Rolling in Money
Average owner-operator income has never been higher, say the latest Overdrive figures.
Owner-operator Leon Speegle of Cullman, Ala., modestly calls his 2004 income “pretty good for an Alabama boy.” He grossed $151,000, or $1.03 per mile, flatbedding drywall and steel for Boyd Bros., plus $17,000 in the form of Boyd’s fuel surcharge. After expenses, Speegle netted $75,000, or $12,000 more than in 2003. That net would have been even better if not for a mechanical problem that required an $8,700 rebuild, plus two weeks’ lost revenue. “But I’ll get it back this year,” he says.
Speegle has reason for optimism, and he’s not alone. The latest Overdrive research shows that average one-truck owner-operator income in 2003 was $47,300, or $5,500 more than the previous year. That’s the highest since Overdrive started its Owner-Operator Market Behavior Report survey in 1996.
Efficiency, not pay raises, is the key to owner-operators’ rising fortunes, says Chris Brady of Commercial Motor Vehicle Consulting, who compiled the 2005 report.
“The owner-operators who weren’t good businessmen in controlling costs were probably weeded out in the past few years,” Brady says. “Operators who regularly looked at their numbers and thought of ways to improve them – those are the ones that survived.”
Now those who remain are enjoying flush times, even though average miles are down, says Todd Amen of American Truck Business Services, which handles the books for 20,000 owner-operators.
“They’re working less, but they’re in such demand that they’re making more money,” Amen says. “There’s just so much more freight. It all translates to more money for the owner-operator.”
Amen’s average client grossed 7 cents more per mile in 2004 than in 2003, while running 5 percent fewer miles. “Owner-operators were not expected to be much affected by the hours of service changes, but the numbers show that they are,” Amen says.
Carl Lawrence of Macomb, Ill., an owner-operator who pulls farm and industrial equipment and Freightliner RV chassis on a stepdeck trailer for Bennett Motor Express, grossed $152,000 in 2004. That’s $25,000 more than in 2003 – partially, he says, because the new hours rule helped Bennett get rate increases from big customers to compensate for lost productivity.
Bob Abts of Brillion, Wis., an owner-operator who hauls paper products on a dedicated run for Dart, made a net profit for 2004 of $62,000, or $6,000 more than in 2003. “The miles were about the same, but I was running more efficiently,” Abts says.
Sam Mobley of Lake Wylie, S.C., an owner-operator who pulls dry vans for Schneider National, grossed $135,000 and netted $53,000 before taxes in 2004, averaging $1.02 per mile in revenue and 62 cents per mile in expenses. His goal for any load is at least 30 cents per mile clear profit, so if a load doesn’t pay at least 92 cents per mile, he’s seldom interested.
Mobley routinely asks truckers their cost per mile and routinely hears, to his dismay, “I don’t know.”
“At least once a year I sit down and figure out all my fixed costs on a cents-per-mile basis,” Mobley says. This is one reason Mobley and his wife, who has a computer job at a Charlotte, N.C., hospital, are able to live in a gated lakefront community on a golf course.
Of those owner-operators with detailed business records, too many keep them only to hand to the accountant at tax time, Brady says. “It’s not just getting all the business deductions that you can. You’re cheating yourself if you’re not taking the data that you’re gathering and using it.”
Mobley agrees. “There’s not a whole lot of ways you can save,” he says, but small adjustments in speed, idling time and eating habits can pay off big. Mobley advises planning for the next day, next load or next trip, and making sure the truck is well stocked. “You can get it a lot cheaper at home than you can on the road, whether it’s laundry soap or bologna,” Mobley says.
Abts and his wife, who works 35 hours a week at a convenience store, put $1,200 in their savings account each month and plan vacations this year in Cancun and Hawaii. “I’ve got a system,” Abts says. “If they do it my way, drivers can make an extra $10,000 a year.”
Much of Abts’ system involves fuel economy and home cooking. “I have a $100 refrigerator and a $150 microwave in the truck that save me a ton of money. I once spent $150 a week on food on the road. Now, I don’t spend more than $15.
“It’s not how much you make, it’s how much you keep of what you make. And it’s not just me. Lots of guys are running smart and trying to do it the right way.”
The right way includes making smart use of technology, successful owner-operators say.
Lawrence uses his laptop and onboard printer to generate reports on all aspects of his business. He uses Profit Per Mile from Easy Trucking Software “so that I’ll know whether a load is worth doing again.” His favorite technologies are fax machines and electronic banking. “When I get that load delivered, I fax the bill of lading to Bennett, and my pay is direct-deposited within a half-hour.”
Speegle enters his load info on his Palm Pilot and downloads it weekly into his laptop. He plans routes with Microsoft Streets & Trips software. He shops online for the best deals nationwide. He uses Centramatic balancers in his duals and Cat’s Eye sensors that allow him to eyeball tire pressure while walking around the truck. When not on the road, he updates his computer records, does online research, and reads business books such as Thomas J. Stanley’s The Millionaire Next Door and Dave Ramsey’s The Total Money Makeover.
This is a good time to become an owner-operator or to expand your owner-operator business, so long as you prepare for the inevitable burst of the bubble, Brady says. One day, a spike in fuel prices will coincide with a drop in freight, and some carriers will realize they over-expanded. “Times like this never last,” Brady says, “but good business practices will always pay off.”
One practice Amen advises is to make a good lease arrangement with a strong carrier. “This is a great time to be an independent, because these guys out there on their own can cherry-pick their freight,” Amen says. “But that won’t last forever, and when the economy dips, the independents are going to get killed at some point. Long-term stability requires you to be with a large fleet that negotiates agreements with large shippers.”
Lawrence says his decision to buy his first truck after 11 years as a company driver – for which he credits an hour’s inspirational conversation at the Mid-America Trucking Show with Marcia Taylor, founder of the carrier he’s now leased to, Bennett Motor Express – enabled him to put his daughter and wife through college. “It’s given me financial security.”
Lawrence feels secure about the near future, too: “It’s really looking to be a good 2005.”
SAVING – EVEN PROFITING – ON FUEL
Of the many diagnostics available, Sam Mobley keeps his on-board computer screen set on fuel mileage and miles driven. When the Schneider National owner-operator started in this business, his fuel cost per mile was 14 cents. Now it’s twice that.
His 2004 fuel bill through Dec. 17 was $37,207, or $5,000 more than in 2003 with the same miles. Each mile per gallon lost in average fuel economy costs Mobley $4,500 a year.
The big sour note of the 2004 economy was the sound of the fuel pump, as the cost of diesel hit a record high. Savvy owner-operators like Mobley nevertheless found ways to boost fuel economy, cut costs and increase profits.
Mobley fondly recalls his second truck, a canary-yellow 2000 conventional with beautiful lighting, but he doesn’t regret trading it after three years of accelerated depreciation because it got only 5.5 mpg. He now has an aerodynamic 2003 Volvo 780 with a 500-hp Cummins that gets 6.6 mpg.
Boyd Bros. owner-operator Leon Speegle says he avoids idling, sticks to 65 mph and does progressive shifting to keep his fuel costs down.
Dart owner-operator Bob Abts routinely gets 7.7 mpg on a dedicated paper-hauling run that includes Chicago traffic and 300 miles of Kentucky hill country. “I never drive over 60 mph. That’s the magic trick right now.”
Abts also progressive shifts, gets his wheels aligned once a year and uses liquid tire balancers. He checks his tire pressure weekly and uses pressure equalizers. He gets his engine tuned at least once a year and whenever his fuel economy drops. In warmer weather, he uses B2, a 2 percent biodiesel fuel additive that boosts lubricity. He bought a $1,200 bunk heater for his cab and runs it off an inverter, “so I can shut the truck off at night.”
Mobley uses the cruise control and keeps track of his miles per gallon per month, per week and per load. Knowing to the tenth of a gallon how much more fuel a heavy load will burn enables him to adjust his speed depending on what he’s hauling. Even easing off 2 mph, Mobley says, can make a big difference in fuel economy.
If you’re running efficiently and getting a good fuel surcharge, an increase in the price of diesel can be good news, says accountant Todd Amen. “If the carrier surcharge is based on 6 mpg and you average 7.5 mpg, you’re profiting from the surcharge. With a good surcharge, drivers can make money off high fuel prices.”
Abts, Mobley and Speegle all say this is the case with them. Speegle figures he pockets $550 a week from the Boyd Bros. surcharge. Abts says, “I’m kind of looking forward to the price going up again.”
Abts says he used to be a “Billy Big Rigger” who blows past at 70 mph. “These guys pass me all day long, and at night, when I pull in, there they are in the same truck stop, bragging about how fast they got there. I just chuckle and go to bed, knowing I have more money in my pocket than they do.”
IF YOU THINK 2003 WAS GOOD