A carrier’s policy on detention pay is more important than ever under the new hours-of-service rule.
There is no quick way to find your dream carrier. Pay rate and available miles tend to be the most important factors, but many owner-operators choose to run for carriers with lower rates or fewer average miles.
What factors compensate for low revenue? It may be the convenience of running for a fleet that has freight near the house. It may be the availability of particular lanes or particular freight. It may be that respect is valued more than a little extra money.
The owner-operator who chooses a carrier based solely upon one or two factors – whether tangible things such as rates and miles, or more personal factors such as convenience and respect – may well regret the choice. In spite of what’s said at the truck stop diner, not all carriers are alike. Your choice should be based upon your business plan as well as interviews with recruiters and veteran owner-operators running for the carriers in which you are interested. Consider talking to at least 10 fleets.
Your initial choice of carriers should be based upon what you need to make a living and run your business. “You can make a decent living at 90 cents a mile if you run 2,500 miles a week,” says Kevin Rutherford, a small-fleet owner who also runs The Alliance, which provides owner-operator financial services. “But you can also go broke if you don’t run your truck like the business it is.”
Many owner-operators, like Randy Dunn, won’t settle for revenue that doesn’t give them a good margin above their operating costs. “I need 70 cents a mile to run my truck – and it’s totally paid for,” says Dunn, who pulls a flat for Universal Am-Can. “I’ve been averaging $1.35 most of the last few years and making a decent living.”
Once you have culled the field to carriers who provide enough revenue and miles, concentrate on other matters, some of which will determine how much of that revenue you’ll keep.
For owner-operator John Cegalis, who pulls over-dimensional loads for DD&S Express of Baltimore, the primary concern in finding a carrier is its honesty. “I have run for other heavy haulers who had hidden charges like ‘oversized charges’ that allowed them to skim from my revenue or charge big fees to arrange for permits,” Cegalis says. “DD&S doesn’t beat me out of money.” Cegalis adds he chose DD&S because they do not have company trucks. “The temptation for a carrier with company trucks is to load them first and give them better freight,” he says.
While it is important to talk to recruiters, you will not get a well-rounded perspective without talking to owner-operators, especially on touchy issues such as forced dispatch, home time, log policy and favoritism of company trucks. Find operators who have been with the company for years and compare their experiences with those of newer ones. Keep in mind that some owner-operators, because they don’t want more trucks to compete with, may portray a company negatively.
Jan Tabers, a recruiter for Paschall Truck Lines in Murray, Ky., says the most consistently asked questions concern pay, miles and home time. “The more business-oriented owner-operators ask more questions,” Tabers says. “For instance, they ask about where the freight is strong and if they have to run New England. Very few ask about things like turnover rates. Some want to know if they will be in a drop-and-hook operation.”
To make sure you ask all the questions you should, and that you get full, accurate responses, get organized. There are standard questions every owner-operator should ask; other queries will reflect your unique concerns. Following are some of the basic questions beyond rates that you should consider asking recruiters and owner-operators.
HOW MANY MILES A WEEK DO YOUR OWNER-OPERATORS AVERAGE? This number is as important to your fiscal health as your cents per mile. Because some of your large costs, such as truck payment and insurance, are fixed – that is, they do not change with the number of miles you run – you cannot afford to run too few miles, even at a good rate. On the other hand, more miles are useless if you are barely making enough per mile to cover all costs. Also, ask if the company’s main shippers have seasonal slowdowns that would affect your average miles.
HOW MUCH DEADHEAD CAN I EXPECT AND WHAT IS THE RATE PER MILE? Companies advertise rates, but seldom stipulate whether they include deadhead. You need to know estimated deadhead and its pay rate. More than 10 percent deadhead is excessive in most operations.
WHAT IS YOUR AVERAGE LENGTH OF HAUL? The longer the haul, the more efficiently you use your earning power because you spend less time loading and unloading.
WHAT ARE YOUR STRONGEST LANES? You need to know where the freight is and where it goes. Too, there may be parts of the country you simply don’t want to run. However, if you live in an area where few truckers want to go, you have the advantage of being able to get home at will and for a good rate. On the other hand, the rate outbound may be depressed. If you work on percentage of revenue, this is a significant issue.
WILL I BE REQUIRED TO LOAD AND UNLOAD? Some carriers provide a set amount to pay lumpers, which sometimes might not be enough. Some carrier ads may read “100 percent no-touch freight,” when in fact you might be forced to unload if the fee for lumping exceeds the amount the company will pay. Also, check to see if that fee is reported as taxable income on your statement.
WILL THERE BE MULTIPLE-STOP LOADS? If there are, will you be paid for each stop except the last, or a flat fee? This is a more significant question now, given the limitations of the new hours-of-service rule. Too many multiple-stop loads can affect your ability to run hard when you need to do so.
IS YOUR OPERATION DROP-AND-HOOK? Drop-and-hook has always saved time, but the new hours rule makes it more beneficial than ever not to be bumping too many docks because you can get more driving hours in your on-duty cycle.
DO YOU HAVE DEDICATED RUNS? Companies having dedicated freight may require you to qualify, based on where you live or other factors. Learn how it works.
WILL I BE ALLOWED TO TRIP-LEASE? Trip leasing is a dying institution, but some companies will allow you to broker freight if you’re facing a deadhead from the middle of nowhere. They may charge a fee. Owner-operator Dunn, for example, says Universal charges 20 percent if the carrier finds the load and 10 percent if he finds it. It may gall you to discover such costs later on, so learn the allowable conditions and terms beforehand.
HOW OFTEN WILL I GET HOME? You don’t want to deadhead hundreds of miles every time you want to get home. If your company does not have regular freight headed into or through your hometown, you need to evaluate what kind of schedule and costs you’ll face to get the home time you want.
AM I REQUIRED TO RUN IN THE COMPANY’S FUEL SYSTEM? It’s usually cheaper to run in the company’s fuel system, but you may occasionally run into cheap fuel outside the system or find yourself outside the system in need of fuel. Is there a penalty for fueling outside designated fuel stops?
CAN I REVIEW A SAMPLE SETTLEMENT AND A COPY OF YOUR LEASE CONTRACT? Any carrier that says no is suspect. To protect yourself, have a lawyer and accountant check out the documents.
DO YOU HAVE A COMPLAINT RESOLUTION PROGRAM? If there is no program, take heed. If there is, ask owner-operators how it works and how fair it is.
IS THERE A REVIEW BOARD TO DETERMINE IF AN ACCIDENT IS REPORTED AS PREVENTABLE? You want every possible avenue for protecting your driving record.
IF THE FLEET HAS COMPANY TRUCKS, WHAT IS the POLICY for DISPATCHING THEM AND LEASED TRUCKS? The practice of running good freight around owner-operators to load company trucks is common. If you can get a satisfactory company policy in writing, you can at least raise serious objections if the policy is broken.
DO YOU BILL DETENTION TIME AND, IF SO, HOW MUCH OF THAT WILL YOU PAY ME? Because of the new hours rule, some carriers are charging detention more aggressively, while others fear losing customers. Not billing detention is now a double negative for owner-operators because of the hours rule: They get nothing for long waits and they lose productive wheel time.
IS THERE ANY TIME AT WHICH DISPATCH BECOMES FORCED? It is not typical to force owner-operators to take freight they do not want, but you need to know the policy and the unstated practices. Turning down freight may hurt your reputation within the company if done too regularly.
WHAT IS YOUR OWNER-OPERATOR TURNOVER RATE? Industry turnover is always high, but anything over 100 percent is cause for concern. This number indicates how a company treats its people.
DO YOU HAVE A PURCHASE PROGRAM FOR TIRES AND PARTS? Discounts offered by fleets, such as those set up with truck stop chains, can save you money.
DO YOU OFFER TRIPPAK OR A SIMILAR SERVICE? Processing paperwork without such a service can be inconvenient and expensive. If it’s offered, ask who pays for it.
HOW MUCH DO YOU ADVANCE ON A LOAD? Running money is usually available, but you should know the company’s policy and terms regarding Comchek or other money service. If you need a repair or more than the typical percentage for some reason, will the company help you?
WILL YOU CONSIDER HELPING IF I HAVE a MAJOR BREAKDOWN? If your bank balance isn’t ready to handle such an emergency, find out if your carrier will stand behind you. Remember to ask the terms of repayment.
WHAT IS YOUR LOG POLICY? No recruiter will admit that pressure exists to doctor logs. But you definitely want to hear what other owner-operators have to say about how far the company will push you to bend the rules – and how much you’ll fall out of favor if you don’t give in.
WHAT ARE YOUR RIDER AND PET POLICIES? If you like to take along your wife, significant other or a child – and Fido, too – don’t forget to ask this question. Carriers’ insurance usually specifies who may accompany you.
AM I PERMITTED TO ARRANGE FOR MY OWN FUEL TAX REPORTING? Some owner-operators like to do this to avoid paying the administrative costs imposed by some carriers.
Remember that you are not a potential employee, so don’t act like someone looking for a job.
As a business partner with skills and equipment to offer, you deserve respect, clear and candid information about every aspect of your potential working relationship, and a willingness to discuss your personal concerns, such as home time and pet policy. A recruiter willing to treat you in that manner knows that you will make money for him, as well as foryourself. Don’t settle for anything less.
PERSONAL APPEARANCE COUNTS
For some larger fleets, the initial hiring process for a new owner-operator might consist of nothing more than a background check and a phone interview, says John Merkel, a former recruiter.
“I have to get a feel for somebody over the phone, and then they can come to orientation,” Merkel says.
Whether your first meeting with carrier personnel is at orientation or before, you should dress appropriately and present yourself accurately.
“The attire should fit the job,” says Gerald Carter of Carter & Associates, a consulting firm in Dadeville, Ala. “Truck drivers are OK as long as they’re clean.”
Being overdressed for an interview is not a problem. Being underdressed is.
“I don’t expect anyone to come in wearing a suit,” says Dana Workman, co-owner of Cottonwood Creek Inc., a 12-truck fleet in Louisville, Ill. However, “I like to see someone who’s neat because they represent me when they’re out working. I don’t want the first impression our customers have to be a bad one.”
Swearing, chewing tobacco or gum, eating and smoking are generally unacceptable at an interview. “If they come walking in with a burning cigarette, I think that’s inconsiderate,” Workman says.
Carter says someone being interviewed needs to demonstrate a healthy balance of giving complete answers and asking pertinent questions.
“The interviewee doesn’t need to control the interview by constantly talking and not listening to the questions,” he says. “Just go in there and be yourself. If they don’t want you, then it’s not the job for you.”
LEARN WHAT YOU’LL EARN
The ads call out to you from the pages of every trucking magazine: $500 sign-on bonus! We pay 100 percent fuel surcharge! Free base plates! Paid loading/unloading! Sign on today and get 100 gallons of free fuel!
With so many carriers recruiting owner-operators and so many factors to consider within each pay package, it’s no wonder that nearly a third of respondents to an Overdrive survey said they have a tough time estimating revenues from advertised compensation packages. And the confusion doesn’t lessen once they lease on. “At least 75 percent of the owner-operators I do business with don’t understand their pay deal,” says Russell Fullingim, a former trucker and owner of Truckers Financial Service in Corning, Calif. “They don’t have a clue.”
To make matters worse, many recruiting ads are designed to woo owner-operators, not necessarily to provide good information, says Richard Snyder, director of recruiting for Crete Carriers. “I’m not saying they are being dishonest,” he says, “but they’re not being honest, either.”
That’s because many important qualifications related to compensation and other costs and benefits can be obscured in the fine print of some fleet advertising, says Mike Norder, a spokesman for Schneider National. Referring to disclaimers in fine print, he says, “There are too many asterisks in pay ads.”
All of this makes comparing pay packages a time-consuming, often frustrating, endeavor, says Atlanta owner-operator Anthony Howard. “Sometimes there are stipulations you don’t know about until pretty late in the process,” he says.
It matters little whether a carrier says it pays 96 cents per mile or 98 cents per mile, says owner-operator accountant and business consultant Kevin Rutherford of The Alliance. “It’s not an important number because it’s not a real number,” he says. “Just because a company offers 2 cents more per mile than your current package doesn’t mean you’re going to earn 2 cents more per mile.” Factors such as whether carriers pay for all miles and how they calculate miles make it difficult to make an informed decision, he says.
Difficult? Yes. Impossible? No. Owner-operator business advisers say the key is to develop a system for comparing pay packages. For example, Kelly Anderson, president and CEO of Impact Transportation Solutions, Neosho, Mo., has created a spreadsheet to help owner-operators take an apples-to-apples look at carriers. But before you can make any meaningful comparisons, experts say, you must know what you need to make each month to cover your expenses. Only then will you know if a carrier’s package is a good deal for you.
Start by adding all of your fixed costs for the year – truck payment, license, permits, insurance – any costs that do not change with the number of miles you run. Divide by 12 and add your variable costs for a month – fuel, maintenance, tolls, scale fees – any costs that depend on the miles you run and where. Divide the sum of your fixed costs and your variable costs by the average number of miles you run per month to determine your cost per mile for a given month. This is what you need to make each month just to break even.
Be sure to include non-revenue miles, such as deadhead or a trip to the shop, in your monthly mileage estimate, since those miles cost money, too. “I just talked to a guy the other day who said the company he’s going to lease to is going to pay him 55 cents per mile for deadhead,” Fullingim says. The only problem? “It costs him 65 cents to operate the truck.”
For some elements of a pay package, such as detention pay – which is becoming increasingly important under the new hours-of-service rule – it’s also helpful to know your revenue per hour driving, Anderson says. To determine this, multiply your per-mile rate by your average driving speed.
Knowing your hourly rate lets you determine if the detention pay a carrier offers compensates you adequately for the revenue you lose while sitting on a load. “The bottom line is: Know what your costs are and know what you can accept,” Anderson says. “What are you making running down the road? What are you making sitting at the dock?”
Use your break-even point and your hourly revenue estimate as you begin to gather information about pay packages. Ask carriers detailed questions about all revenue items and any cost items they cover. Plug those numbers into your spreadsheet to begin making comparisons (see sidebar). “One may offer you your base plate. One may pay your fuel taxes,” Fullingim says. “You need to put all of this down to see who’s offering what and how.”
As you begin your research, keep your lifestyle choices firmly in mind, advises owner-operator J. Travis Cockrel of Ethelsville, Ala. “It is all going to even out between how much you make and how hard you work,” he says. “If you want to be home on the weekends, you might have to take a job that makes less money.”
To make your comparisons as accurate as possible, make sure you understand some of the more confusing aspects of pay packages:
LEARN HOW MILEAGE IS CALCULATED. Ask each carrier on what system they base their paid miles. “You may have five companies who offer you 83 cents per mile,” Fullingim says. “Each one may use a different program for figuring miles. Sometimes what I figure [for owner-operator clients] is way off from what they are actually paid.”
Household goods miles give the shortest route, so they are the least desirable from an owner-operator standpoint, says Dave Goodson, a business adviser to fleets. Practical route miles (which most carriers use) average 3 percent to 5 percent more than household goods miles; and hub miles average 3 percent to 5 percent more than practical route miles, he says. Most owner-operators would like to be paid on hub miles, but few carriers do so.
LEARN THE POLICY – AND PRACTICE – REGARDING FUEL SURCHARGES. Find out exactly how the surcharge is computed and whether it compensates for all or only part of rising diesel prices. The best-case scenario is a carrier that bills surcharges to all clients and pays all surcharges to the owner-operator, Rutherford says. “Some say they will fight to collect it but will pay it to you either way,” he says. Talk to owner-operators leased to the carrier to find out if it pays and how often. If the carrier only pays on collection, ask for the average amount passed on to owner-operators and use that number to make your comparison.
IF PAY IS BY PERCENTAGE OF REVENUE, LEARN HOW IT’S DETERMINED. Some carriers may pay 78 percent of 100 percent of the revenue. Others pay 78 percent of 96 percent of the revenue, taking 4 percent off the top. Owner-operators “need to find out what percentage they are getting paid a percentage of,” Anderson says.
That’s something that confuses many owner-operators, Fullingim says. If a carrier says a load pays $1.40 per mile, “they think they make that per mile, even though they may only get 75 percent of that,” he says.
But in reality, if the average load pays $1.34 per mile and the carrier pays 78 percent of 100 percent of it, the owner-operator makes $1.05 per mile. If the carrier pays 78 percent of 96 percent, the owner-operator makes $1.01 per mile. “On a 10,000-mile month, that’s a $400 difference,” Anderson says.
LEARN WHAT’S PAID FOR. Anderson cites an owner-operator friend who gets a good rate, but must carry $5 million in cargo liability insurance because he hauls high-end electronics. “That would throw up a red flag on a comparative spreadsheet,” he says.
Another example is detention pay. With the new hours-of-service rule cutting into productivity, more and more carriers are offering to pay for waiting time. But many don’t pay it if they don’t collect it. Make sure you find out a carrier’s policy on paying for detention, especially if you’ll be in a live load and unload operation, as well as other costs that vary from fleet to fleet.
LEARN THE REAL COST OF ANY CO-OP PROGRAM. “Owner-operators are very suspicious about buying through the company store,” Goodson says. “But for cash flow reasons, many do.” If you think you will make use of a carrier’s co-op program, ask what the markup is on things like tires. Ask how quickly the purchase has to be repaid.
“Make sure that the fleet is offering you something that really is a good deal,” Fullingim says. For example, some carriers with fuel programs charge owner-operators a surcharge of $1 to $3 each time they use the card, he says. “That adds up to anywhere from $300 to $900 per year,” he says. “It’s worse than using an ATM.” On the flip side, you may be able to buy fuel at a cheaper rate than you could on your own. The only way to know for sure is to crunch the numbers.
Too often, owner-operators who change carriers are wooed by a hefty sign-on bonus or the promise of 2 cents more per mile than they currently earn. “But you can’t just look at the top line, you have to look at the bottom line, as well,” Schneider’s Norder says. The only way to do that is to know your costs and get as much comparative information as possible from each carrier you’re considering. If owner-operators do that, Crete’s Snyder says, they’ll know if making a change makes sense. “Sometimes the best thing we can do is reaffirm that they’ve got a good deal,” he says.
–Lorna Lindquist contributed to this article.
HOW TO FIND AND COMPARE REAL INCOME
Use this spreadsheet to compare carrier compensation packages to help determine where you would earn the most money. For an Excel version of this spreadsheet that automatically does the calculations, log onto THIS SITE.
1. Estimate the MONTHLY MILES that you will run, based on your available time and the carrier’s promises.
2. Put in the carrier’s advertised MILEAGE PAY. If the carrier pays on percentage of revenue, ask for an average rate per mile that its owner-operators make based on percentage.
3. List any per-mile bonuses.
4. List all of the elements a carrier includes in its pay package, such as stop pay, city pay, layover, detention, load and unload. Divide each by your miles per month to determine its per-mile basis.
5. Add all of the per-mile elements to the mileage pay to determine your TOTAL revenue per mile.
6. Estimate monthly costs that either you or the carrier will cover – fuel tax, permits, tolls, etc. When a carrier covers a particular cost, such as tolls, leave that line blank. For an annual expense, such as base plate, divide by 12 to get the pro-rated cost.
7. If you’re comparing local or regional operations with long haul, also estimate monthly costs for food and other personal road expenses, which will vary depending on how many days you’re away from home.
8. Add the cost elements and divide by your monthly mileage to determine COST PER MILE.
9. Subtract the cost per mile from total revenue per mile to determine your PAy per mile for that carrier.
10. Calculate your monthly NET revenue for that carrier by multiplying your net revenue per mile pay by your monthly miles.
Once you have run revenue and cost comparisons for all carriers you’re considering, look at the factors that are tough to assign a dollar amount to, such as home time, rider and pet policies, and availability of dedicated runs. Only then can you make an informed decision that meets your personal needs and those of your family.
Based on spreadsheet provided by Kelly Anderson, Impact Transportation Solutions.