Did you know that a couple of pennies can be the difference between being a successful owner/operator and a failure? There are several things that can put an owner/operator on the ropes, some are things that you can’t foresee, an accident for example, a broker who’s been around a long time going belly up and leaving you hanging for a load. But the most common causes are things that you can foresee and can plan for.
There are a couple of keys to success and without them our odds of failing go up tremendously. The first is reserves, if you start out without any reserves in the bank you are almost certain to fail. There are those who started out with nothing but a beat up old truck and a willingness to work and ended up with a fleet of trucks. But they’re the exception not the rule. Without reserves to carry you over bad times a single load you don’t get paid for, a major repair to the truck or even something as small as the need to replace a couple of tires can put your business in the red and from there it’s just a matter of time.
Say NO TO CHEAP FREIGHT – you hear it all the time and most of the time the conversation turns to the major carriers, they’re the ones responsible for the cheap freight. Really? Stop and think about that for a minute, if the carrier is carrying loads that they lose money on then how do they stay in business? It’s not the major carriers who are hauling that cheap freight, it’s the under financed and slowly dying owner/operators who are hauling that cheap freight.
We all know people who live paycheck to paycheck. They’re always a week behind paying their bills, or they’re at the loan sharks, those paycheck advance places, borrowing on next week’s check to pay this week’s bills. Owner/Operators can fall into this same trap and once you’re in that rut your business is dead. The need to have $1000 to pay an expense becomes more important than the cheap rate and so they take the load and actually end up paying the shipper for the privilege of delivering their freight for them.
So reserves are the answer to that problem, but reserves in and of themselves are not the total solution and often what we think is more than enough in reserve can get eaten up with nothing more than a bad turn of luck. Back when my wife and I were trucking we purchased a new truck with a cat in it and they apparently had a bad batch of fuel injectors the day they put our engine together. We dropped one and it did some major damage to the engine. Cat fixed the engine but refused to replace all the injectors and would not pay us anything for the 7 days we were down while they repaired it. Less than a month later it dropped another one and we were down 10 days for that one. This was just a twist of fate, but not running for 17 days out of the month put a serious dent in our earnings that month. A $10,000 reserve can disappear in a heartbeat if you or your truck are laid up and can’t run. Fortunately we had enough to cover us and give us a chance to get back on our feet, but had we been hit with another bad break on top of that we might not have made it.
The key at this point is having enough to not only cover the emergency, but to keep you running once it’s over so that you can build your reserve back up.
If a bad turn puts you into the pay check to pay check category or worse into the getting an advance to pay last week’s bills you will find yourself starting to take any load you can find. Once you fall into the category where a load, any load and at any price is better than sitting the handwriting is on the wall and you’re on the road to bankruptcy.
Next time we’ll talk a little more on this subject and show you how to avoid paying a shipper to haul their freight.
Till then, be safe.