Bankrolling a Hotshot Trucking Company…


I get a lot of questions on hotshot trucking start-up costs.   Since I’m sitting home today idle, it seems like a good time to go over that part of getting into the business.

Now, just to be really specific, this info assumes that you have your equipment in perfect condition, are ready to roll and have customers lined up, and money in the bank.  It also assumes that you are currently able to cover all of your normal living expenses for at least the first 45 days after starting your hotshot business.

If you haven’t gotten that far, this won’t help you immediately, but it may be good to know once you get to that point.

The way my hotshot company works (and as far as I know most trucking businesses work) is that I pay all up front expenses to move each load.  I then send in my invoice, and have to wait for payment by my customers.  The average time that I wait to be paid is between 10 days to 30 days after I turn in the load invoice and paperwork.  (That 10-30 days is only because I have made arrangements with them ahead of time (and given incentives) for them to pay me much faster than most companies normally pay.)

If you are just getting started, keep in mind that the average wait for that settlement check is 30 to 45 days, and you have to keep enough operating cash on hand to cover any and all  jobs you may book until the money starts coming in.   Figure here that you can theoretically run every day for 45 days if you have enough work, and you have to be able to bankroll those 45 days of running.

If you do run 45 days, you can make about 22,000 miles (at around 500 per day), so you can see how your expenses can start piling up fast.  Not that this is the norm for a beginning hotshot business, but you sure don’t want to have to turn down work because you ran out of operating cash.

On the other hand, you can sit for long periods of time in this business without any work whatsoever, and whatever money you have accumulated goes fast when you’re not moving.  It’s smart to start out with as much money as you can save up, and then sock back as much as you can when you have a lot of work to get you through the slow times that will come.

The general consensus (or conventional wisdom) surrounding start-up money that will cover your operating expenses is that a person should have no less than $10,000.00 set aside.  I would recommend at least that, and anything extra is icing on the cake.  With fuel knocking again at $4 per gallon, more is definitely better, and if it keeps going up in price, then I would not hesitate to raise that operating start-up cash to $15,000.00.

In my experience, people most often underestimate their initial operating expenses by around 50%.  The fact is, until you actually pay those expenses up front, it’s hard to imagine what they would be.  I’ll try to lay out for you what it actually costs to run a hotshot truck…

If you think about it, the average hotshot truck probably gets somewhere between 12-15 mpg unloaded.  With a trailer and load of any size, you can pretty much figure on that dropping down to between 5-9 mpg.

My stock diesel tank on my 5500 holds 52 gallons.  At $4 per gallon it takes right at $208.00 to fill it up.  Do a little math, and it will become apparent that it doesn’t take long to burn through $1K in fuel.  Depending on your trailer, the load, the profile of that load, you can burn a lot of diesel a lot faster than you think you can.

At worst, that $1K will take you 1250 miles at 5 mpg.  At best, you may squeeze 3800 miles out of it.  It depends on your truck, whether or not you pull a trailer, what type of loads you get, what kind of terrain you’re running on, and last but probably most importantly, how you drive.

Having a lead-foot in this business costs you money and cuts into your profits.  It’s better to run steady but slower at 60-65 mph and give yourself enough time to make your delivery than to run 75 mph on the interstate just because you can.  That extra 15 mph may gain you a few minutes per hour you drive, but it may cost you 2-4 mpg in mileage up front, and more wear and tear on your truck that you’ll pay for later.

Most trucks have a ‘sweet spot’ where they run the best but when you exceed that spot, they turn into big fuel guzzlers.  That sweet spot on my Dodge is 2100 rpms or between 60-63 mph.  If I run faster, I really start sucking down the fuel.  Of course if I run slower, I get even better mpg’s out of the truck too, so when I’m not in a big hurry I’m not ashamed to run 55 to bump up my mileage, and lots of the time on my way home I do just that which increases my profit margin.  Just something to keep in mind…

So getting started, just assume the worst case scenario for whatever equipment setup you run.  I mostly run truck-only loads these days, and calculate my projected cost for any given trip based on 12 mpg, which is the worst case mpg for my truck in my current circumstance.  As long as you use worst-case mileage for your calculations, you can fairly safely assure yourself you won’t run out of operating cash on a particular job.

Back when I hauled truck beds on a 40′ trailer, I used 5 mpg for my calculations.  So obviously equipment and the average type off load you haul has to dictate the amount of fuel expense you need to plan for.   If you haven’t hauled anything yet and are trying to figure a planning point, start at 5 mpg just to play it safe if you will be towing a trailer.  If you’re running truck-only, then use your lowest known mileage less a couple of miles so you always figure in a buffer zone.

This category is iffy… If you have a truck payment, you need to figure that in.  You also need to get a commercial insurance quote and figure that amount in as well.  Just for grins, we’ll use an average truck payment of $550 per month and another $550 for the commercial coverage.  45 days worth of truck & insurance payments will cost you $1650.

The next expense to think about is doing regular oil changes.  You have to do these on schedule every time and keep records of all service done to your truck per FMCSA rules if you are under your own authority.  If you run under someone else’s authority, they’ll probably tell you when you need to get in and get your oil change and service done since they have to keep records on it.

On my Dodge, those oil changes run me about $130-150 for the oil and filter, and fluids.  It’s a little higher when the DEF fluid needs topped off, and I always top off all other fluids at the same time.   When you run a lot, you do a lot of oil changes.  We do ours every 7,000 miles and use synthetic oil.  So if you use my maintenance schedule, in a year running 100,000 miles, you should plan for 14 oil changes per year, which obviously is an oil change every 26 days.  You won’t always run this much, but you need to be prepared in the event that you do get busy and need to keep up that maintenance.

Other operating expenses are lodging and food.  To keep food costs down, and because I’m not big on eating out, I usually take food with me when I work.  I usually get easy to fix stuff at my local grocery store and just keep it handy so I don’t get caught out working without at least something halfway edible.  I mostly go for snack foods and things I can either microwave or mix up with hot water from a coffee maker, since most motels have either one or both of those items in the rooms.

Once in a great while I might run through McDonalds for a burger or a bacon biscuit, but I can tell you I’ve done that about 4 times since I started hauling.  I do, however, stop at Starbucks a lot, and figure that into my expense budget.

Lodging is one of those things that you just have to play by ear a lot, especially when towing a trailer.  Not every motel can accommodate a hotshot rig & trailer, and there isn’t a real easy way to find cheap motels everywhere you may run.

I’d have to say the average motel is going to run between $50-$100 a night, although I’ve stayed at a few for $45 and a couple that were well over $100.  It depends on location and what’s going on at that particular location.  In most small towns you can do pretty well for around $50 for a clean room.  If you’re in Midland, TX, and are lucky enough to find a room, it’s going to run you $160.  The point is, figure a reasonable amount if you use motels so you don’t have to camp out in your truck.  (Some folks do by choice, I just don’t.)

Another expense to think about is tolls.  Whenever possible I route around toll roads, but once in a while I get a hot load and am forced to use them to get the load delivered on time.  I keep enough cash on hand to cover tolls, most of the time, anyway.  In the age of plastic money it’s not something I think about too much.  Which means I have needed to use a toll road and not had the cash in hand.  Luckily I did have enough loose change in the truck and my purse to make it by… but it’s better to have a $20 stashed in your wallet for just such occasions.

Next comes tires.  My first set of tires was a good one, and we got almost 2 years out of them.  But when it came time to replace them it cost us a whopping $2100.00.  Now, you can buy six tires for less than we did, but we got good tires, not iffy ones.  If you think about it, those tires are one of the most important parts of your equipment.  You can limp into your home base with a lot of mechanical issues, but a blow-out in the wrong place, or hitting bad weather with bad tires can ruin your trip or get you killed.

Personally, I won’t run may-pops or other iffy tires, saving a few bucks isn’t worth losing time, a load, or my life.  So I figure in enough money for good tires that are correctly rated for my truck and the weight I can haul with it.  The same goes for trailer tires.  Make sure the rating is right and don’t exceed the safe weight for the tires you run.

If you’re running new, good tires, you’re probably safe to assume (although I cringe at the word) that you probably won’t have tire expenses unless something bad happens.  So let’s kick this expense over into the emergency repair category.  If you have old, thread-bare, or el-cheapo may-pops on, do yourself a favor and replace them with good tires before you hire the truck out.

So to recap (the list, not tires!), so far, our operating expenses should include fuel, maintenance, food, lodging, tolls, and tires.

Let’s add emergency repairs just for giggles.  If you’re the handy type and carry tools and commonly needed parts, you should be fine with a minimum of $1K for emergency repairs.  If you’re not, figure $1500.  You may need more, or never need it at all, but if you are under a load and have to be towed, that will set you back by a fast $500 bucks, so it’s better to be prepared…

Over all, let’s look at how much money it costs to run for 90 days.  Most companies, as stated before pay between 30-45 days after being invoiced.  Some, however, may have some unexpected SNAFU and not pay you for longer.  So, theoretically, to run 90 days without being paid, just going by a 500 per day mile average at 10 mpg, (45,000 miles) and having no emergencies or breakdowns, and figuring for a motel nightly, you could spend $18,000 for fuel (4500 gallons), 90 motel nights at $75 would be another $6750, and oil changes would cost you about another $1000 bucks.   If you stocked in enough food not to have to eat out you would have spent about $300, if not, eating out would run you about another  $1350 at $15 per day.  If you have a truck payment, add that in.  Insurance, add that as well.  We’ll use my example costs from above, 90 days of truck & insurance is another $3300.00.

All of that (remember, no unexpected bad stuff or emergencies) makes 90 days of normal operating expenses cost you about $30, 400.00.  Half of that would be $15,200.00, which is a realistic 45 day operating budget.  (If nothing bad happens.)

Of course, you probably won’t hit the gate running like that unless you just luck out and get in with someone who has more work than drivers.

Most hotshots work 2-4 days per week on average.  Some weeks we just sit and worry and don’t work, other weeks we run like striped-butt monkeys and use up all of our hours.

Now figure in to that, let’s say you actually work 20 of those 45 days in your first couple of months.  That would be pretty exceptional, but it has happened.   Using the figure for what it costs to run for 45 days, one day average operating cost is about $338.00.  Multiply that by 20 and you have $6760 for 20 days working.  Figure the other 25 days out of the first 45 days in business as off duty days at home looking for loads.

If you started with a $10,000.00 budget for your first 45 days, and spent $6760 working 20 of those 45, then you would have just over $3K left to get you through until your settlement checks come in.  If you’re like most of us, in the meantime, you still have a house payment and a family at home that expects to be fed and clothed.

Of course, you can affect a lot of your operating expenses depending on how you like to run.  If you’re a camping out in the truck kind of guy, then you can shave off the costs there.  But if you’re running an old truck and have unexpected break downs, you can add more there.

Even though this list obviously isn’t written in stone, it’s still pretty realistic as far as numbers go.  Some guys may pay a lot more for commercial insurance, or have a bigger truck payment.  Some guys have no truck payment and get cheaper insurance.

You just need to put pen to paper and figure out what is realistic for your setup.

In the meanwhile, keep your day job long enough to make sure you cover your own existing living expenses and provide for them first, (as in, cash in the bank) make sure you have your truck and commercial insurance covered, (also cash in the bank), and then set aside the additional $10-15K for your initial 45 days of operating expenses before you ever book that first load.  Once you have all of that covered, cash in hand, you’ll be set to get started hotshotting on the right foot.

 

And you’ll be glad you did it right, trust me on that one.

 

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28 thoughts on “Bankrolling a Hotshot Trucking Company…

  1. Hello SMBurns,

    First off,I love your blog. Highly informative. You are a smart gal.

    I have been researching and exploring the trucking/hotshot world for about 3 weeks now. I have a question for you, but before that a short preface about me.

    My current job in the medical field is hardly stimulating and boring but its reliable and pays the bills. Im 29, debt free as of 14 months ago and make 30 an hour with 40-50 hour 5 day work weeks. My wife makes 30k, I make 65.I live in Houston, we have 3 kids all 10 and up. With my profession I can enter and exit the workforce as I please anywhere in the US. I am a total trucking newbie but a fast learner.

    I have had a hard time nailing down what an owner operator of a medium duty truck can actually make, profit wise. Given this short context of me, in my shoes, would you consider investing into the hotshot business? I don’t want to spend time researching the trucking world if there is slim chance at upgrading from my current salary in the long run.

    I would love to contact you with further questions over the next few weeks. My email is JDMiles15@gmail.com. Thanks for any and all information you have provided.

    • You would have to work pretty long hours to make more than you are now running a 1-truck operation, and would have to limit where you live to “near an oilpatch”. Plus, with kiddo’s at home the paychecks are definitely not steady or reliable so Mama might not be on board… but once they’re up and out, providing we’re still drilling by then, it would make you a good in-between normal work and retirement career. And feel free to fire away any questions to me at smbtransportllc@aol.com. I’m not always right, but I more or less always have an opinion 😉

      And thanks for the nice words, it encourages me to keep on writing!

  2. I love what you’re doing here and as the owner of a hotshot business, I’d like to add some suggestions. Factoring. Factoring gets me paid as quickly as the next day via fuel card or wire to my account. The company I go through pays 88% on the invoices immediately, 10% goes to a reserve account until the invoices have been paid, they keep 2% but they also have a lot of tools to utilize that can do everything from lowering the cost of FedEx to keeping track of work and payments. Secondly work. I don’t know how you run(I haven’t read all of your posts just yet), but I know it’s not as hard as you make it sound to get work. What you need is to draw a line from Wisconsin down through Amirillo and stay east of it. Have a good load board, wake up early, two light pulls for more than one heavy(unless the heavy pays as TL), and know what you’re worth before accepting a rate. I do short haul typically during the week and book a long over the weekend to keep running. The goal is to always run two. Pick in Syracuse, pick in Owego, drop one in Jersey, pick another in Jersey, drop one in VA, take another and both off in NC. For example(from this past weekend;) My loads I pick on the go. I run under 26 for more than 3 reasons. Combo structuring is crucial. So is load structuring. Again, I love your articles- I’m just adding from my experience because I took from yours. Safe travel- Michael w/Georgia Overdrive Trucking Company

  3. Here’s my 2 cents worth… for what it’s worth… I appreciate your comments first of all, but I have a different take on two of your points in particular. I did note that you said you didn’t know how I run, so here’s the skinny…

    The first point is that you apparently haul LTL loads and piece them together as you go, and I run oilfield hotshot.

    Business-wise, they’re two entirely different animals, and there is no way to apply LTL operating rules to hotshot.

    The main point being that hotshots are on-call, we don’t beat the bushes for loads, so load boards are not useful to find hotshot loads. If it’s not oilfield related, it’s not true hotshot. It’s whatever type of hauling it is, LTL, trailer hauling, or whatever, but hotshotting is when we get called out by our customers to make emergency runs.

    I’m pretty sure your customers don’t call you at midnight to pick up XX and take it to ZZ… there’s the big difference.

    The reason it’s hard to get into hotshotting is that you have to find a company willing to run your truck, and in the oilfield, it takes time to become established and to get on the call lists of our customers. In some cases we have to wait in line to be added to a call list. It’s a waiting game getting listed and then we wait again to get called.

    But when those calls come in, they’re guaranteed to pay well enough to make the waiting worthwhile.

    Having said that, it sounds like you’re thriving in your particular area of hauling, and kudos on that! It takes a lot of energy and coordination to put those LTL loads together and get them all where they’re going on time. I did just a tiny bit of that back when I first got started and completely understand the level of time and dedication it takes to keep that trailer loaded and moving.

    The second point… I don’t use a factoring company for a reason, that reason is that factoring is expensive. I understand that some folks do, and that’s fine, but it’s not for me.

    I’m not interested in all the bells and whistles that you get charged for by using a factor, and I’d be interested in just how much exactly you pay a year for their services. I’ll bet it’s a pretty good chunk of change. It’s more than I want to pay when I can simply wait and collect the whole amount with a little patience.

    Yes, it takes that first month or two for the checks to start flowing, but it’s worth the wait when it means more cash in my pocket.

    And I hope you don’t take this as my being completely lazy 😉 just pointing out that yes, if I wanted to haul LTL I could be busy 7 days a week, which I could also do hauling horse trailers and never have to pick up the phone to hunt for loads, but that’s not my goal.

    My goal is to run a little and be paid a lot for every mile, and to also have a lots of time at home with my sweetie.

    Anyway, I’m hoping for your continued success and appreciate the info you posted here that may help someone else looking to do your style of trucking, and thanks for reading!

  4. Come to think of it Michael, how would you like to write a guest post for this blog? I think a lot of folks would love to know how your particular type of trucking works, what to look for, how to plan loads, etc. If you’re up to it, write something up and email it to me and I’ll get it posted.

    smbtransportllc@aol.com

    Sue

  5. Uh… yeah Sandy, here in OK the tolls for my truck are about 4-6 bucks per road… and like I said, I normally avoid them. This ain’t NYC where the tolls are high as an elephant’s eye…

  6. Jake, my truck has 19.5″ wheels and I run Continentals. They’re the same brand of tires that came stock with the truck and the first set lasted me a good 90K miles. The set on now is holding up great.

  7. I m thinking of buying a truck an trailer an Start hott shotting. I live in south Louisiana an have working offshore for many years. I see you saying there’s not that much work , but right now the oilfield is booming. Do you think that’s really that bad to try an get in to the business ?

  8. Hi Pat, It’s not that there’s not work, it’s that most of the work is being done by the big hotshot outfits for a lot of reasons I’ve written about in other posts, which leaves not much for independents unless they already have established contacts.

    Acme is the king of hotshot in your area, so if you want to get into the business they would be your best option. Acme works on a lease basis, they lease your truck and trailer for a percentage of the load gross. Just keep in mind that to go to work for them you need a minimum of two years CDL driving experience within the past three years that can be verified (this may vary from terminal to terminal) and you don’t want to go into big debt for your equipment.

    You might want to read my post on leasing, it’s complicated and you need to understand exactly what you’re getting into. Good luck, hope things work out well for you!

  9. Well i started a hot shot 4 months ago on my own some weeks are ok but here recently its been slow 75 % of calls for loads i get want big trucks any advice to improve my businesses ?

  10. It would help if I know generally where you are working out of, and what type of loads you’re trying for. There could be a lot of reasons and that would help me narrow it down some.

  11. Ok Frank, here is what I think some of the trouble may be… You’re in a good location to be running parts & pieces out from the manufacturing sites to rigs or holding sites, but ACME is in that area too, (along with a lot of other hotshot outfits) and they’re getting the lion’s share of the good hotshot loads due to contracts/big business arrangements.

    You say you get calls for big truck loads, I assume that’s brokers calling? If so, that’s one of the aggravations of hotshotting as brokers often don’t really look at or remember what size of truck you have or don’t bother to look at their equipment lists.

    Also, most of the real hot drilling going on within a few hundred miles of you is up here in OK, over at Midland/Odessa and up in the panhandle of TX. Unfortunately Acme is also everywhere the oilfield is booming. I’m not sure how much drilling is going on down in your particular area but it’s probably not as much as these hot spots.

    It may also hurt you a little with some companies to have a shorter trailer than the usual hotshot which is 40′, as that’s what a lot of the oil companies request even though that extra 2′ doesn’t mean much in practical application. For some reason (probably just habit) that’s what most of them request even when the load is smaller. I only got around that trouble by having a 2 ton truck for heavy truck only loads, and a 20′ trailer for in-between stuff, kind of a special niche in the hotshot business, as some did ask for a bigger than 1-ton truck and didn’t care about the length of the trailer if one was needed.

    The last thing I can think of that may be going on is the normal early fall slowdown, for some reason it seems to get slower for about 2-3 weeks this time of year, then again in January – February.

    Hope this helps, or at least helps explain it. Not sure how to cure the Acme thing, the inattentive broker thing, or the seasonal slow-downs, but the trailer issue can be overcome just by being super-reliable and never late for your deliveries for your customers. That part just takes time.

  12. We just started a hot shot business a couple months ago. Wondering if you can suggest any companies that hire hot shot companies for regular runs. We just are stuck and do not know where to start going or any suggestion on good load boards. We want to stay in the Texas, New Mexico & Arizona area. All your advise is greatly appreciated.

    • I can assume that by hotshot you mean the oilfield, and my assumption can be wrong unless I ask. So let’s start there, what are you hauling, and where are you hauling it so far? The trouble with actual oilfield hotshotting, if that’s what you are trying to do, is that right now the oilfield is in a bad slump, and even when it’s busy, big hotshotting outfits have most of the lucrative contracts with the oil companies. Even when things are booming it takes a lot of hard work and contacting multiple companies just to get one or two good accounts with a small hotshot outfit. I wish I could say something more encouraging, but the oilfield just isn’t coming back yet, ask all the folks Halliburton has laid off in the past couple of years…. But if you’re talking about hauling something else, then I’ll have to revise or customize that advice to the type of loads you’re wanting…

  13. We are looking for a hot shot driver for picking up single pull Gooseneck / 5th Wheel Trailers from Nebraska to California for a fair price and the work is consistent.
    Anybody interested Please give us a call at 760 677 9217

    • To Trailer Super Store : Do you have loads from Nebraska to the south ,i.e. carolinas ,georgia ,fl. and if so ,how often loaded south.

  14. I am a female I own an F350.dually
    I’m a truck driver with cdl
    I’m considering putting my son and son inlaw
    In the dually. I loved the detail in your article
    But I can’t find anywhere online the averages realistically for revenue. Can you help me?

  15. You probably won’t find that info online as it’s a great well kept secret in the industry. My rule of thumb is if it’s an oilfield hotshot load, the pay should be an absolute minimum of $2.50 per loaded mile, more if it’s a short run (under 100 miles I would charge a day rate), and more if there is hazmat involved. Any less than that and it’s hard to make a profit IMO. Good luck, hope it works out for you.

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