Making it in the Transportation Industry

[Skinny]

Hello. I know there are a lot of threads about this subject, but I just dont seem to be able to find answers that suit my situation. I'm 21 years old and in about 4 months I'll be finishing college and having a BA in Business Administration. I have been approached by companies who offered me jobs, but I have also been approached by my brother and our cousin to start a trucking company. Now, I'm very optimistic about the trucking company and I think that it is very possible to make more money in the long run than taking some random job with some company that's gonna decide my hours, paychec etc. Anyways, these are some of the facts regarding my brother, my cousin and the business we want to pursue:

-It will be located in the Iowa, under LLP

-I dont have CDL, and the closest thing I've used for hauling goods is a 1998 Chevy Silverado

-My brother has been driving for 1 year, and has has owned a druck for about 5 months, driving it and leasing it with Terminal company.

-Our cousin has been driving for over 2 years and does not own a truck,but plans to buy one within next 2-3 months before we start a business.

-I would run the business, find loads, the care of the books. My brother and our cousin would drive and as time and financing permits we would buy more trucks under company.

-For beginning, my brother's truck and my cousin's truck will be owned by them.


ESTIMATED MONTHLY EXPENSES:
PAYROLL 1600
WEBSITE'S W/LOADS SUBSCRIPTION 300
INTERNET 50
MISCELLANOUS 150
TOTAL 2100

WHAT I WOULD LIKE TO KNOW:

If I'm taking care of all the books, act as a dispatcher for the company taking 10% of all loads and putting it in our company's bank, will I be able to cover all these expense and in few months be able to make some money so I can increase my paycheck as a dispatcher. Also, what other costs am I missing out. Like, does the company need to have insurance or some type of licence, even if its just a dispatching service? Or does the company need to get some kind of authority or licence from state or federal government? Are these licence possible to get, even if I dont have a CDL or because one of the drivers has less than 2 years driving experience?

I feel that us three starting a company have a big advantage, since both my brother and our cousin will be driving and I'm not charging so much for my services, so the expenses are not too big. But, are two drivers adaqute or are able to haul enough so that taking 10% from their loads, will be able to cover these expenses. Also, is there a possibly bigger long run financial or economic profit so that we can purchase more trucks?

If anybody can please help me out, that would be great and thank you in advance.

[rank]

If I am understanding you correctly, the two trucks need to gross $21,000 monthly to cover the $2100 in dispatch expenses? That should be no problem but perhaps look at it a different way (I dont know why I'm getting into this because I just got my knuckles rapped for doing this exact thing).

1. how much revenue are the two trucks likely to generate?
2. what are the expenses likely to be?
3. will there be enough left over (after paying the drivers) to pay yourself $1600/month salary?

Lets just trow numbers out there. Say the drivers gross $2,000/month each (not much I know but they're building a business right)? That takes the companies fixed expenses to $6100 so far (2000+2000+2100) Add in Liability and cargo Insurance at $1250/month both trucks (probably way low) and you're at $7350. 1600/month for maitenance on trucks and trailers...let's call it $9,000/month.

Let's say you've got flats and steps and you live in good area and you manage to do a good job finding freight and you average $1.55/mile after fuel costs (1.90-.35 for fuel...all miles not loaded miles), each truck would have to move about 2900 miles/week. And I left out alot of expenses. And I gave you a really good rate because I wanna get off on the right foot
:twisted: :wink:

IMO a two truck operation will have a difficult time supporting a $1600/month dispatcher. I would be looking to use both drivers on ONE truck and eliminate insurance, capital invetsment and arguably some maitenance costs.

Maybe if two guys switched off solo driving ONE truck on regional routes (no room for a third guy tho because the off duty driver would dispatch).

Or, have them drive team loads that you dispatch (again though, maybe no room for a third guy becasue OD driver could dispatch from the truck).

Or you get your CDL and drive when they ran out of hours, then they could dispatch you. Gotta reduce the costs and keep the truck moving.

[Skinny]

Thank you rank for your input. I do like the idea of having both of the drivers run one truck, but I dont think my 2 drivers agree on that. I think its the matter of personal space or something ? Now I will try to clarify and elaborate more regarding the expenses and how the business is planned to be ran, because I think I gave you a wrong idea with the first post.

The trucks will be owned and operated by the drivers and all the expenses occured (cargo insurance, maintenance, trailers, tolls, IFTA etc.) with the trucks will be paid by the driver/owner of the truck.

Say, a truck does $4000 a week which my drivers believe is realistic, that makes it $8000 for the two trucks, which equals around $32,000 a month. Taking 10% of that is $3200 and this is monthly gross income for the company. With the monthly expenses that I listed in the first post running around $2100, this would result in $1100 monthly net income. This offcourse is not very realistic, but its possible, especially having the company start in May/June when I believe the rates are much better than currently what is being offered. I may miss out few here and there expenses that my brother and my cousin may not be giving me, since they dont necessarily know about and that's actually the reason they would want me to be taking care of books in the first place.

Now am I understanding this correctly and do you think these numbers look realistic to you at all? Again, I want to thank you for your inputs.

[Ian Williams]

You would be better off starting with 1 truck and keeping in moving as much as possible.

To get an idea of the dismal economics of the truckload dry van and reefer segments of transportation read "Sweatshops on Wheels" by Belzer.

http://www.ilir.umich.edu/sweatshopsonwheels/

Truckload firms are in the same perfect competition commodity hell that corn or soybean farmers are in. For the most part you are a price taker, there is nothing that differentiates your 53' van from the others out there.

You will also want to poke around the website of OOIDA, they have a wealth of knowledge and have the answers to questions you did not even think to ask.

http://www.ooida.com/trucking_tools/trucking_tools.html

If I were in your situation I would look for a job in dispatch/operations/management so you can climb the learning curve on someone Else's dime. Its easy to loose you shirt in transportation real quick if you don't know what you are doing.

Use the search feature on here to read all the posts by GMAN, he is the resident OwnerOp/Small fleet wise man on here.

You may also find the posts by Steve Booth, a new OwnerOp relevant.

BOL

[GMAN]

Doing $3-4M in revenue per truck is realistic, but may be high starting out. It takes a bit of time to learn your way around the business. It takes time to find the better brokers who have the good paying loads. Finding good loads takes time. You will also need to factor in some costs for telephones, office expense, computer (if you don't have one already), software to run the business (unless you want to design your own or use a spreadsheet). There is no need to spend $300/month for load boards. I only subscribe to getloaded.com and internettruckstop.com. I pay about $60 for both. There are some free load boards which are owned by some of the larger brokers and carriers.

Before starting you need to find out your operating expenses, by the mile, and decide what your minimum haul rate will be. It isn't a matter of keeping a truck moving that is important. It is making a profit. Some new people think that as long as they keep moving that the rate isn't that important. Without profit, there is no need to move the truck. You should not need to run 3,000 per week to make a profit.

You will also need trailers for each truck, if you plan on running your own authority. If you plan on pulling flats, you will also need tarps, chains, binders, etc., If the three of you are going into business together, I would plan on having some working capital to keep you going until the money starts coming in. Most businesses fail due to lack of sufficient working capital. Make sure to put everything in writing. Doing so will help avoid any conflicts later. Everyone's job and compensation should be clearly defined. Good luck.

[rank]

$4,000 week average (every week for 52 weeks) sounds a little high, but I don't know your specifics so yeah it could be possible. At $2/mile that's 2000 miles a week (PLUS DEAD MILES SO FIGURE AT LEAST ANOTHER 400 THAT ARE UNPAID). You'd be earning your money if you could keep them earning that.

The biggest problem I see with this scenario is this: They have all the capital invested, they have all the risk and you take a percentage of the gross. Over time, I see them resenting you because you deadheaded them 200 miles to pick up and 200 miles after the drop just to get that $2/mile load that pads your percentage. Meanwhile they paid the fuel on those unpaid miles.

Then, after you take your cut, any surplus goes into the company fund, which you are a part of.

Good deal for you but I dont see it lasting. This is why we have freight brokers...they take their cut and they are gone.

With some tweaking, I think you guys might be able can make it work. If I was a driver, I would want you tied to the NET profit, not gross. And If I was a dispatcher, I want my drivers to keep one truck moving instead of two trucks sitting (doesn't neccessarily team). If you can agree on this, you may have something.

Oh yeah, another option if they each want their own truck is for them to meet and turn. Don't know if you could pull that off from a dispatch point of view though.

Good luck

[Skinny]

First I would like to thank all of you who have contributed to my post, I really appreciate it.

I guess my question regarding this type of business is just too general. Without having the exact costs computed (insurance, trailers renting costs, fees) I cant find out how much I'm going to have to charge per mile and the exact volume trucks are going to have to do per week or month in order to break-even or make profit. If anybody can point me in any direction, it would be greatly apprecaited. Starting with cargo insurance, because I've heard that's a pain to find w/unnexperienced drivers.

We are planning on running two 53' vans. I'm assuming that some load boards are better then others when it comes to what your hauling. Which one do you guys recommend?

I'm very familiar w/excel and spreasheet programs and I think for starters that would be appropriate to use. I'll be using my apartment for the office in the beginning and I dont think we'll be investing in a business phone till things ride out (Use personal phone). As you see, I try to minimize costs as much as possible, because as I understood you guys, finding good brokers/loads take time and I wanna try to minimize the investment as much as possible. But I would like to find out, how much investment is needed? With already having two trucks, is $20,000 enough for the fees?

Another thing that concerns me is the fact that I'm just a college boy with a degree and a year experience flipping burgers and 4 years in sales, but not much trucking experience. What's the best training school or videos can I get, in order to get to know this industry better?

Now with the OOIDA website, the tools they have are limited. Do I need to get annual membership in order gain access to bigger selection of tools and goodies?

Again, thank you for your inputs they are very much appreciated.

[rank]

Yep, you really need to become familar with dry van rates in your area.

Trulos.com is a free loadboard with lots of postings. try it for now. make lots of calls to the brokers telephone number and tell them you're calling about Souix City to wherever. He or she will tell you what it is and what it pays and what it weighs and how many miles it is (always double check the mileage). Do the same thing for hypothetical backhauls.

If they ask who you're with give them your company name, if they ask for your M/C number tell them you're not set up with them, if they still want the M/C number tell them you're a private carrier and you don't have one, is that a problem? (it is but let them figure it out). Sure you're misrepresenting yourself to the broker but it's all in the name of research. :wink:

Add up what all the loads paid. Deduct the tolls. Deduct the fuel (figure 5mpg) FOR ALL MILES. This cannot be overlooked. Some people think because they got 1.70 and 1.50 they averaged 1.60. Not so. DEAD MILES CAN KILL YOU.

Be realistic about how far a truck can travel in a day. Learn the hours of service regulations. Know your drivers....how far will they travel in a day? What time do they get up? What time do they shut it down? Can the truck P/U in Columbus at 08:00 (it's never 8:00 BTW) and be in Dayton before recieving closes at 2:00pm?

Do this about 500 hundred times and you'll start to get a good idea of the rates and which brokers pay better and how many miles you actually need to run before you can make any money at this. It's gonna be alot because you guys look like a high cost operation to me...and vans don't pay that well.

Then, once you've figured how much profit there is (if any) you'll have a better idea about how much money is available for equuipment. It should be an eye opener.

Now, get on the phone.

[GMAN]

OOIDA will provide more assistance for members than non-members. Membership is only $45/yr. Two of the larger insurers of cargo and liability insurance for commercial trucks are Northland and Great West. OOIDA also has insurance, but it may not be accepted by all brokers. Northland gave me the best rates. You will need insurance before you can get authority. I pay less than $5M/yr per truck, but have many more years of experience. I would count on spending $6-12M per truck. Most insurance companies will require drivers to have at least 2 years of experience. You will need registered agents in every state. OOIDA will act as your agent at no charge if you are a member. There are services available for a fee. Authority costs $300. It is a one time expense. You will probably need to have a business phone to be able to get base plates, SSR, etc., Many states require a listed business telephone number. It also makes you appear more legitimate. It should not cost more than $100/month. You can probably get unlimited long distance in that figure, which could help you making calls. Once you become a member of OOIDA, you can gain access to their forum. Most of us are either owner operators or run our own authority. However, there are also a lot of drivers who are on the boards. It is a good resource. You can apply for your authority on line, but there are services who will do it for you for a fee, including OOIDA.

I mainly use www.internettruckstop.com and www.getloaded.com load boards. You will need your authority before you can subscribe to most load boards. CH Robinson, Schneider and Landstar broker loads and have their own boards you can access at no charge, once you are set up with them. They will require you to have your MC number before they will set you up. $20M will be enough for permits and base plates, but may not be enough for your insurance unless you finance it. I suggest keeping money in escrow for emergencies. Each of the drivers should have either workers comp or an accident policy. I suggest the APP or accident policy. It is much less expensive and would pay off without some of the hassles of workers comp. OOIDA has it available for about $140/month per driver. There are other sources for that, but that is a very competitive rate.

[Skinny]

thank you guys for your input.

Rank I really like that website trulos.com with free loads posted, its an adrenaline rush first time you talk to the brokers. I think this might save me money from taking any classes on dispatching, because I can just keep practicing till these brokers get sick of me , and than I'll come up with different name for the company lol.

GMAN, thanks for running some of those numbers for me, its something I can play to keep myself busy figuring our what's gonna work out for us. Also, I'll try those insurance companies as soon as start looking for insurance. I actually have 2 to 3 more O/O that are willing to switch to our company as soon as I can manage to get them decent per mile rate, which is I think the only thing that's gonna be a challenge.

Thank you guys very much, I'll keep you posted on how the things goes.

[BanditsCousin]

Cell phone, tolls, meals, repairs, emergencies, insurance, insurance, insurance , maintenance, cargo claims, etc.

Too many expenses!

However, you have come to the right place to ask such a question

[rank]

I actually have 2 to 3 more O/O that are willing to switch to our company as soon as I can manage to get them decent per mile rate, which is I think the only thing that's gonna be a challenge

Now you're talkin'. Spreading your overhead over more trucks is a good idea. Especially somebody elses trucks.

If you charged $25 a load and found a load every other day for 10 trucks you'd have $125 a day. It's not easy to find good paying freight to keep those trucks happy though, you'd be one busy dude.

Gotta be careful not to saturate an area too. If you do, you may be tempted to play favourites with your company trucks. If the other o/o's a running the same lanes as your company trucks and your company trucks get all the good loads.....well 'nuff said.

[brian]

uhh wheres your fuel expenses? as far as I know it isn`t free yet

and why the hell would you go to college to make 1600 a month? hell I did better then that when I was 16, and I was a real idiot!

[rank]

uhh wheres your fuel expenses?

that's the great thing about dispatch. all that stuff is somebody elses problem.

and why the hell would you go to college to make 1600 a month?

I've got no answer for that LOL.

[Skinny]

and why the hell would you go to college to make 1600 a month? hell I did better then that when I was 16, and I was a real idiot!

Yes, I know its low, but I feel like I'm going to start a business in which I'm not investing any money nor have any financial obligations towards to, but I still get all the returns and profits and I believe the benefits in the long run will definitely be much bigger then starting of at someone else company.

Also, I live in Iowa where my parents and most of my family resides. If I would like to find the highest paying job for my profession, I would have to move as far away as possible from Iowa. Since, I'm not planning on doing that, I think that investing my time in this venture for few years will give me a lot of money in the future, plus all the benefits of getting the experience of running a business.

Believe me, I do have offers from numerous companies that very much exceeds that 1600 dollars a month, but I think I really have potential to succeede in this business with my family.

[LOAD IT]

Skinny, you can do better than $1600 monthly. Make it clear to your partners that finding customers, loads, scheduling maint, invoicing, collecting past due accounts, processing paperwork, logs, running drug program, having their money on-time each week and everything else that you will do as the "dispatcher" requires salary to support you and yours. Back in the day when I was the company and did all of those things above, numerous drivers thought I was just sitting around getting fat off of them. One of my best friends/drivers back then got drunk and told me exactly how he felt. It hurt and he cut deep, but that was his opinion and when he left and lost his truck. I gave him a job and he drove for me until his bad leg wouldnt let him drive anymore. Make sure that they understand what you do, and do a good job for them. You are all in it together and they need to feel good knowing that you will answer the phone at 315AM when they have a problem. This business is a 24/7 business and as long as you have a truck on the road, you need to be available for that truck and driver. Good Luck with your new venture.

[rank]

[quote]finding customers, loads, scheduling maint, invoicing, collecting past due accounts, processing paperwork, logs, running drug program, having their money on-time each week and everything else.../quote]
....permits, fuel taxes, income taxes.....yep, it's a ton of work .

[BanditsCousin]

Start finding shippers in your area that may be interested in extra capacity. Your brother and cousin aren't going to be happy with crappy rates when they leave home. Backhaul is another story, but anyone can click all day on GetLoaded and fill trucks. Plus, you have to buy some trailers.