Time For An Owner-operator Update

Hi steve! I remember you!

If you're bored check this out. I stole your old thread from the old forum and redid it onto this new forum. It will probably give you a bunch of flashbacks.

Steve "the cool dude" Prime Journal

Daniel. Thanks for the ride down Memory Lane. I just read through the entire thread. It seems so long ago but it really wasn't. I bought a new Rand Mcnally 720 GPS when I started with my first Truck. I recently looked at the odometer on it and it was 295,000 miles. Hard to believe I put that many miles on in 2 years-8 months.

Hello All, and so very sorry its been so long since my last update.

Welcome home Steve! I've actually kept up with you through the TT grapevine, but it is good to hear from you again! Really glad to hear things are going well for you.

Steve, I'm always concerned about the content of some of these posts and how they will be perceived by folks who read them in the future. So don't take offense here brother, but the veracity of the following statement concerns me.

I make more in a week then I did in 5-6 weeks at Prime.

Steve, I'm sure you know your business better than I do. I actually looked into being an owner operator , and I discovered that hauling containers from the ports was one of the more profitable ways of doing it, but it still didn't meet the requirements I was looking for. I do understand business though, and while you may have revenues that are close to five or six times your paycheck at Prime, to make the claim that you are making that much more money could very well be misconstrued by some innocent folks in here considering taking the plunge into the world of being an owner operator. A good operator at Prime should be able to make a thousand dollars a week. So are you actually saying that you are making five to six thousand dollars a week? I know that revenue to the truck is one thing, but your claim indicates that you are making approximately $285,000 dollars a year!

Steve, I don't want to see anybody mislead by that claim. Between you and your accountant what kind of number are you filing when you file for your income tax? That number is going to be much more close to what you are actually "making." I'm not actually asking for you to give us that number, but would appreciate it if you could clarify your statement so that folks don't go baling over the edge of the boat just to try and get on the same boat you are on. I know from years of experience that a hard working guy like yourself who is willing to hustle and do what it takes to make it can definitely do well as a self employed person, but I have figured this truck driving stuff out nine ways to Sunday, and I have never been able to figure a way to make that kind of money at it.

Old School

Thanks for your reply, and just to be clear. it was not my intent to mislead anybody. I can only relay the facts of what I make. when I was with Prime, I was averaging 650-700 per week. Using that as a base 5X650 = 3250. I make that on a regular basis after paying my fuel expenses and insurance. My checks have been as high as 4600 in a week but are regularly in the 3200+ range when I work a full week. Being an O/O has the benefit of taking off when I want to which I take advantage of. so obviously on those weeks I don't earn quite that much. I have a regular run to West Va to pick up lumber. it pays 1036.00 to the truck. fuel cost is around 225-275 depending on discounts . I can do it in a day, I don't typically do 5 a week but 3-4 per week and then something else the rest of the week. Hopefully that explains it. I realize that there are other factors to consider like my truck payment of 1600 per month, which I have sent 3000 per month since I bought it to get it paid off sooner.

I make that on a regular basis after paying my fuel expenses and insurance.

I realize that there are other factors to consider like my truck payment of 1600 per month

Oh yeah......and that one other little 'side note' like the truck payment you almost 'forgot' to mention in your '5 times what I used to make' calculation. Now Prime guarantees $700/week during training alone. The overwhelming majority of their solo company drivers certainly make a lot more than $650-$700/week. They start at like 41 cpm so a 3000 mile week is over $1,200. So that kinda throws a wrench in that calculation also.

Every O/O I've ever spoken with makes a killing. They just seem to always 'forget' one or more of the expenses when they discuss how much they make and 'underestimate' what they used to make as a company driver. And the time frame is never over a period of years. It's always over a period of months.

And why the short time frame?

Because what business doesn't do great in the beginning? They all do! You go out and finance everything you need to get going and start producing revenues. That's the easy part. Everyone is a rock star in the business world their first 6-12 months because nothing has happened yet. As time goes on the equipment starts breaking down, changes in technology change the way business is done, contracts get renegotiated, long-term upgrades start coming due, and one-off incidents like illness, injuries, or accidents start draining the accounts. You find a niche, start moving forward, then competition discovers that niche and pulls the rug out from under you.

What's to stop anyone else from doing exactly what you're doing? Nothing. And who makes big long-term profits in a business that anyone can enter at anytime? No one. It's Capitalism 101........where nice profits are to be had, competition will swoop in and take their share unless you can simply do something they're not capable of. Otherwise everyone eats each other's lunch.

my truck payment of 1600 per month, which I have sent 3000 per month since I bought it to get it paid off sooner.

Isn't that kinda risky? I mean, cash is king. When you're out of cash, you're out of business. You're in a commodity service with:

- tight profit margins - the average profit margin in the trucking industry is 3%

- high capital & operating expenditures - truck purchase, tires, fuel, permits, insurance, operating authority, road use tax, and on and on

- poor cash flow - all of your expenses have to be paid up front, while all of your receipts come in after the services are rendered, probably Net 30

I would think the last thing a brand new business in an industry with those economics should be doing is using their early cash flow to pay off long term debts used for capital expenditures. Let the debt ride and save up your cash. That's your cushion - your life line. There's two main approaches you can take:

- You can try rolling the dice and try to quickly pay off trucks to use as collateral for buying more trucks but you're hoping against hope that the easy money is just going to keep rolling in and you're going to have enough cash on hand to maintain operations

- You can save up the cash while you're still in the early stages and nothing big has gone wrong. Then when the old adage "everything comes in threes" proves true once again and you have three major problems right in a row you'll have the cash to get through it.

Commodity businesses are cycles of booms and busts. Very few of those businesses survive the busts because they get carried away during the booms. Thy keep making long term bets on growing big without taking short term measures to protect against the inevitable tough times.

Brett

You make a lot of good points. You have certainly been in this business a lot longer than I have and I have tried to take everything I have learned from this site and apply it to the way I do business. In the very beginning of this post I explained about my first tuck breaking down a lot. Trust me, I am no rookie to Break downs and the cost associated with it. I am not foolish enough to spend all my cash flow. I keep a sizeable maintenance account. (currently pushing 40K) to cover expenses to include paying my quarterly taxes too (which I do). I know there are risks and going to be ups and downs and I try to prepare myself for them as much as I can.

40k in maintenance account is awesome. It will get you through almost any major break down including truck replacement if needed.

just a word of advice. That 40k needs to stay in that account and not touched even when buying another truck.

The way I had my accounts setup was 40k in maintenance to cover most major issues that can come up (the bad stuff comes in 3's) and I had a separate fund specifically setup to cover tires. The two accounts were never borrowed against each other or used for anything but the truck they were were setup for.

My 2nd truck was setup the same way and had its own separate accounting set just for the 2nd account.

When getting a 2nd truck I know that setting that truck up would have a few startup cost off the bat. So I used the first truck to setup an entirely different account that I labeled 'MISC" and that account was used for the startup cost of the 2nd truck. The 2nd truck had its own maintenance and tire accounts that were not touched for the startup of the 2nd truck.

I know it seems like alot of steps and extra money just sitting there but I believe in more is better and giving myself the best safety net I can even if it means going "Over-Kill" on redundant accounts to ensure that you can battle through slow and bad times.

You seems to be doing well so far and I hope that continues but I threw this out as hopefully an idea that you may not have taken into account. Perhaps you can use all of it or even parts of it.

I know there are risks and going to be ups and downs and I try to prepare myself for them as much as I can.

Yeah that's where it's at in the beginning for any business - survival! The toughest part about getting into a new business is all of the things you can't prepare for because you don't even know they exist yet. It's bad enough that there are a lot of things you know you have to prepare for but their timing is completely unpredictable. But the complete unknowns that suddenly hit you one day can be the killer. In other words, people who account for all of the knowns go out of business if they've failed to account for the unknowns.

The other tough part I've learned about being in any business over the years is that every 3-5 years a major change will come around that will convert your well-constructed and well-executed business model into a pile of rubbish. It might be a change in the laws, a new technology, a new competitor, the loss of a major customer, or a million other things. But it seems just when you've really got it down something throws a wrench into the works and completely turns everything upside down. These are the times that the most creative, knowledgeable, and prepared businesses will take share away from competitors and continue to grow while the rest fall behind or go broke.

I also think the constant changing and evolving is what throws a lot of people off. When you have a job nothing really changes that much. You don't have to worry about the competition, the laws, the technologies, and all that. You show up, you do what you're told, and you go home with a paycheck. You can get into a routine and nothing may change for years. But as the owner you have to be on top of every law, every competitor, every customer, and every changing technology. You have to adapt to these major changes in a hurry. In fact you may have to predict the effect they'll have and make moves before the change arrives or it might be too late.

Now Old School ran his business for like 30+ years. I'll bet he'll attest to the fact that at least 6 times over those thirty years (and probably more) there was some sort of major change in the technologies, laws, competition, or business models in his industry that would have put him out of business if he didn't make some wholesale changes to the way he ran his company, and in a hurry!

So you'll surely see the same thing. Electronic logbooks will be a requirement soon. The widening of the Panama Canal is going to change the distribution methods of freight for years to come. Changes to emissions requirements or the laws regulating the ports could render certain advantages or strategies obsolete. Drones and self-driving vehicles will even eventually come into the picture and could make major changes to the landscape of distribution. Heck, the State of Virginia could easily pass laws that would require a wholesale change in strategy.

I've been running this website full time for 8 years now and we're currently in the midst of the 3rd gigantic shift in the landscape that we've had to adapt to. All three of these changes were enough to put several of our competitors either out of business or out of the competition entirely. Fortunately we adapt fast and well so we're coming out on top every time something major happens. In fact, we welcome it because we know we're going to handle challenges better than our competitors so that's what allows us to set ourselves apart.

Being in business is always fascinating. Mark Cuban said, "Business is the ultimate sport." I agree.

Steve- Thanks for sharing. It's really good to hear another point of view.

I sent you a private message.

40k in maintenance account is awesome. It will get you through almost any major break down including truck replacement if needed.

just a word of advice. That 40k needs to stay in that account and not touched even when buying another truck.

The way I had my accounts setup was 40k in maintenance to cover most major issues that can come up (the bad stuff comes in 3's) and I had a separate fund specifically setup to cover tires. The two accounts were never borrowed against each other or used for anything but the truck they were were setup for.

My 2nd truck was setup the same way and had its own separate accounting set just for the 2nd account.

When getting a 2nd truck I know that setting that truck up would have a few startup cost off the bat. So I used the first truck to setup an entirely different account that I labeled 'MISC" and that account was used for the startup cost of the 2nd truck. The 2nd truck had its own maintenance and tire accounts that were not touched for the startup of the 2nd truck.

I know it seems like alot of steps and extra money just sitting there but I believe in more is better and giving myself the best safety net I can even if it means going "Over-Kill" on redundant accounts to ensure that you can battle through slow and bad times.

You seems to be doing well so far and I hope that continues but I threw this out as hopefully an idea that you may not have taken into account. Perhaps you can use all of it or even parts of it.

Guy, Thanks for the vote of support.... I don't intend to use my maintenance account for anything but expenses related to this truck only. I was going to use it for tires as well, but my intent is to get it to 50K and level it off there. and as expenses come about I will replenish it to that level and for each truck I own I will have a separate account as you suggested. I normally only pay myself $500.00 per week and everything else goes into the account. once I reach. 50K, I'll consider giving myself a raise :) Should be there in about 2 months or less.