.

And even with normally good employees, there’s no guarantee that any particular employee can go a little berserk without warning and can do massive damage to a carrier’s safety score in the process.  It can happen to the best of us.  One accident, one speeding ticket, one missed mechanical issue on a pre-trip that results in that driver being placed out of service, any one of these can wreak havoc with a carrier’s SAFER scores.

Now, my friend has already gone through about five drivers this year, give or take one or two.  Some of them just didn’t want to work and fizzled out on her after the first paycheck was in their hand.  One hid the fact that he had substance abuse issues.  One trashed her safety score by getting put out of service a few times (yes, a few) and not reporting tickets he’d received to the company.  Another driver trashed equipment and didn’t bother with those pesky maintenance issues at all….

The drivers she has now, thankfully, are good drivers she can rely on.  But she didn’t get a crop of good employees overnight, she went through plenty of pain getting to where she is now.

Which brings me back to my original question… to grow or not to grow.

I can see the advantages of expanding.  Obviously there would be increased revenue…    …  …  Ok, well, that’s the single advantage of expanding.

There are plenty of drawbacks.  Higher equipment costs, higher repair costs, higher taxes, tags for all of those trucks, insurance, well, just higher everything costs.  And with expansion comes dealing with employee payroll, taxes, and well, just dealing with employees.  My friend has the temperament to deal with her employees.  Me, not so much.

I’ve had employees.  I’ve had well paid, nicely treated employees who wanted nothing more than to rake in a nice paycheck for doing as little work as humanly possible.  And I’ve had employees who had sticky fingers.  I’ve had one really good employee, but he was a little nutty too and it took a lot of time and effort to keep him roped in and focused on the job.  So what’s a small trucking business owner to do?

I suppose in my case, the answer is to stay small.  I won’t ever get rich running one little truck, but then again, that’s not my goal.  I just want to have a decent living doing something I enjoy, and for now that seems to be exactly what I’m doing.

For the time being, at least, I’m just going to keep my focus on doing what I can myself.  Sure, I have to turn down loads from time to time since I’m incapable of being in two places at one time, but then again, maybe that is a good thing.  It sure beats not having loads booked at all!

 

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5 thoughts on “Go Big or Go Home? Naw….

  1. I say keep your operation small, at least in this line of work. I will hopefully begin working again with my former livery business as the chauffeur recruiter/trainer and I will vouch that it is a challenge to hire good people. In our business, you can literally go through almost 100 people before you find one solid one. So I too will have my job cut out for me.
    As I said before, farm out the work you can’t cover as your chances of finding a good carrier are much greater because they have “skin” in the game.
    Ciao,
    Joe

  2. It’s tough dealing with employees, especially in the trucking realm. But whether or not to grow – just remember that the headaches associated with it grow exponentially – not in a linear fashion. Every time you add a small number of employees and equipment, you add a much larger number of headaches.

    And being in a commodity service, you’re never going to make much in the way of profits. The only reason you’re making money now is because you’re driving and paying yourself. Take away a good wage from the equation and how much money would be left over as profit for the company? Pretty much zero. Now add twenty trucks – and how much profit is left over to the company after paying a solid wage? Zero. Now go to Google Finance or whatever your favorite stock market page is and look at publicly traded companies like US Xpress, Werner, and JB Hunt with thousands of trucks. Over periods of 5-10 years, if you average everything out, they’re barely breaking even and their average profit margin is about 3%.

    And it doesn’t matter what area of trucking you’re in – hotshots, refrigerated, dry van, flatbed, local, regional, dedicated, or OTR – doesn’t matter – it’s a commodity service – there are hardly ever any true “profits to the company” in the end over long periods of time.

    Where people get rich starting large commodity-based companies is through equity. They’re cash poor, but equity rich because they build up large amounts of trucks, real estate, tools, long-term contracts, and other equitable items. So the owners always have tons of equity to finance anything they like, but they never really make anything in the way of profits long-term. So you can live like you’re rich with large amounts of equity behind you, but it’s all debt-based. You’ll never have large amounts of cash.

    To me, that’s a terrifying way to live. Farmers have done it for generations. Trucking companies do it. Airlines do it. In fact, American Airlines just filed for bankruptcy. Delta and United already went through bankruptcy in recent years.

    That’s the way it is with any commodity – price is all that matters, so there’s almost never much in the way of profits over the long run. You’ll have a good month here and there, and a good year here and there. You take that cash, buy more equitable items or pay off debts, and use your improved financial situation to finance your way through the next down cycle of losses.

    Now coming from someone with 20 years in the trucking industry – my advice to you would be to research the transportation industry while you’re doing what you’re doing and find out where you can make better profits than you can owning trucks and moving freight. Freight brokering, logistics services, warehousing (maybe – also a commodity though), reselling insurance, handling repairs and maintenance, bookkeeping for small companies, consulting, recruiting drivers, etc.

    There’s tons and tons of money to be made in trucking, but ironically it’s not in owning trucks and hauling freight. It’s in selling products and services to those who own trucks and haul freight. But the fact that you’re doing it now is giving you seriously priceless experience. You’ll understand the industry really well and be able to spot opportunities you can get into – much more profitable ones than you’re in now.

    That’s what I’d be doing in your situation. Use this time to enjoy yourself and educate yourself about the industry. Talk to people – make connections – and look for opportunities. They’re out there if you understand the industry well enough.

    Best of luck!

  3. Very interesting food for thought Brett!

    I was just thinking this isn’t so different from ranching, where all the money is tied up in cattle and feed and land. My assets just have wheels but still need fed…

    And those exponentially growing headaches that come with expansion are well worth avoiding in my perspective. I’m happy right now doing just what you describe, getting to know who and what is shaking in my particular area and finding a specific niche to squeeze into.

    I’m starting to get the bigger picture but know there’s still way more out there I haven’t figured out yet, so that’s pretty much what I’ve been working on learning. I’ve still got a long way to go but I’ll get there one way or another!

    I can’t believe it’s already been a year since I started this thing, it’s crazy how fast the time has flown…

  4. Yeah, you’re definitely getting priceless experience in so many ways. If you want to have a career somewhere in the transportation industry, you’re absolutely doing the right thing getting this experience as an owner/op. Driving will teach you a bit about trucking, but owning a company and dealing with brokers and legalities and all that – that’s where you’ll really see just how many opportunities there are to make great money out there.

    I always loved the business model of finding an existing system and inserting myself in the middle in such a way that I provide a valuable service to people. For instance – home improvement. I was a contractor for a couple of years. I found tons and tons of problems within the contracting business that I knew I could solve, and make a profit doing so. So I built a test website where people could fill out a quick form if they wanted to hire a contractor to do work, and I would forward that request to all the contractors that signed up on my site for a small fee. It saved contractors a ton of money on advertising, and it helped homeowners get a whole lot more information about the contractors than they could get from a one inch newspaper ad, and with one quick form they could get multiple estimates – for free. It worked instantly! A perfect business model. The system of finding and hiring contractors already existed, but it was terrible and archaic. I brought it into the 21st century and provided a valuable service for contractors and homeowners alike – a win-win for everyone. Now I’m developing my “real” version of the site with tons and tons of features and opportunities to make money.

    You should have no problem doing the same with trucking. If you’re looking for opportunities to save people time and money, and to make a complicated system easier and more efficient, you’ll find dozens of opportunities for sure. Then it’s just a matter of finding which opportunity you feel suits you best.

    And you’re 100% right about ranching – it’s another commodity business and there’s really no profit in it. I raise a couple of beef steers each year and I laugh to myself when my neighbors doing the same are beating their heads against the wall trying to find a way to make it profitable. My next door neighbor raised two steers and fed them as cheaply as possible. It took him 18 months to get them big enough to at least sorta cover their ribs – LoL – and he was bragging how he made $600. I said “You made $600 in 18 months? Break it down – you made $1 a day! That won’t even pay for the cup of coffee you had to drink in the morning to get the energy to go out and feed em!”

    Although owning trucks and hauling freight is a commodity service with very little profit in it, there are lots of services you could provide within the trucking industry that would not be a commodity – they would be a valuable service to people and quite profitable to you. The trick is figuring out your niche, and becoming great at it. That’s when the money really starts rolling in!

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