Strength in numbers

| December 12, 2008

“Most carriers pay a sign-on bonus,” says Al Hingst, vice president of contractor programs at U.S. Xpress. “We pay a sign-on bonus per truck. If you sign on with 10 trucks, your bonus will be twice as much as for five.”

When leasing to a larger fleet, the small fleet owner remains fully responsible for his employees, including pay, benefits and paperwork.”That means payroll, workers’ compensation, medical leave, civil rights responsibilities, Social Security contributions, state withholding, unemployment insurance, family medical leave, drug tests, DOT physicals – all of it,” Taylor says.

Even though the small fleet owner assumes all those responsibilities, the larger fleet still has to approve the drivers for insurance purposes, notes Schriner. This can become a hardship during a driver shortage. “You ask the carrier to make an exception, but they can’t because of insurance regulations,” she says.

Nevertheless, the benefits that come with a large fleet’s economies of scale make sense for many small fleet owners. What follows is a closer look at some of those advantages.

CASH FLOW
Of all obstacles small fleet owners encounter, sporadic cash flow is the most constant. “If you’re on your own, you get paid in 30-, 60- and 90-day billing cycles,” says Derek Leathers, an executive vice president at Werner Enterprises. But running a trucking company costs money every day, and fully independent small fleet owners are usually caught spending their own money to run their trucks while awaiting payment from brokers and customers.

“A lot of the time I have $10,000 to $20,000 of my own money out there before I get any coming in,” Arnold says. “When I get money coming in, I can’t use it all to pay bills. I set some aside for operating money.”

Schriner recommends having $50,000 or $60,000 in the bank if you plan to operate independently. “When I was running under my own authority, there was always that question of when or whether or not I was going to get paid,” she says. “Even my best customer took 45 days to pay. I had tarps wearing out, truck repairs, driver payroll. It became too difficult because all of that was coming out of my pocket.”

The main points of ODD’s lease contract with FedEx are typical of most small fleet owner-operators and large carriers. Schriner and Dunn supply trucks and drivers, handling freight, routes, and shipping and receiving operations. FedEx supplies the materials and the trailers.

STEADY BUSINESS
Because a large carrier’s strength is in its freight base, leasing to a large carrier relieves a small fleet of the worries of finding freight.

“We have over 400 sales professionals handling the sales effort,” says Philip Thornton, a vice president for Old Dominion Freight Lines. “We handle all sales and rate negotiations.”

Schriner strongly recommends talking with other small fleet owners who lease to the company “for the real nitty-gritty” about freight and other matters. “The most common mistake any owner-operator will make is not doing the homework,” she says.

Some independents can make it work without the help of a large fleet, Taylor says. “If you can find a good, captive customer who can give you the backhaul, or who you can dedicate your operation to, then it can be good,” he says. “But if not, then you’re hauling a lot of brokered freight, and that’s a big risk.”

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