Growing Pains

| December 12, 2008

This time around, Mike Connors was very careful in choosing a driver for a second truck.

Florida owner-operator Mike Connors added one truck in 1996, then another in 1997. But before 1998 was over, lack of revenue forced him back to a one-truck operation.

“It’s not that we weren’t profitable,” Connors says. “It’s just the money didn’t meet the frustration level. The risks were too great.”

Connors recently hired a driver and put an old truck back in operation for another chance at being a small fleet owner, but this time with more caution. He established a dedicated run with a stable client at a good rate, which means predictability for his second truck. Since deciding to expand in January, he says, “My expectations just about match what I’m getting.”

Truckers who plan to expand should realize that their success at operating one truck doesn’t guarantee they can duplicate the profits with a second, third or fourth truck. Connors’ initial failure at running a small fleet is not uncommon. Many owner-operators who try to expand fail because they can’t find that stability in a reliable driver or in freight, and they either lack management skills or can’t find time to manage while driving.

Fleet owners who once held the reins of their own rigs and others suggest writing a business plan, investigating the amount of demand for services, and building good relationships with clients and potential drivers.

“If you’re going to be a fleet owner, you have to become a teacher, manager, cheerleader and mother,” says Ken Dewitt, a principal with Tidwell DeWitt LLC, a consulting and accounting service that advises trucking companies. “You have to learn how to be a tough businessman.”

And the first step in that direction is a business plan.

A DETAILED PLAN FOR GROWTH

Whether two pages or several dozen, a business plan has to be specific and written down, Dewitt says. More than a list of goals, a business plan details how you will achieve those goals.

“I’m working on an acquisition right now where a fleet is buying 50 trucks and they don’t have a business plan,” Dewitt says. “That’s why the failure rate is so high in trucking.”

“It took me 35 years to get to where I am now,” says owner-operator Gary Stowe, who runs 10 trucks out of Michigan, “But I had my vision set on what I wanted to do and how I wanted to get there. When I finally got to the point where I wanted to get, I kicked back.”

A successful owner-operator has to be willing to develop a plan like Stowe did, Dewitt says. “A smart businessman builds a profit model into his business plan and follows it,” he says.

A key part of a business plan is building an adequate financial cushion for times when you can’t keep the seat filled or when freight is difficult to find.

Scott McElmurry, owner of MST Freight Services, a nine-truck operation in Lakeland, Fla., says his rule of thumb is to have $10,000 in the bank for every truck on the road. The nest egg is necessary because “you never know what you’re going to run into,” says McElmurry, who once managed a fleet of 35. “As long as you have that kind of cash, people will stand behind you longer. You can go three or four months and lose money and still have time to figure out what the problem is.”

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