And here is how I am going to succeed where others who have come before me have failed.
The best way to buy a tractor is to walk into a dealer of your choosing and pay in cash. The next best way to buy a tractor is to pull a home equity loan and pay cash for the tractor. Reason being that home equity loans have better interest rates due to less perceived and/or actual risk to the lender. You get to write off the interest and depreciate the tractor. Then comes either bank or captive (from the manufacturer) financing.
Leasing has the benefit of being able to write off the entire amount of the lease payment, but you have no equity in the vehicle at the term of the lease. And, depending upon how the lease is written, you may or may not have the benefit of depreciating the vehicle during the lease period.
Typically, a lease carries a lower payment because you are only financing the depreciable amount of the vehicle, given the length of the lease, plus the interest on the note. A purchase, on the other hand, is for the entire amount of the purchase price, plus interest. A purchase usually requires a sizable down payment, while a lease (with a lesser amount financed) typically requires a small lease inception payment.
My leasing of the 2006 KW W900L from Interstate Equipment Leasing (Swift) will carry a fixed daily cost of about $100.00, plus variable costs which includes fuel. Bertha has a hefty entertainment bill, but I know I can keep her amused. While I didn’t know it at the time, I ran like an O/O minus a few skills which I will elaborate on in short order.
While in Arrow’s orientation class, I used the lease/purchase segment to catch up on a nap. Reason being, they spoke only about the lease itself, not the mechanics behind the successful operation of the business. It was a sales call and little else. And without, at the very least, a brief introduction into the management aspect of running O/O, the scenario is suicide, on all levels. Trial by fire? Sure; it might work. But it depends on the individual. Still, it is not the way to go for the new O/O. Too much to loose, and failure comes quick and hard.
Swift’s O/O class is one day and it could easily be three. But the quality of information coupled to the O/O services furnished by Swift and this outfit:
http://attrucktax.com/
gives the prospective O/O a better than fighting chance of success. Remember; I am looking at a 20%-30% increase in overall income and a huge combined write-off.
The first major challenge in making the transition from company driver to owner/operator is the paradigm shift from being cared for by the company to caring for your business. The boards run rife with people who are looking to be taken care of. This isn’t a bad thing, in and of itself. Quite the contrary. It is a naturally occurring behavior and it comes from our infancy. We come into the world fully dependent on our mothers for food and love. An infant will do anything it can to appeal to its mother in the interest of self-survival. It is hard-wired into our genetics and cannot be changed until later on in one’s life, if ever. The pitfalls of dependency on outside entities of any kind are that there are bound to be significant disappointments. (If you use your imagination, it will spare me the task of further elucidation).
Of itself, trucking is an unusual job. A driver must use his or her own sense of cunning in order to be efficient and successful. We are out there, virtually unsupervised and left to our own devices to get each trip done.We are entrusted with several hundred thousand dollars worth of equipment and freight and then expected to do the “right things” with all of it. Rarely is there anyone present to hold our hands as we learn to manage it all. Reality smacks hard to the less-than-prepared. I felt it on many occasions while at Watkins Shepard, and felt a different kind of smack with Arrow.
I took all of what I learned with my two past employers and synthesized a picture of efficiency for my position with Swift. My initiation, if you will, was immensely challenging to my intellect, my emotions and my inherent good sense of diplomacy. By the time I hit orientation at Swift, I had committed my self to learning how to become the best company driver I possibly could, which I did. And little did I know, my determination raised a promising candidate for the position of O/O.
I am a sincere Individualist. I have owned and operated several small businesses spanning through my time as an automotive technician, furniture designer/builder, massage therapist, car salesperson, photographer and now, trucker (both van and flat).
What was lacking in all of my past business lives was a game plan. I just figured I could do it all on my own and experience has taught me otherwise. I cannot do it all on my own, and I know this now. And in seeing all that is necessary regarding record keeping and financial planning, I don’t think that anyone else can handle it all on their own, either. In the interest of seeing others succeed, I write all this junk to help, not hinder. My greatest joys will come from enlightening others to the possibilities of O/O as I create my own success story.
The bookkeeping is best left to someone who knows the trucking business. A budget based on fixed and variable costs is required in order to know how to run your truck. You can’t just wing it; you can’t! The reason for my smiles and sighs during my class was simple. Most everything thing they spoke of regarding all the various tax considerations (fuel, road, mileage, income, etc.) had already been projected by my accountant. And while the accounting/consulting firm mentioned above is a wise way to go, my Angie is a rock star, and I will stick with her for now.
When a new O/O begins to appreciate the applicable strategies of time management, fuel purchasing management, fuel consumption management and all the other efficiency considerations, there is nothing left for spreadsheets, estimated quarterlies and sifting through wadded up little receipts stashed in a Wal Mart bag. To do so would be inefficacious. And to not do it, or to not have it done, again, is suicide.
The first place to begin is to look at your cost of living away from the truck. With your accountant, you need to get a picture of what, exactly, is required to run your household bills, car payments, insurance, food, etc. With that understood, you then know what you need to make to cover your and your family’s living expenses.
Next: In order to decide what truck financing option is best for your particular needs, your accountant can look at your current state of financial well or not-so-well being and make suggestions based on pragmatic thinking. Like most of us, the lease will work where other means won’t based on limited assets. So? Look at what aspect of the industry you are drawn towards, then look at the leases that these companies offer. THEN, have your accountant run income projections based on the hard facts of each lease. Included in these projections will be your earnest assessment of how you run. I have recorded all of my trips and mileage, so I was able to furnish real-world performance figures to Angie for her projections.
This second step in the determination of your anticipated success or in making the decision to hold off is critical. In my other businesses, it wasn’t so necessary for the reason of the simplicity of my businesses. Not so with trucking. The Feds are up your ass, as are the state and local governments. And not only are they on you for income taxes, they are on you for road use, mileage in their respective states, and not only the fuel you buy, but the fuel you burn. Are you getting the picture? Who needs and accountant? I’ll give you two guesses…. And who fails at becoming an O/O? Hmmm…..
This is a very complicated way to earn a living. Being a company driver will earn you a nice paycheck without the mind-f#ck. Turn the key and go. Simple, right? Yup. Like I said before, with the way I run freight for Swift and, given the work load my DM’s hand me, I’m in line for fifty grand per year and no hassles. It’s too easy for my ADHD noodle.
I need more challenge and it needs to be an ongoing event. Flatbed securement feeds a good part of the monkey, but it isn’t enough. I need more, and I will get my fix as I learn fuel purchasing strategies, running strategies, load selection strategies and road/fuel taxation minimization.
And, sad as it may seem, I will learn and employ fuel conservation techniques, despite my Bertha’s 68 mph top end speed.
One myth I will bust right here before I head outside to enjoy the day: Fuel price is irrelevant to margin of profit. As fuel prices continue to rise, so will my margins. Anyone who cries at the pump does not have a grip on fuel consumption and fuel surcharges paid to the driver. While many of the drivers I have met who are not O/O claim that this is the worst time to go O/O, I have factual information which speaks to the contrary.
It’s absolutely beautiful this afternoon in Scottsdale, AZ. I bought a used bicycle off of Craig’s List yesterday for $50.00. Someone is getting busted on the second floor of my hotel for a felony warrant by the local police, the front desk girl wants to go for a spin in my tractor, and I want to go for a spin on my new (used) Schwinn CrissCross.
This post is one of several intended to inform my audience of the why’s and why not’s of becoming an owner/op. And also, to furnish a means to establish the facts as to whether or not one is ready to rise to the task. If nothing else, this rant is inended to stimulate thought based on facts, not fiction. Hope it helps.......
