Top dollar

| December 12, 2008

Even after putting down $18,000 in cash toward his 2006 Peterbilt 379 a year ago, stepdeck hauler Larry Kogl, leased to Landstar, still earned $40,000 last year.

Alvin Baldwin of St. Louis, a heavy-haul owner-operator leased to Greatwide subsidiary Dallas & Mavis, made a New Year’s bet with his dispatcher: He would gross $100,000 in the first 100 days of 2006. To Baldwin’s annoyance, a wreck that wasn’t his fault put his paid-off 1999 Western Star out of commission for part of January, so his 100-day earnings was only $85,000. Still, he expects to net $115,000 this year, on a gross of $350,000 – even better than the $102,000 he netted in 2005 and the $94,000 he netted in 2004.

When contacted in mid-September, Baldwin had lined up a load from Florida to Maine that would gross him $13,000, of which $10,000 would be profit. So what if he had to deadhead 1,000 miles to pick it up? Baldwin says he’s doing too well to waste time “bitching like a driver.”

“If you want, you can make money out here,” Baldwin says.

American Truck Business Services in Denver knows this to be true, because it handles the books for approximately 30,000 leased owner-operators. But what do its most successful clients, and their fleets, have in common?

To find out, Overdrive, asked ATBS to check average net incomes for its clients, who are spread throughout most of the nation’s leading carriers, and identify the three fleets where leased owner-operators take home the most money at the end of the day. Then Overdrive asked owner-operators and officers at each of those fleets – Greatwide, Landstar and FedEx Custom Critical – to share their success secrets. The consistent answer: partnership, mutual support and mutual respect. From the executive side, those qualities make perfect sense: Being 100 percent owner-operator, Landstar and FedEx Custom Critical hardly can afford to alienate their partners. (Dallas & Mavis is also exclusively owner-operator; Greatwide is not.)

“The driver bears 95 percent of the company’s reputation on his shoulders,” Baldwin says. “I do good customer service. I take pride in what I do.”

Such dedication warrants dedication in return, says Virginia Albanese, vice president of operations and customer service at FedEx Custom Critical. “We not only need to recruit fabulous contractors to come in the door, we need to listen to them, to communicate with them, and to help them find ways to be successful,” Albanese says. “If contractors are not enjoying what they’re doing, not keeping busy, not putting money in their pockets, they are not going to stay.”

GREATWIDE LOGISTICS SERVICES
Irving, Texas
www.greatwide.com
4,487 Owner-operators
controlling 5,460 trucks
Average net income: $65,000 to $75,000

Told about Alvin Baldwin’s latest income projection for 2006, Brian Kinsey, president of Greatwide Truckload Management, is impressed – to a point.

“He’s good,” Kinsey says. “He hustles. But he is not in the least bit unique. There are 80 others at Dallas & Mavis like him.”

Baldwin’s most recent load from Florida to Maine, for example, paid him $6,500 plus a $3,500 surcharge, $10,000 total. But more important than any surcharge, Baldwin says, is how he chooses his loads, controls his expenses – in short, how he runs his business.

He figures his revenue not only per mile but also per hour, because of the nature of his business. Hauling a 16-foot-wide, 65-foot-long yacht, or an oil-rig generator down a Wyoming logging road, Baldwin might run only 100 miles in a day; DOT regulations don’t allow him to haul oversized loads after sunset.

Baldwin needs $1.10 a mile just to break even, but that doesn’t mean he’ll take a load even for $1.15, because he has to take wear and tear into account. “I figure, if I can’t make at least $2 a mile on heavy haul, then I’m losing,” Baldwin says. In 2005, he averaged $2.15 a mile for all miles, including deadhead.

He’s amazed to hear other owner-operators say, “That’s not on my map,” and turn down runs in certain areas. “Are you seriously telling me you’re going to turn down an $8,000 piece of freight because you don’t like Massachusetts?” he asks rhetorically. “Those guys are just cutting themselves loose. I go where the freight is.”

As his first expense, he pays himself a salary of 30 cents per mile. He stays on top of maintenance, fuel economy and every other aspect of the operation. Every two weeks, Baldwin figures all his expenses and revenue for the previous two weeks, his goal being to score a profit in each of those 26 divisions of the year. Every two weeks, he puts some of his profits into a maintenance account.

Baldwin schedules his shop time, with an eye toward price and convenience rather than driving from emergency to emergency. For example, he recently scheduled some routine engine work to coincide with a trip home and a few days off; it cost him no downtime, and getting the labor done in St. Louis at $65 per hour was much better than in Denver at $105 per hour. He and his wife, Caren, paid the $3,400 repair bill out of the maintenance account.

“We just wrote a check for it,” Baldwin says. A less savvy owner-operator, Baldwin says, might have saddled his credit card and ended up paying twice that expense once interest is included, or even been put out of business.

“I’m my own company, so I have to look at what I do as a business,” Baldwin says. “It’s not a game. It’s what you do to make a living for your family.”

The carrier Baldwin has been leased to since 2003, Dallas & Mavis of Kenosha, Wis., was bought in 2005 by Transport Industries Holdings, based in Irving, Texas. In January 2006, that company changed its name to Greatwide Logistics Services.

“We’re a $1.2 billion company that no one ever heard of before, as if we came out of nowhere,” Kinsey says.

While the company’s name may be new, its commitment to owner-operators is not, he says. Some Greatwide subsidiaries, such as Dallas & Mavis, have been owner-operator fleets for decades, he says. “We’re an owner-operator-based company,” Kinsey says. “This is not a sideline. These owner-operators are taking significant business risks and are equal partners in the operation.”

Baldwin says he always liked Dallas & Mavis, and his admiration has increased since Greatwide took over. “They’re willing to sit and listen to us. You don’t see that a lot out here. You see a lot of corporations against the driver.”

Greatwide hopes to extend across all the divisions Dallas & Mavis’ Guardian Dispatch program, in which each owner-operator is assigned a “guardian angel” dispatcher “who watches over him and talks to him every day,” Kinsey says. The company also offers its Greatstart program, which enables new owner-operators to buy their first trucks at reasonable rates and get financial advice from American Truck Business Services.

The company’s biggest owner-operator innovation, announced at this year’s Great American Trucking Show, is Greatcare, which Kinsey calls the industry’s “first affordable group health insurance program for owner-operators.” For example, Greatcare offers health insurance to a 35-year-old non-smoker in good physical shape for $265 per month, Kinsey says. Greatcare also offers dental, vision, life and even pet insurance, plus preferential rates on physical damage and homeowner’s insurance.

“Greatwide’s bringing all that in,” Baldwin says. “They’re helping the driver. They’re saying ‘Thank you’ to drivers who do a good job.”

FEDEX CUSTOM CRITICAL
Memphis, Tenn.
www.customcritical.fedex.com
1,200 Owner-operators
controlling 1,450 trucks
Average net income: $70,000 to $80,000

Before leasing to FedEx Custom Critical more than two years ago, Jon and Deborah Nutter of Nicholasville, Ky., were leased to a large fleet that treated them well. The Nutters had only one complaint: pay.

By contrast, at Custom Critical, the Nutters netted about $100,000 in 2005 out of a $204,000 gross. “I’ve heard of higher in our company,” Jon Nutter says, “but we’re very happy with the amount of money we make. FedEx has a lot of freight.”

The Nutters, who drive a Peterbilt 387 with a 53-foot trailer, quickly distinguished themselves as go-getters at the FedEx expedited division. “We would take 80 percent of the loads they threw at us. We would go, go, go.” Even a $200 day, Nutter says, is better than twiddling your thumbs waiting for a better load that may not arrive. “Wishing doesn’t pay the bills. If you sit for three days and do nothing, you lose money. We just take it and go.”

Soon the Nutters were invited to join the fleet’s 10-member Contractors’ Council, which meets three times a year with Custom Critical President Jack Pickard. Nutter says the fleet officers asked: “Why are you here? What do you like about us? What do you need from us that you aren’t getting?”

The Nutters replied, “Keep us happy with good pay and some recognition, and we’re going to stick around.”

“This group is not a shy group,” Albanese says of the Contractors’ Council. “We have a wonderful dialogue.”

Owner-operator concerns and recommendations frequently are implemented by the fleet, Albanese says. For example, Custom Critical used to pay contractors for any deadhead past 100 miles. Contractors said that wasn’t enough, so the fleet now pays for any deadhead past 50 miles. “They now have to run less miles without pay,” Albanese says.

Tolling is now a hot topic among owner-operators. Existing tolls are being increased, and new toll gates are springing up or under discussion everywhere. The fleet listened: Custom Critical will start reimbursing its owner-operators for all tolls, Albanese says.

The fleet recently increased its fuel surcharge – for loaded and unloaded miles – and gave each owner-operator a choice between percentage and per-mile pay, Nutter says; both were recommendations of the Contractors’ Council six months before. The Nutters opted for percentage pay. “We make more money that way,” Jon Nutter says. “Other drivers do fine on the flat rate, though.”

Custom Critical owner-operators benefit from simply being part of the big FedEx family, including “very nice discounts” on a host of business expenses, Albanese says. An even bigger advantage is the torrent of freight feeding into the FedEx system. Thanks to FedEx’s new one-call expedited freight service, more than 600 sales people across all the FedEx divisions now are soliciting freight for Custom Critical. “That has been a big win for our contractors,” Albanese says.

Custom Critical’s freight forecasters constantly revise their estimates of how busy the fleet will be, what types of loads it can expect, and where those loads will be, so the fleet can make sure capacity is maximized and every contractor has plenty to do. “We don’t want too much of anything in the fleet,” Albanese says. “We want just the right amount.”

Officers are now looking into ways to assist owner-operators with health insurance and retirement savings without jeopardizing their status as independent contractors. In a competitive industry, “We have to be constantly out there looking,” Albanese says. “You’ve got to keep evolving.”

As top producers, the Nutters recently got to take advantage of Custom Critical’s most glamorous benefit. The fleet awards savings bonds quarterly to owner-operators who meet goals of availability (accepting 70 percent of loads), on-time delivery (within 15 minutes of the ETA) and safety. At the end of the fiscal year, the fleet whisks away the top 50 quarterly winners by number of loads, plus their significant others, on an all-expenses-paid trip.

In July, the Nutters and their peers went to the Atlantis resort in the Bahamas. In 2007, the destination is the Venetian in Las Vegas.

After that, who knows? “Those contractors go all out for us, and we want to go all out for them,” Albanese says.

LANDSTAR
Jacksonville, Fla.
www.landstar.com
8,300 Owner-operators
controlling 9,000 trucks
Average net income: $70,000 to $80,000

Aaron Shirey Jr. of Santee, Calif., an owner-operator leased to Landstar, grossed $102,000 and netted $85,000 in 2005. He won’t do as well in 2006 because of some engine work on his 2001 Freightliner Classic XL, but he still expects to net $70,000.

Landstar pays good freight rates and fuel surcharges, Shirey says, but he adds that its biggest benefit is something that doesn’t have a dollar sign: freedom.

Before leasing to Landstar six years ago, Shirey was leased to a fleet out West. “They had forced dispatch, and they had trouble getting me home. They told you where you could fuel, where you could stop.”

Landstar couldn’t be more different, he says. He and his retired father, Aaron Shirey Sr. – who acts as his son’s dispatcher – love Landstar’s new Load Alerts program, which enables contractors to request notification of any shipments that meet their personal criteria: origin, destination, type of haul, even a minimum revenue per mile.

“We basically go wherever we want whenever we want,” Shirey says. “If I wanted to stay on the West Coast, I could.” Being a warm-weather guy, Shirey picks loads that take him to Florida and back home each week.

Shirey is the very model of the Landstar “business capacity owner,” as the fleet calls its owner-operators, says Pat O’Malley, executive vice president of operations for the Landstar Carrier Group. As the nation’s largest owner-operator fleet, Landstar uses more than 1,100 sales agents to fill 9,000 trucks, most of them one-truck operations.

“Landstar’s in the small-business business,” O’Malley says. “We’re exclusively owner-operator. That’s all we’ve ever been and all we’re going to be. What we’re offering to small businesses is freedom and opportunity.”

Just as each owner-operator has the responsibility to be smart, productive and safe, “we at the fleet have the responsibility to provide ongoing support in all areas of business,” O’Malley says.

Landstar uses percentage pay, O’Malley says. “It’s not about the miles, it’s about the money. It frees you up, so that you can make more money by making better decisions. You don’t have to just run, run, run, while your cost per mile remains fixed and your compensation per mile remains fixed so you can’t get ahead. Drivers ask our recruiters, ‘How many miles can I get?’ and the answer is, ‘As few as possible.’ The fewer you can get, while meeting your financial goals, the better.”

One of the myths outside Landstar is that its owner-operators have to be “just this side of a Microsoft programmer” in order to find loads and otherwise navigate the company’s computer system, O’Malley says. “We provide a variety of ways to access the loads. Every small business is different. We don’t have a one-size-fits-all strategy.”

Landstar contractors can skip the computer and get preferred load alerts by phone. Larry Kogl, a 66-year-old stepdeck hauler from Atwood, Kan., does this.

“You can work it any way you want,” says Kogl, who has won several laptops from Landstar for service and safety, but immediately sold each one of them. He instead talks to a dozen Landstar dispatchers on the telephone. “They’re the ones on the computer,” he says, laughing. “That’s their job.”

Kogl netted only about $40,000 in 2005 on a gross of $122,000. Why so little profit? Because he bought a 2006 Peterbilt – and put so much money down that the truck will be paid off by spring 2007.

“I’ll be debt-free come March, if all goes well,” Kogl says. “That’s how I operate. I like to pay things off as quickly as I can and pay as little interest as I can. I always put everything back in the truck. My house is paid off, and I don’t have a family, so why not put it back?”

Landstar schedules more than 100 owner-operator events yearly, O’Malley says, including Appreciation Days get-togethers in Florida each January and Illinois each July. At industry gatherings such as the Mid-America Trucking Show in Louisville, Ky., Landstar provides suites with free food, drink and seminars just for its contractors. “You don’t see anyone else doing that,” O’Malley says.

Kogl takes time off to go to as many of these events as he can. He has started entering his Pete in the Landstar truck beauty shows, coming in third at Appreciation Days in Rockford, Ill., this summer. Besides being a lot of fun, the Landstar meetings are full of helpful, practical information, Kogl says.

“They tell us that of 100 owner-operator applicants to Landstar, only 2 to 3 percent get hired,” Kogl says. “I figure, I’m a pretty special person just to be with this company. I could retire if I wanted to and get by, but that’s not my goal in life. Trucking is good to me, and it can be good to anybody.”

Adds Shirey: “Some drivers need to be told what to do, but nobody tells you what to do here. You hold your destiny in your hands. ”

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