Owner But Not Operator - Question From A Newbie

Hi Everyone,

I'm thinking of getting into the trucking business. I have a friend who has bought two trucks in the last year. He has people do the driving for him and he operates this a side business. He says he's making about $60,000 a year after expenses. I have the money to buy a tractor trailer and the time to operate a side business. Do you think I can really make money in this as a side business without being the driver? I'm thinking about $65,000 to buy a 5 year old tractor + refrigerated rig plus another $20,000 for startup costs - license, tags, insurance, etc. Am I being realistic? I'd like to hear from anyone but especially from owner; not operator small businesses.

Thanks,

Lee

Lee, welcome to the forum.

I'm a man who believes in opportunity and free enterprise. I ran a small custom manufacturing business for thirty years. If you believe in capitalism and understand it's concepts, then you understand the importance of setting one's business apart from it's competitors by finding a niche or specialized market that only you can service, or at least that you can service better than any one else. That is the biggest problem with the Trucking industry, there is no way for you to distinguish yourself from the competition. It is a commodities business and therefore the lowest price always gets the job. Do you really want to invest the necessary capital that you are talking about just so that you can constantly figure out how to cut corners just so you can get the job?

I have a niece who has a lot of experience in the shipping business, and decided that she wanted to buy a few trucks and do some short haul work in an area of the country that had a lot of opportunity for that kind of work. She was just like you in that she was not going to be an operator, but she had some money she wanted to invest, and since she knew a lot about the business it seemed a logical conclusion to go ahead and jump right in. She discovered real quick that she had made a big mistake. I hope you don't make that same mistake.

If you've got capital and aren't sure what to do with it, just keep doing your research, but I sure wouldn't dump it into a used tractor and reefer trailer. That's my two cents, and I'm saying that as a person who loves this industry and makes a decent living at it. I also am trying to be realistic in my response to you - this business has about a three percent profit margin, and that's what the people who are experts at it manage to squeeze out. I think your friend just hasn't been at it long enough yet to realize the many pitfalls that are going to hit any one in the business. I would ask that friend of yours some very pointed questions. When he tells you he's making that kind of money after expenses, is he putting money back in escrow accounts for maintenance and does he have escrow accounts set up for buying trucks to replace the ones that he is wearing out right now? These are legitimate expenses that I can guarantee you he is not accounting for if he thinks he's clearing that kind of money. And these are the expenses that will usually jump up and surprise an inexperienced trucking investor putting him right out of business just when he thought he was doing well.