Used truck prices and interest rates have fallen, so many owner-operators faced with higher costs and slow freight view buying a second truck as an income-boosting chance at a slice of the American dream.
Successful small fleet owners say making that second truck profitable is difficult even in the best of times. Inconsistent freight can leave one truck to pull the income weight of two. Sure, equipment prices are down and the driver shortage has let up slightly, but truck repossessions and trucking bankruptcies are at record numbers, with diesel costs not expected to drop soon. Nevertheless, some truckers succeed with a second truck by managing to attract and keep that elusive key element: good drivers. Other key ingredients include a conservative business plan, significant cash reserves and a truck-savvy financial adviser.
“It’s a kind of misconception, going from one to two trucks, thinking that two trucks double the profits,” says Scott McCahan, head of safety and contract relationships for FedEx Custom Critical. Owner-operators succeed in adding trucks when they “have waited until they were in a good financial position to do it,” McCahan says.
That means committed freight and substantial savings on hand, says Andy Currier of Seattle. “I totally lost my business,” says Currier, now a company driver for the Oregon-based Combined Transport. “If we had $20,000 to $30,000 in the bank, I don’t think we would have gone under.”
The first time Currier tried expanding was in 1989, when his costs were low, customers and drivers were reliable and runs were dedicated, he says. Business boomed for a few years until he injured himself and had to sell his trucks to pay medical bills.
Opportunity knocked again last summer, when he was hauling expedited freight and “making astronomical amounts of money,” and his carrier asked him whether he could add trucks. “I had no reason to believe things would be anything but good,” Currier says. He was doing repossession work on the side and was picking up trucks at repo prices. “The fleet grew overnight,” he says. “The kids called us Rabbit Express.” Soon the owner-operator of 20 years had his own authority.
But in eight months, Currier’s nine trucks shrank to one. In January, he sold his last truck for what he owed on it. “I couldn’t afford to keep them with the hikes in insurance and fuel,” Currier says.
Other problems included slow payments, difficulty getting fuel surcharges, a broker stiffing him $20,000, a dramatic freight slowdown and expensive driver mishaps. “We were deadheading thousands of miles all of a sudden,” he says. “We had trucks sitting for days at a time. Truckers were underbidding themselves for loads. These guys are dog-paddling to stay afloat.”
McCahan says you have to measure the costs before you grow. “What is the impact if the truck doesn’t run for one, two, three months?” he says. “You have all the expenses of the first truck with the second truck, and you are now paying someone to drive that second truck, and then you have to pay yourself.”
Other expenses include recruiting costs, driver benefits and additional bookkeeping, says Jim Daniels, head of corporate development for Werner Enterprises. “The list goes on, and with every new cost there are expenditures a fleet owner must pay.”
Have savings to survive at least three months, says Paula Hudson, president of the Texas-based Truckers Home Office. “There are a lot of hidden costs, such as state fuel tax and repairs,” she says. There are also unforeseeable expenses. Several owner-operators say they had trucks stolen and lost income until the trucks were found and repaired.
Even if you are just considering a second truck, do a fearless self-evaluation of your business practices, such as your commitment to record keeping, says Mel Darton, owner of Trucker Tax & Accounting in Salt Lake City. “You shouldn’t get the first truck until you can work it like a business,” Darton says. Consider your financial track record, Hudson says. “Have you been profitable for the past three years?” she says.
Patrick Monihan, who grew up in the trucking industry, ran his family’s former truck leasing business from 1980 to 1995, when he began the Cleveland-based Monihan Transportation Group, which now has 50 trucks and 30 drivers. Monihan began his fleet with a truck that had been leased to Roberts Express. His knowledge of that company, now merged into FedEx Custom Critical, gave him confidence in leasing to the carrier. “They paid well from Day One. I didn’t have to invest a lot. I slowly got more into trucking and less into leasing.”
He found a driver and later hired a team for that truck. Six months later, he added a second truck. “We started turning a profit definitely within the first year,” Monihan remembers. “I’m very frugal. I move very slowly.”
Jewel Braner, who handles the books for her family’s eight-truck Illinois firm, says they knew their drivers well before hiring. “We don’t add a truck to the business unless we have the business and a dependable driver.”
Perry Wiseman, president of Truckers Accounting Service, agrees. “Have a driver in mind and do extensive background checks before even buying the next truck. Another truck is a dime a dozen, but good, dependable drivers are hard to find.”
Walt Wheeler, whose 12 trucks are leased to Landstar Ligon, began with one truck leased to Landstar in 1997. He feels his performance as a single-truck owner-operator and his relationships with agents helped him succeed. “The No. 1 priority is knowing your business inside and out, which includes having contacts, knowing your agents and who your corporate partners are.”
“It’s important to lease to more than one carrier. Put your peas in more than one pot.”
– Will Yarber, owner of Yarber Express of Ill.
Communicate with your carriers, says Will Yarber, owner of Yarber Express. The Illinois resident leases three trucks to JDC Logistics of Milwaukee, three straight trucks and three cargo vans to Landstar and two hot-shots to the Illinois-based Farm Services. He personally takes loads weekly within 300 miles of home, and will take an occasional load to Florida to talk with Landstar employees. “I make it a point to go see my dispatchers because it’s important to communicate,” he says.
If you consider leasing a second truck at your current carrier, make sure you can judge freight patterns and what the company is like. “Go through a year of cycles with the company,” McCahan says. “It all goes back to doing your research.” Before jumping carriers, remember the expense involved in moving your truck. “Some places it costs $2,000 to $3,000 to move it,” Currier says.
“I leased to several companies until I found a company that did what they said they would do,” Yarber says. “With several vehicles, it’s important to lease to more than one carrier. Put your peas in more than one pot. If one carrier slows down, the other will make up for it.”
Dale DeFullhart of Indiana has three trucks and two reefer trailers. Last year, he was home nightly with his old carrier’s dedicated automotive runs. “They said, ‘We can give you three more runs,’ and I went and rented trucks,” he remembers. “They kept offering me runs.” But that company consolidated runs until there was no freight for the five trucks he eventually had. He still has his trucks running, but is considering a non-trucking business with his father.
Many recommend incorporating, such as Rick Hixon, an Indiana Landstar Ligon agent who no longer drives but has six trucks leased to Landstar. He says incorporation protects personal assets such as homes, by separating them from business assets such as trucks. Yarber says he is now incorporating after his tax preparer and his attorney clarified the benefits.
Small fleet owners agree you shouldn’t expand your business without consulting a tax preparer and an attorney. To save costs, DeFullhart’s wife initially handled his books, but he says the business would have been more profitable had he hired an accountant to do the books from the start.
Some advise hiring a manager as well, even part time. “Ask yourself, ‘Can I run this from out on the road?'” McCahan asks. “The paperwork and taxes will take time away from the wheel.” Often family members handle the paperwork well, but accountants say that can create costly mistakes.
Some small fleet owners, such as Hixon, think maintenance leases save money. Buying vs. leasing a truck draws mixed reactions. But all agree growing your business slowly is the way to thrive. “If I had to do it all over, I wouldn’t have grown as quickly as I did,” Currier says.
While there are many sad tales of owner-operators who took the leap to a second truck, there are success stories as well. Hixon is expanding because some freight and dedicated work is available. Monihan says financing is tougher to get now, but “if you have ability to get drivers, get trucks, it’s not a bad time because so many are going out of business.” Hudson says for those who do succeed, there are great rewards: “building equity, assets, a good credit report and personal pride.”
– Charles Cox also contributed to this article.
Good drivers: hard to find, hard to keep
Quality drivers are the key to making your expanded operation work, but there is no sure formula. Successful owner-operators often follow similar approaches, such as avoiding job-hoppers and providing top-notch equipment.
Will Yarber of Illinois offers quality equipment, screens carefully and follows “gut instinct.” He keeps drivers by treating them the way he would want to be treated, Yarber says. Some hires he met at truck shows, where he has won first-place awards. “I take a lot of pride in equipment, and that attracts better drivers,” Yarber says.
Andy Currier of Seattle had several show-quality trucks before rising costs and other problems forced him to sell. But good equipment helped his hiring, as did his demand of five years of experience, including driving in ice and snow. “We had people knocking on our door wanting to come work for us,” he remembers.
Still, some drivers created expensive problems. “One driver took a truckload to New York City against my express policy of not going to New York City,” Currier says. “The driver got about $8,000 worth of tickets because he was not registered for New York City, plus hit an overhead obstruction, and we lost the trailer for two weeks.”
Walt Wheeler says he has good drivers for his 12 trucks. Landstar Ligon, the North Carolina resident’s carrier, checks the drivers’ qualifications, while he does the interviewing.
“Driver turnover is minimal until you get to the end of the year or the beginning of the new year,” Wheeler says. “Drivers who have not saved money and planned for the slowdown leave at that time of the year. We also lose them to them buying their own trucks.”
Prospective employees are initially put off when Wheeler tells them they have to buy their own fuel for cargo and straight trucks, which get much better mileage than semis. “It’s hard to convince tractor-trailer drivers they can make a decent living,” he says. “We show them our records.”
Patrick Monihan, who has about 30 drivers in his Cleveland-based small fleet, agrees communication is essential. His drivers know they can call anytime. “That’s a big point about putting another truck on. You’ll get calls at the worst times.”
Word of mouth is the best advertising for good drivers, Monihan says. Many owner-operators hired drivers through newspaper ads, including Dale DeFullhart of Indiana. “Every time we run an ad it’s like playing the lottery,” he says. “One time our telephone doesn’t quit ringing, and the next time, we can run the same ad and not get one phone call. It’s hard for the little guys to keep up with the big carriers.”
Two’s company, three’s a crowd
One way to soften the pitfalls of owning two trucks is to own three – if not more. Overdrive‘s 2001 Market Behavior Report indicates owner-operator investment in multiple trucks doesn’t begin to pay off until the third truck is put into operation.
Jim Daniels, head of corporate development for Werner Enterprises, sees logic to that pattern: “With additional units, the costing structures are already in place, and this allows expenses to be spread over additional units.”
“Buy in threes,” says Will Yarber, owner of Yarber Express. “If you only have two trucks, if one truck goes down, it’s hard for the other one to carry both of them.” Mel Darton, owner of Trucker Tax & Accounting, agrees: “If you are going to two trucks, you better get to three real quick.”
Should you go independent?
Some say getting your own authority is essential to surviving with more than one truck. “You can’t make it leased to a big carrier,” says Mel Darton, owner of Trucker Tax & Accounting in Salt Lake City. “I have not seen any owner-operator do it with any success over the long term.”
Jim Daniels, head of corporate development for Werner Enterprises, disagrees. Having “a relationship in place with a carrier that offers business solutions and technology to the fleet owner that aid in per-truck production” is important, he says.
Dale DeFullhart of Indiana got his own authority in January to cut people out of the financial pie. It helped, but it had its price. “It created a whole new bunch of problems,” DeFullhart says. Extra responsibilities include collecting pay from customers and providing trailers for his three trucks.
Andy Currier of Seattle says he went independent last August, and it helped, although he had to sell his trucks and become a company driver this year. “I could negotiate my own rates,” Currier says. “A lot of brokers take percentage and additional percentage for using their authority and insurance. It was easier to get loads with our own authority.”
It also helped cut costs because he could open national accounts for tires, truck washes and other needs. That provided him with discounts and a statement for these services, instead of depending upon drivers for receipts.
If you work with reputable brokers and get contracts, you can succeed in a niche market, Darton says. One of his customers has three trucks seasonally hauling Seattle produce to Alaska and returning home with fish. “For that four or five months, he makes a ton of money,” he says. “Niche markets make it per load.”