Look both ways before you leap

| March 07, 2006

Job-hopping should be a business decision, not an emotional one.

In mid-December owner-operator Brian Powell of Farwell, Texas, wasn’t sure leaving his carrier of four and a half years to jump to a new trucking company was a good decision. The money made sense – he was getting the same number of miles each week but more pay per mile and a better fuel surcharge.

So he made the jump.

Still, he gave up several weeks of income – at least $1,000 in profit, he estimates – and there were other issues just as important as the money. “At my old company, I knew who to go to when there was a problem,” Powell says. “I knew how settlement people wanted their paperwork done. I knew how to work the system. I’m still learning the ropes here.”

With driver turnover rates in the trucking industry hovering at an all-time high, according to the American Trucking Associations, plenty of truckers are looking to leap from one carrier to another.

Sometimes it’s the right decision. Many times it’s not. And the difference between a good decision and a bad one is in the preparation you make before you decide. Checking out both your current company and prospective new company as thoroughly as you can is an essential pre-jump procedure.

So why do so many truckers make the jump?

“The No. 1 reason is financial,” says Darin Heinemeyer, director of recruiting at Dart Transit. “The No. 2 reason is not getting enough miles. That’s an operational issue, and it’s also a symptom of the first reason. The No. 3 reason is a family situation, which is usually another symptom of finances. If your finances aren’t working out, you’re going to have other problems.”

But most drivers make the leap without considering the true price. Changing to a new carrier – even one that offers more money per mile – can actually cost more than staying put, say accountants and recruiters. The direct financial costs can run into the thousands for owner-operators, and intangibles, such as new routes, new dispatchers and new procedures, can affect all truckers.

Recruiters and accountants say most drivers make the major decision to change employers based on emotion rather than good business, and many pay the price in their wallet.

“We try and talk our clients out of changing at all costs,” says Todd Amen, president of American Truck Business Services. “If they’re with a good carrier and making decent money, a change probably won’t do them any good. If you change carriers once in a year, you increase your odds of going out of business by 50 percent. If you change twice in one year, your odds go up 99 percent.”

Lost opportunity
Why does changing carriers have such a major effect on drivers? For owner-operators, fixed expenses like truck and insurance payments don’t stop during the inevitable down period between resignation and the time they receive their first settlement with a new carrier. For all drivers, at-home costs like mortgage payments and other living expenses also continue during that ramp-up period.

Truckers who are leaving because they can’t live on what they earn at one trucking company aren’t likely to do better just because a new company is offering 2 cents more a mile, Heinemeyer says.

“Most drivers are probably better off staying where they are,” Heinemeyer says. “It’s perception. They have a perception they’re not making much money. They have a perception that the system they’re working in isn’t working for them. We have contractors who say, ‘I’m not making enough money.’ Then we’ll crunch the numbers and find out they’re doing very well. We just have to figure out where their money is going.”

Moving to a new company may seem like a great opportunity. But lost opportunities cost many who make the move. Consider what the average owner-operator may give up in revenue to make a switch for 2 cents more a mile, says Todd Amen.

“You’re going to be down for at least three weeks,” Amen says. “You have to identify your truck, turn in your Qualcomm and trailer. They’re going to keep some of your escrow. You might not get paid for your last delivery on time. There’s orientation at the new carrier. It’s a process.”

Not to mention all the loads that will pass by while a trucker is waiting for all his ducks to get in a row. For example, an owner-operator running 130,000 miles a year who sits for three weeks will miss out on more than $7,600 in paid miles, Amen estimates.

Even when they start driving again, owner-operators will not earn the money right away that they did at their previous carrier. Few drivers start driving the same number of miles immediately upon hire. For owner-operators it may take time to identify the new carrier’s best lanes, figure out procedures at shipper locations and build the good will with dispatchers that leads to more lucrative loads.

Other costs
For some drivers a move can mean a loss of investment, too. Earl Fletcher moved from Grand Motor Freight to Murphy Transportation six years ago. Though he now pulls in more money with Murphy by putting more road under his tires, the move was expensive and it took Fletcher time to recover.

“I was in a lease/purchase [program with Grand Motor Freight] and I lost my lease,” Fletcher says. “I lost $14,000 when I gave the truck back.” He also lost $4,000 when he stayed parked between employers. Still, even though it took time to recover, Fletcher is glad he made the decision. “I’m happy where I am right now,” he says.

A 2-cent-per-mile increase translates to roughly $2,600 in revenue over the course of a year, but a trucker may miss out on the thousands of dollars some carriers give to drivers who stay for five or 10 years. Company drivers also may give up valuable safety and longevity bonuses and seniority perks, such as new model trucks, by leaving for greener pastures. And they could lose access to medical insurance and other benefits, such as 401(k), for months or even a year when they make the switch.

Owner-operators looking to score a few more pennies a mile may give it back if their new carrier doesn’t have as good a program to allow drivers to purchase fuel, repairs and parts at lower rates. Both company drivers and owner-operators making the switch from a carrier who pays based on practical miles to one that uses household goods miles may lose as much as 10 percent of their pay to the new calculation, even if they are getting more per mile.

It all requires careful consideration, says Dart’s Heinemeyer. “It’s all about research and all about packaging,” he says. “Don’t just look at rate per mile, but what’s their fuel surcharge and are they competitive there? Do they pay fuel surcharge on all miles or just loaded miles? Do they hold your settlement for a week or two weeks? All these things come into play. Switching for five cents may sound great, but it may not be a financially sound decision.”

One more hop
Truckers should also consider another factor – their résumé. Chances are your next employer will want to know how many other carriers you’ve worked for. Drivers who make frequent changes are less desirable to the very carriers that pay more and offer more benefits, recruiters say.

But changing companies is not always a bad idea.

Allen Schwinn, who now drives for CFI, left his last carrier because he couldn’t get enough miles. The shift cost him at least $4,000, but it paid off within a year. “Right off the bat, I got better miles. I was making $3,000 to $3,500 a week,” Schwinn says.

Other drivers have lost very little money during their career changes. Bill Holland now drives for Marten Transport after a switch in early 2005. He has changed carriers six times during his 15 years of driving, and money has always been the motivation. “I lost one paycheck, maybe, from orientation,” Holland says. He also temporarily lost insurance benefits. But better rates and pay began on the first haul. Over time other benefits kick in, too.

“They [Marten] give you 401(k) and a raise after one year, and a bonus raise six months after that,” Holland says.

Not all drivers make the decision to jump based solely on money. Bobbie Smith, a 21-year industry veteran who drove 10 years for Southern State, left the company when it changed locales. “They were leaving South Carolina. They had good benefits and I was making good money with Southern State; I just didn’t want to move.”

Smith said he didn’t haul for almost six months after quitting Southern State, and that layover time cost him about $5,000. But now that he’s found a new home at Triangle SC, he’s happy and isn’t thinking about moving again.

Owner-operator Powell says he wasn’t swayed by emotion but raw data. When he quit his old carrier last November, it was after he had researched his new firm for three months and crunched the numbers in a spreadsheet. “The numbers really didn’t work out too good in the favor of my old company,” Powell says. “But there are things more than money, you know. The relationship you had with the people.”

That relationship is still good, says Powell, whose wife’s truck is leased to his old carrier. But the money is better at his new company, and in the end, his decision was based on business, not emotion.

“You have to do the math,” he says. “It’s a business. That’s the way I try to approach this. It’s my career.”


Think First, Jump Second
When truckers quit one fleet to go to work for another, few calculate the entire impact on their income. The decision should be based on more than just pay per mile and feelings.

Owner-operator Brian Powell, for example, didn’t realize he was moving from an over-the-road carrier with average lengths of haul more than 1,000 miles to a regional fleet with 350-mile hauls. “That’s one of the things I’m kicking myself about. I spent too much time listening to a recruiter than talking to drivers. I miss going out on the road,” Powell says.

Talking to as many drivers of a potential fleet as possible is one of the best ways to evaluate a move, say recruiters. “Get feedback from drivers,” says Dart Transit’s Darin Heinemeyer. “If you talk to 20 drivers and only two are happy, that’s probably not a good carrier.”

You can also do things to minimize any downtime between jobs. Try to run for your old carrier right up until you start orientation with your new company, Heinemeyer says. Other advice: Visit your potential employer and ask to speak to a fleet manager. The more information you get, Heinemeyer says, the more smoothly your transition will be.

Finally, don’t make a hasty move. Often, drivers will jump to a new carrier when rate increases are announced. “But if you’re a driver or contractor at a large company and you see other carriers coming out with rate increases, chances are your carrier isn’t far behind,” Heinemeyer says. “It doesn’t hurt to ask if your carrier has plans to increase wages.”


Financial Checklist
When drivers change carriers, pay per mile is usually their first concern. But pay is just one part of a driver’s employment package. Other things to consider:

For company drivers:

  • Quantity of miles

  • Practical miles vs. household goods miles
  • Benefits
  • Safety, longevity and sign-on bonuses
  • Length of orientation

For owner-operators:

  • Quantity of miles

  • Fuel surcharge
  • Practical miles vs. household goods miles
  • Access to group rates on fuel, service and parts
  • Length of orientation

Source: Drivers, accountants and recruiters


Do the Math
Todd Amen, president of American Truck Business Services, estimates the average owner-operator will spend nearly $11,000 in a switch from one carrier to another just to gain 2 cents per mile. Amen’s company, which provides accounting and other business services for thousands of owner-operators, calculated “hard” costs – those which would accumulate on average during a three-week layoff – based on a business that runs 130,000 miles a year. The “soft” costs of getting up to speed at a new carrier – learning new routes and procedures, determining profitable lanes and getting access to more lucrative loads – depend largely on situation, but Amen says it’s a fair estimate.

For company drivers, the costs are much lower because they avoid fixed business expenses like truck payments, and their new carrier will often pick up the tab for some expenses, Amen says. It also takes less time to make the switch – less than one week in some cases.

“For a company driver to make this change, it could cost him as little as $1,000,” Amen says. “The new carrier will buy him a bus ticket. He doesn’t have to turn in the truck – he probably abandons it at a truckstop. It might cost him five days of down time instead of three weeks.”

Still, personal costs like mortgages, food and bills continue to accumulate during that time off, and new hires are not as productive. It can take months for a company driver just to get as many miles at his new carrier as he was getting at the previous carrier. Such costs should be factored in before a move, experts say.

Switching jobs for 2 cents a mile
Three weeks of fixed expenses -$2,247
Three weeks of opportunity costs (lost loads) -$7,635
Variable expenses saved $3,450
Increased revenue over 12 months $2,600
Daily personal expenses -$2,100
Total “hard” costs after 1 year -$5,932
“Soft” cost of getting up to speed -$5,000
Total cost: $10,932

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