By the numbers: Migration back to leasing for more owner-ops evident in mid-year performance analysis

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Updated Oct 10, 2022


With some of the signs flashing red, as it were, on the prospects of bona fide economic recession, the indicators remained mixed for owner-operator business performance as of a couple weeks ago, the time of ATBS Vice President Mike Hosted's mid-year benchmarking presentation I initially reported on at this link. Hosted will be familiar to regular readers from his earlier-year presentation with Overdrive and our own Gary Buchs at the Mid-America Trucking Show, part of our Partners in Business program. Today's edition of Overdrive Radio dives in with Hosted for his recent distillation of what ATBS has seen since then. (The video version of the podcast up top includes most of the charts and graphs illustrating year-over-year comparisons of average revenue, costs and bedrock income that Hosted shared throughout.)

[Related: Big owner-operator revenue gains entirely offset by fuel, other costs].

His insights include plenty in the way broader economic and freight trends data. As rates on the spot markets for freight have continued to slide, ATBS, he said, is starting to see a shift for many owners who went out and got authority during the last couple of spot market boom years -- a move back to leasing as a refuge from declining rates and rising costs. 

Howes logoOverdrive Radio is made possible with the support of Howes. Find out about their diesel additives, lubricants and more via HowesProducts.comThanks to our friends at Overdrive sister publication CCJ, we can quantify that anecdotal trend to an extent. 

Every year, CCJ compiles the CCJ Top 250, ranking the most sizable freight carrying trucking fleets in the nation. The rankings are the result in part of surveying those carriers directly, with the survey running typically in the June and July months of the year. Of those 250 carriers, 97 have reported in consecutive years the number of leased-on independent contractors among operators working with them. Comparing that group for this year to what was reported in 2021, there’s been a rise in leased-on independents -- in spite of political and regulatory pressures like California's AB 5 contractor law making some carriers skittish about leasing, particularly out West.

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It's not a big number -- yet. Considered in the aggregate, those 97 major fleets were contracting with a more than 2% greater number of independents in 2022, at the height of the fuel-price shock in those early summer months, than in 2021. Whatever your situation, there's plenty to glean in this week's episode, as Hosted compares the performance of leased dry van, reefer and flatbed owners, likewise independents with motor carrier authority, among ATBS clientele. Dive in with the slides up top, or listen via the players below: 

Bonus: Listen to this week's episode to find out how you can share your winter-fuel story to get a prize pack from Overdrive Radio's sponsor, Howes, including a bottle of both their Diesel Treat and Diesel Lifeline fuel treatments aimed at combating winter gelling. 

Podcast transcript:

Mike Hosted: My name's Mike Hosted at ATBS. This is my 14th year at ATBS, so I've been here quite a while, really gotten to see a lot of ups and downs in the trucking industry in that 14 years. Started in 2008, right before the great recession and the world fell apart. Here we are kind of going in a similar direction, but it's a little too soon to tell, so we'll go through what we know.

Todd Dills: Yes, most certainly some of the signs are flashing red, as it were, on the prospects of bona fide economic recession. Though the indicators are mixed in what we'll hear today from Mr. Mike Hosted, just whom you heard introducing himself up at the top. Hosted, a vice president with owner-operator business services firm ATBS, will be familiar to regular readers from his earlier year presentation with Overdrive at the Mid-America Trucking Show and our Partners in Business program. This podcast, which you can also consider part of that program, will pick up with, as he noted, what ATBS is seeing in terms of owner-operator business performance through the first six months of this year.

I'm Todd Dills, your host as usual for today, and before we dive in fully with Hosted, I'll note that his original talk was accompanied by a variety of slides presenting owner-operator revenue, cost, and income data, as well as plenty in the way of broader economic and freight trends data. If you're listening on the traditional audio only podcast platforms, you'll get plenty out of this, no doubt. But do know there's a video version of this one that includes those slides for visual reference too. You can find it via the post that houses this podcast at overdriveonline.com/overdrive-radio in the September 30th post there. It'll also be cataloged in video form on Overdrive's YouTube channel and on Overdrive's Facebook page if you follow us there.

One major trend ATBS is starting to see, paired with generally downward volumes and rates in the spot market for freight, there's a shift for many owners who went out and got authority during the last couple of spot market boom years since the beginning of the Covid pandemic.

Mike Hosted: We saw a huge migration of ICs going from a fleet to getting their own authority and we're starting to see a migration back where those folks that went and got their own authority are struggling to get the rates they need and that has caused a big migration back towards major motor carriers.

Todd Dills: Thanks to our friends at Overdrive's sister publication CCJ, we can quantify that anecdotal trend just a bit this year. CCJ every year compiles their top 250, ranking the most sizable freight carrying trucking fleets in the nation. Rankings are the result in part of surveying those carriers directly, with the survey running typically in the June and July months of the year. For both this year and last, 97 out of the top 250 carriers reported numbers of leased-on independent contractors among owner-operators working with them. Comparing that group for this year to what was reported in 2021, there's been a rise in leased-on independents this year for sure, in spite of political and regulatory pressures like a AB 5 making some carriers skittish about leasing, particularly in California.

Those 97 fleets considered in the aggregate were contracting with more independents in 2022 at the height of the fuel price shock in those early summer months. It's not a huge uptick in numbers among them that we're talking about, just a little more than a 2% rise in the aggregate, but perhaps reversal of the trend toward motor carrier authority for owner-operators that's been so prominent during the very long spot freight upcycle the last couple of years. Hosted digs much more into those cycles in what follows.

Before we get there, though, I wanted you to know I'm sitting here looking at several boxes worth of swag from Overdrive's radio sponsor, Howes. Among all of it, are a couple of cases of their diesel treat and diesel lifeline products aimed to preventing and correcting, respectively, problems with winter fuel gelling. If you have experience with that issue, and particularly if you've been a Howes customer, tell us your story to win a prize pack including a bottle of each of those fuel treatments in addition to more. You can do that by leaving us a message at 615-852-8530 with your winter fuel story and or how you use Howes products. We'll be in touch to make sure we've got the right shipping info for you, if you do. That number again, 615-852-8530. Okay, on the other side of the break, we'll jump right in directly with Mike Hosted for a roundup of economic indicators.

Mike Hosted: Controlling your fuel costs and making sure you have a big, big maintenance reserve right now are the two things you need to start with to make sure your business is going to be successful for the long term.

Todd Dills: There's much more where that came from about how ATBS client owner-operators are performing and just what you can do to get ready for a big downturn possibility.

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Mike Hosted: First off, I'd like to start by talking about the economic environment of trucking. We all hear anecdotes, we all hear chatter on the CBs and everything else about what's happening with trucking, what rates are doing, how fuel's impacting things. This is real data, so this is going to give us a real clear insight as to what's actually happening, what we're seeing and averages across the independent contractor programs, so we're going to see a lot of good information here.

The first thing I want to start off talking about is the spot market. We'd like to talk about the economics and what we're seeing. First off, let's talk about that spot market. We've all seen what's happening, we hear about it, but here's some raw data for you all to really gauge what's happening. Just for information on the left hand side you see zero to 250, that is going to indicate the number of loads on the spot market per one truck looking for a load. You can see it goes all the way up to 250 and then the red line is what we consider the breakeven point. If it's above that red line, that means things are better for the independent contractors, the truckers out there, where they have more negotiating power, they really have control of the situation.

If we're below that red line, things are probably going to be a little bit better for the shippers because there's rate pressures and there's just not as much freight to be hauled. Generally speaking, if we're above that red line, things are really good for you all. If we're below that, it's a lot tougher to run in the spot market. This holds the test of time. If you look in the middle here in 2018, things were really good in trucking, Really, really good. I'm sure most of you remember that where we were above that red line. We saw rates go up to $2.55 back in 2018. 2019 was not a good year and early 2020 of course was a disaster because we didn't know what was going to happen in the world.

But then coming out of that Covid scare, we really skyrocketed up to all time freight levels. There was a bunch of freight to be hauled, there wasn't enough trucks, there wasn't enough drivers of you all to haul all that freight, and so we saw a huge, huge demand for truck drivers to haul freight. It really peaked kind of late last fall where we were seeing about $2.40 loads per one truck looking for a load in the spot market, which was an all time high and continues to be that all time high and rates ballooned up to $3.23 a mile on average. I know some of you all saw rates way higher than that, but that was the average rate.

Things got really, really good and it was still really good up and through March, April of this year and things really kind of fell off a cliff since then. With the crisis in Ukraine, fuel prices skyrocketing, a lot changed here in the last 4, 5, 6 months and that happened to really impact freight, so what we really saw was starting in May, things got a lot tougher to be in the spot market. What we last saw two, three weeks ago was there were only 65 loads per one truck looking for freight and rates have gone down to $2.83. Well, since I put this slide together two weeks ago-

Todd Dills: Hosted was speaking just about two weeks back from the date of this podcast airing on September 30th, 2022. The dynamics he's about to describe here have only continued since, as well.

Mike Hosted: It's fallen even further, so now there's about 55 loads per one truck looking for a load. Rates have gone down to about $2.63 in the spot market and in the spot market as most of that's an all-inclusive rate, there's no fuel surcharge, that's baked into the rate. Rates have really fallen off in the spot market as of about May and continue to fall. That really tells us that it's really shifted in the favor of the shippers and things have gotten a lot harder. We saw a huge migration of ICs going from a fleet to getting their own authority and we're starting to see a migration back where those folks that went and got their own authority are struggling to get the rates they need and that has caused a big migration back towards major motor carriers.

That's big picture spot market. When we get more granular, what I did was I backed out the fuel surcharge. Again, the fuel surcharge is baked into it, so what I did was took the average from that time and really what you can see is again, in 2018 things were really good. After we subtract out the fuel surcharge, rates were about $2.22 a mile. 2019, as I said, things got really tough and it went down to about $1.70 after we backed out the fuel surcharge. Early Covid rates were about $1.90, and then when things got really, really, really good at the peak there, we were seeing $2.50 rates even when we back out the fuel surcharge. But as of now, because of that high fuel cost, rates have gone down to $2.13 and again, since I put this together, they've actually fallen below $2 a mile in the spot market on an average rate.

The spot market's gotten considerably tougher recently and I know that especially you all that run in the spot market have felt that pain. It's just been a big dynamic shift. That's the spot market. We've seen a big shift downwards over these last 4, 5, 6 months in terms of the number of loads available, but also that rate given to you, especially once we back out that fuel surcharge because fuel's gone up so much. That's the spot market. It's important to understand the spot market for sure.

Not a lot of us run on the spot market though, so this is a completely different view. This is the Cass Freight Index and this shows us major shippers, major motor carriers' contract rate that you're going to see at the major carriers of the world. This chart, the blue graph shows us really the number of shipments that are being hauled, purely and exactly how many shipments are being hauled and how much is there demand for that. Again, this stands the test of time. In 2018, things were really, really good. We know that, we felt that, we saw it. 2019, things got pretty poor and we saw a number of shipments drop. Early 2020, the world kind of shut down and we saw an all time low in terms of number of shipments and then coming out of that Covid phase, freight just skyrocketed. We saw shipments go up, everything went up, and really what we've seen in the last six months is that things have really just leveled out.

I think the important thing to get out of this is that the last two years have been the best freight market we've ever seen. Generally speaking, when we get a really boom freight market, it lasts six, nine, maybe 12 months at most. But because of what's happened in this Covid time and all this capacity shortage, truck shortage, you name it, it lasted longer. What normally happens is when freight gets really good, like it was the last two years, trucking companies go out and they buy a bunch of trucks, they hire a bunch of drivers and they flood the market with capacity in trucks and things like that, which crashes the market and normalizes it and takes it back down.

But because there were no new drivers, you couldn't go to school, because there were trucks that you couldn't buy, they were really expensive or they just weren't available because OEMs weren't putting them out, we really saw a big boom freight cycle that lasted considerably longer than what we normally see, so really what we're seeing in 2022 is things are really just normalizing right now. It seems like it's bad but it's not. It's normal. It's just things have been so good the last two years that we've honestly kind of gotten spoiled. I know it's still kind of shifting downwards and we haven't gotten to the exact equilibrium yet. We don't know exactly where we are, but right now things are normal.

What I tell our clients and what I tell our trucking companies that we work with and everybody that I talk to is if you back out 2020 and 2021, if those didn't exist, we would still be at a pretty decent freight market right now. Things were so good that it seems like things are bad right now. Hopefully that makes sense. That's the number of shipments. Again, we're pretty much normal, not bad, not good. We're very normal.

In terms of expenditures though, rates are still at all time highs. Rates, at least a contract rate with major carriers, major shippers, things like that, are still at all time highs. Again, you look at 2018, things were pretty good, expenditures were high, 19 and 20, they kind of fell down and then we peaked again in 2021. We peaked with all time high expenditures and while we are trending downwards, rates are still at all time highs above where they've ever been in the past.

I think it's important for us to realize that again, we do know it's shifting downwards, we can feel it, but they're still at all time highs if we back out the last couple years. It's just important to keep that in mind and realize that hey, freight has gone down, it is a little bit tougher, but it's still better than normal times if we think about it in that context. That is what we see in the market. I get the privilege of helping partner up with motor carriers that way we can deliver a cheaper, better service to you all. I get to talk to a lot of big carriers around the country, small and big, and I get to understand how they're feeling and get to convey that to you all, so that's a really, really cool thing that we get to do and get to share that information with you all.

What are the fleets seeing right now? The larger fleets, the big ones of the world, the Swifts, the Schneiders, the JB Hunts, they're seeing very little rate reduction pressure right now. Again, we saw the spot market pressure has really kicked in and hurt drivers, but the contract freight really hasn't seen much downward pressure yet. Those major carriers that work on 2, 3, 4 year contract rates, haven't seen much reduction pressure yet, which is great. That means things aren't really that bad. It means we're, again, we're equalizing, carriers are telling us it's easier to find drivers right now than it has been the last two years, which makes sense, especially what we call hired guns, which would be someone with their own truck. People with their own truck, as we had already discussed, maybe they went out and got their own authority and they were brokering their own freight the last couple years, well that's slowly becoming a losing proposition where you can probably go run for a big motor carrier and do just as good if not better, but also avoid those headaches and we'll get into more details about that.

Some of the smaller fleets out there are definitely feeling more pressure though, and that's very apparent. A lot of the smaller companies used the boom market the last couple years to go out and run some of that spot market freight and maybe gave up on some of their contracts. Well they're not getting those contracts back so easily and so they're feeling a lot more pressure at some of the smaller carriers right now.

One thing that's notable and we're going to see throughout this, is that flatbed rates have been going down for a few months now. That indicates a couple of things. One thing is that there's a building slow down. That means construction companies, housing builds, things like that are slowing down and that's because interest rates have gone through the roof. The Federal Reserve has taken initiative to curb inflation and by raising interest rates, that's their goal is to get inflation under control. But with that easy money isn't there, so building does slow down.

Generally speaking, the flatbed market is a pretty good indicator of economic times. If flatbed rates are on fire and flatbed's moving building materials, that means the economy's good because there's construction jobs, there's excavating jobs, there's freight moving for building. But when flatbed rates go down, that's generally a leading indicator that the economy itself is slowing down, jobs are going to become harder to come by and things like that. It's too early to put that nail in the coffin yet and say that that things are bad and that the economy's slowing down. Again, rates aren't terrible in flatbed but they have gone down consistently the last few months. We'll keep our pulse on it. I'm sure there's some flatbeders on this call that have felt a little bit more pain recently, but either way it's too early to really say that things are bad and that the economy is shutting down. That's just kind of a general anecdote.

Todd Dills: Here Mike Hosted broke down stages of a somewhat prototypical career journey for an operator in trucking. In part to define the terms he uses occasionally, you heard him mention "hired guns" a moment ago. That's a term that describes in the framework of the journey of a truck driver an owner who leases their own equipment to a motor carrier. The journey he described goes like this:

  1. Company driver, pretty self-explanatory.
  2. Pioneer. This is a term of art for a company employee driver who decides to explore business ownership maybe in a lease-purchase for a motor carrier or other entity.
  3. Hired gun. As already noted, a truck owner leases to a motor carrier.
  4. Lone ranger. An owner-operator with motor carrier authority now competing directly for contract freight and or working the spot freight market. Finally…
  5. Trailblazers, those lone rangers who add trucks and grow a small fleet.

The last couple of freight boom years’ worth of migration up that ladder to the last two categories is now in something of a reverse trend, as we illustrated at the top and as Hosted went on to note himself here further.

Mike Hosted: For the last two years, we saw a big migration of company drivers, lease purchase, hired guns move out into this open market. Right now we're quickly seeing these lone rangers and trailblazers move back to motor carriers. Just a different shift, different dynamic and it's a good indicator of economic times. Now let's get into the fun part. That's what we see on the rates as a whole. The spot market has shifted downward. You can still make money at it, but it's become considerably more difficult.

However, contract rates at major carriers, especially dry van, have remained consistent so far and we're going to continue to see that throughout this analysis. Essentially what I do is I take the last 12 months and I look at them versus the previous 12 months. What we're looking at here is we're looking at 12 months up through the end of June versus the 12 months prior to that. It's really a year-over-year analysis of what's happening in trucking and what we're going to see.

To get started, let's look at miles. Miles have gone down 10.7% for the average independent contractor in the last year. That's a huge, huge number when you think about it. Our average client is now running just over 90,000 miles on an annual basis. That's a big, big drop and it was surprising to me to see that because I know things got harder here towards the end of the second quarter. April, May, June, things got a little bit harder. I was expecting miles to start shifting back up, but they haven't yet. I think there's a lot of reasons behind that. You all probably know them better or as well at least that than I do. But I think there's a lot of reasons that continue to push miles downward.

First of all, one is a quality of life. If you can do just as well working four or five days a week and make that money you need to support your family, go home. Go home, see your family, you've got to be able to have that work-life balance. I think this really good freight market has allowed most of the independent contractors out there to get a little bit more balance in their life, and I hope so. I think that's part of it.

I think there's a lot more though. I think one of the reasons is because we're seeing huge delays at shippers right now and I think you all feel that pain pretty consistently. There are huge delays when you get to a shipper or a dock where you have to wait for unload or load time where it's really taking away from your hours of service and your inability to run freight. I think that's a really big fact that a lot of people are missing is this supply chain shortage and this labor shortage is impacting you all's ability to get to the next load. I think that's a big part of this.

You add that in with the quality of life, and then also I've heard a lot of anecdotes from our business consultants here that when fuel went way up, some people just didn't run as much. They said I'm not going to run, I'm going to park my truck until fuel comes back down. That of course impacted miles, too. There's a lot that goes into this and there's probably more reasons than that, but I think that's a big part of it is miles continuously go down. If things do get tougher in trucking, folks are going to have to start working a little bit harder to get that same income and meet those income needs and household needs. We haven't seen that shift yet where people are starting to run harder to make up for lower freight, which tells us things are still okay, so that's a good look at it.

Now this is miles over time and this is really interesting to me. When you look at it here, back in 2003 when we started tracking this data, our average client was running 12,500 miles a month. Can you imagine? I mean that's just not even possible now. Almost 140,000 miles a year. Crazy to think about. But then we followed the timeline here. In 2008, we kind of hit a valley here and then that's when the great recession started. That's why I say when things get tough, you can see in 2009 miles pick back up, so you all react according to what you need to do. It really shows here on these kind of charts where 2009 things got tougher, ICs started to run more miles because they needed to make up for that lost income.

Things got pretty good in 2018, way over here to the right and miles fell off a cliff again and then 2019 things got harder, and early 2020 things got harder, miles picked back up. But then ever since coming out of that Covid tick there we had, miles have been going down and they haven't started going back up yet, which again tells me things are probably still okay because you all haven't had to work harder, too much harder. I shouldn't say that you all haven't had to work too much harder to meet those income needs, but that could be shifting so we'll keep our pulse on it and you guys see it every day better than I do. It's just interesting to see over time what's happening with miles and how you all have to react out there on the road.

Next up is revenue per mile. Revenue per mile went up 22.5% year over year. Our average revenue per mile was $1.90 a mile. You can see in the bottom right here I have that broken down by segment. I've got the drive and average revenue per mile, the reefer, the flatbed, and then independents, that's those out on their own authority. That's the average revenue per mile we saw over the last year. You can see it went up month by month where it got pretty darn high towards May and June. That 22.5% increase or that 35 cents a mile was pretty much all from the fuel surcharge. We're going to see this theme where you all made more revenue, you all made more money per mile, but it all went out the tailpipe. Yes, it's great to have more revenue and more revenue per mile, but the cost of extra fuel pretty much offset all that incremental revenue unfortunately and we'll see that trend.

I'll spend some time here because I think it's important for everybody to understand the spot market and getting your own authority. I'm going to skip to the next one because it's the same slide, but more detail. This is our analysis. We believe in order to go run this spot market, you do need to earn about 52,500 more in revenue versus the average motor carrier. You need to earn about 48 more cents a mile versus the average motor carrier just in order to break even running on your own. Why is that? There's all these reasons listed. You have to get your own licenses, permits, pay your own IFTA, you have to do the additional insurance, which if anybody's in this, you know that the additional insurance to be out on your own is extremely, extremely difficult to get, extremely expensive. Our minimum additional cost for insurance is 12,500. It's probably more than that though.

You also have to have your own trailer, right? I mean if you're on your own, you have to have your own trailer, you don't have a big trailer pool. That's an annual cost of $7,000. Right now, if you can find a trailer, it's probably going to be more than that. Trailers are extremely expensive and extremely hard to find right now. You also have to book, bill, and collect loads. You've got to send out invoices and collect money and that's extremely difficult, frustrating, and expensive. Then the biggest thing is operational losses. When you're on your own, again, you've got your own trailer. If you're sitting at the shipper and they don't want to unload you for 10 hours, you're stuck. You can't unhook and go pick up another trailer and move on to your next load. You've got to wait for them to unload that trailer. That's where we kind of came up with this number. Really you're looking at about $52,000 or about 50 cents more a mile you need to earn on the spot market versus running for a motor carrier.

You can see here, I'll back up, over time we've got our break even line here, 2018 things were really good. You can see again that it was advantageous to go out and get your own authority, run on your own. 2019 things weren't so good. The last couple years have been very, very good where you could earn upwards of a dollar or more a mile in the spot market versus a motor carrier. Then we fast forward and it was good, good, good, good all through. This is a more condensed view. Up through April, things were good in the spot market and then all of a sudden in May it really fell off.

Right now, you can earn about 44 cents and as of today, I believe you can earn about 38 more cents per mile in the spot market versus the average motor carrier. But you earn that 38 more cents a mile, it costs you 48 more cents to get there. It's a big losing proposition right now to run in the spot market if you aren't doing things right. Again, not to say you can't be successful there, you certainly can, you can negotiate, you can have dedicated lanes you run for certain shippers. I mean you can still do really well there, so don't get me wrong, it's just on average it's become a lot tougher. Again, that's versus the average motor carrier. There's some really good ones out there where you can make quite a bit more than you can in the spot market right now.

This is just a different view at it. I'll skip through it really quickly, over time, but the blue is the spot market. The red is lease to a motor carrier. And again, this is just a more condensed view where you can see that gap was really big. That means it was really good in the spot market, you can make more money there. But things changed. As of May, things changed where that difference has really changed. I got this red text down here, but really what it's telling us is, hey, if you go run the spot market, you're going to earn $44,000 more in revenue, but it's going to cost you $52,000 to get there, so really you're in a big losing proposition where you're probably going to lose about 10 grand in the spot market right now. Again, that's not universal, that's averages, but that's what we like to look at.

Just be informed, make good decisions, ask questions, and really do a good budget when you're looking at that to make sure it's what you can do. For me, if I were you, networking is the biggest thing, if you want to go out and do that. You really got to start networking. You really got to build rapport with agents and get to know people. Right now is probably not the time to go out, but right now is the time to start building that relationship. That way the next time things do get really good, you have the ability to flip that switch. Hopefully that makes sense.

Revenue, we'll skip through this quickly, but revenue is up 9.4%, about $11,500. Again, most of that's going to come from fuel, so nothing too big to report here. Revenue was definitely up across the board, but again most of that was because of that increased fuel surcharge. That's where we're at with revenue. Miles are down, revenue's up, so that indicates things are still okay overall.

Now we'll get into the fund part, which is the cost of stuff. We all know the cost of everything goes up. It has been consistently for a while now and that's everything. That's stuff on the shelves, that's fuel, that's tires, that's maintenance, that's maintenance wait time, everything's got more difficult to run a business. We're going to talk through that and just go over some analysis. First off, fixed costs year over year, they're only up 1.3% and fixed costs are things you pay for everyday. That's your insurances, your truck payments, things like that. Not a huge increase actually in terms of fixed costs year over year, only up about 650 bucks. What really went up was variable costs and the majority of this came from fuel, if not all of it came from fuel. Variable costs year over year are up 26.3%, are up $14,000, pretty considerable.

The other thing I would point out is variable costs per mile up on this chart here. In June, our average variable costs per mile, were at a dollar five a mile. That tells me it's costing you a dollar five a mile to run your truck down the road right now. That's pretty incredibly high. It has gone down since then. Fuel's steadily gone down so it has gone down, but it's still a pretty big cost to run your truck down the road right now. Total costs overall, right now the average total cost went up 14.2% or $15,000 a year. The average IC right now, it's costing them almost $121,000 to operate their business. That's incredibly high. Again, part of that is because fuel went up, but it has become very expensive to run your truck. Again, if we look at this bar graph here and these line charts, back in June it was costing the average IC $1.65 to run their truck down the road.

Now there are programs that have lower costs and things like that, so this isn't universal, but just a very high cost. Our average over the last year, it's cost $1.35 just to run your truck down the road. Fixed and variable costs. Costs continue to skyrocket. We see that, we know there's pain there for you all, but the best business owners are able to really do well in this market right now and we'll get to that shortly.

Next is fuel. Fuel, we all know we all felt, up 52.6% year over year or up 21 cents. The average in the last year was 60 cents a mile in fuel costs, 60 cents. Again in June, we were at almost 85 cents a mile that it costs you to put fuel in your truck. Now a good portion of that gets offset by the fuel surcharge, right? That's what it's there for. What I tell our clients and what you all need to continue to think of is if you're running for a motor carrier and you're getting fuel surcharge, you need to understand their basis. Most motor carriers have a basis of six miles to the gallon, okay? Some 6.5, but you can ask your carrier, you can figure that out, and so what that means is as long as you're meeting that basis, that six miles to the gallon for example, as long as you're getting six miles to the gallon, the cost of fuel should not impact you whatsoever because that fuel surcharge is put in place to make sure that the fluctuation of fuel doesn't impact you.

The best ICs will tell you that when fuel is high, they do the best they've ever done. The reason they say that is because if they're getting 7, 8, 9 miles to the gallon, they're actually going to start making money on fuel because of that high cost and that high fuel surcharge. The best operators right now are running more miles and they're doing it more efficiently and they're making the most money they've ever made because of those high fuel costs. That's really important for you to understand that and it's important for you to know that basis wherever you're running, hey, what is this based on? If it's six miles to the gallon, well as long as you're getting six miles to the gallon, you're going to be doing great.

Another fun thing I'll tell you is right now the difference between six miles to the gallon and seven miles to the gallon is about $10,000 cost a year. The reason that's so important is every dollar that you save, you get to keep. If you go from six miles to the gallon today and adjust your habits and slow it down a little bit and get seven miles to the gallon, that $10,000 goes right into your pocket. That's really important to understand and think through when you're driving out there. I know there's load scenarios, there's logbook scenarios, there's things you got to deal with that don't always jive with that load or whatever it may be. But if you've got time on a load, slow it down and get better fuel mileage because every penny you save is going to go directly into your pocket and you can earn more money by doing more miles, doing more loads. But every load you take, every mile you run costs you something, every dollar you save is free money into your pocket.

It's important that you really focus on the cost side of things when costs are high like this because every penny saved is a penny earned. It's just an old saying and it's really true, especially with fuel right now. The general anecdote is for every one mile per hour you slow down, you get a 10th of a mile per gallon in fuel efficiency. If you're driving 75 and you're getting six miles to the gallon, theoretically if you slow it down to 65, you should be getting seven miles to the gallon. Again, if you have time, make sure you're doing that and you're doing the right things to put that money back into your pocket.

Another fun one is fuel mileage. This one's really interesting to me and it should be to you all too because as we just discussed, fuel mileage is super important right now with this high cost of fuel and it's your biggest cost but also the one that you can impact the most and you can impact overnight. I'll get to a micro view here. We're going to look at the last four years and we're going to look at the fuel mileage here.

On this chart here, we can see in 2018, 2019 we're getting about six miles to the gallon. In 2020, we spiked. Early 2020, we spiked to all time high fuel mileages. I couldn't put my finger on it for a while, but then it became really apparent it was the lack of congestion. That was when the world was shut down, nobody was commuting to work. A lot of our clients told me that was the most fun they've ever had driving, was back in early 2020 when the Covid stuff was happening because they didn't have to sit in traffic, they didn't have congestion, they could run at their own pace. That's since changed of course, and we continue to see more people on the road, more people going back to work. It really went back down after that and that makes sense. We always see a dip in the winter months because idle time's up. There's also winter blend fuels which make it harder.

But I was really expecting fuel mileage to go up this year. You hear so much about the cost of fuel, how it's really impacting drivers' ability to make good money. But people haven't really slowed down yet. The best operators certainly have and they're seeing all time high profits. While I hear a lot about fuel and how it hurts the bottom line, I haven't seen a lot of change in habits yet. Again, that's why I suggest to you to really look at those numbers and understand it because that's something you can change right now to put more money in your own pocket. Just think about that fuel mileage, it's your biggest cost. A lot of people haven't slowed down yet, that tells me either they haven't had to or aren't willing to. Either way you can make that adjustment overnight and really that's going to impact your bottom line.

Another just different look at it, this is fuel mileage by segments. Again, nothing too big in terms of drastic changes. The one that stuck out to me was the people on their own authority are the only ones that had a big uptick in fuel mileage. Well, we talked about it. You don't make changes until you feel pain. You don't run more miles, you don't slow down, you don't do things until you feel pain. Well, guess what? We talked about it. The people on their own authority are the ones that felt pain already and they're the only ones that have changed their habits it looks like so far.

Hopefully you guys could take something out of this and look at your business and just kind of analyze those numbers. Does it make sense? Because it might. I'm not telling you what to do, I'm not telling you how to run your business, but I am telling you what you can do to possibly impact and put some more money in your pocket.

We saw revenue was up to $1.90 on average. Again, we got many clients, many carriers well above that. That was up 22% or $1.90. The revenue was up $14,700, but the cost of fuel completely offset it so $14,700 up in revenue, but $14,400 up in fuel costs. All that incremental revenue gains we saw over the last year, as I said, kind of went out the tailpipes unfortunately in terms of fuel costs. Again, those good operators have run more miles and have increased their fuel mileage and did not have that big of an increase in fuel cost. All that money went in their pockets and you can do the same.

Truck payments, this is a long cycle of truck payments. They continuously go up. They kind of peaked in December though, which surprised me. But if you think about it, there's a big delay in terms of shipments of new trucks and orders and things like that, so maybe these rising prices haven't come to fruition yet to you all and let's hope that's the case. One thing I have noticed though is the used truck market has started to fall a little bit. It's still extremely high, don't get me wrong. It's still extremely high to buy a used truck right now, but it has started going on a downward direction, which we haven't seen for a couple years.

There are more trucks available. There are people that maybe were out in the spot market and said, "Hey, you know what? This has gotten tougher. I'm just going to sell my truck and be a company driver or maybe even leave the industry." That's kind of opened up some trucks. But when you talk to the OEMs, the manufacturers, they're still pretty far behind on deliveries, so brand new trucks are still a premium. They're still pretty hard to get. Major carriers aren't getting their full allotment, so they might order 2, 3, 400 trucks and they're not getting all of them.

Another really interesting thing that I've heard from a couple carriers is they'll put in an order for say 200 trucks, just as a random example, and they'll sign the contract and say, all right, I'm going to pay X amount for these 200 trucks. Well that OEM, Freightliner, Peterbilt, whoever it may be, Kenworth, Volvo, you guys know them all, they'll come back to that carrier and say, "Hey, I know you signed this contract, but our costs have gone up, so here's the new rate. I know we already signed the contract for 150,000 per truck, but guess what? It's now 165,000 per truck. If you don't sign this new rate, then we're going to give it to somebody else."There's an incredible amount of demand still for those brand new trucks, which tells us that the rates are still going to go up on the price of trucks, unfortunately.

This one shocked me and on initial look, I think it'll shock you all too. Maintenance year-over-year was down 3.5% or $404. When you think about that on a big picture level, you say, "What the heck? That can't be true, right?" Well, when you really dive into it, miles were down almost 11%. That tells me maintenance should be down 11%, right? I mean, if you're running 11% less miles, the wear and tear on your truck, the maintenance cost, things like that should be down 11% as well. But they're only down 3.5%. What that really boils down to here, and this is important, is the cost per mile continues to go up. While overall costs are down, cost per mile continues to go up.

If you can see here in June, our average client was paying 14 cents a mile for maintenance. That's a really, really big number and a really big deal, and I really want you all to think about that. The number one cause of failure for owner-operators right now, time and time again is a major mechanical breakdown. Number one cause by far, I mean it's not even close. It's important that you have a really good maintenance reserve set up. Some people do it by the mile, but with miles fluctuating the way they have lately, it might be better to think about maybe a fixed cost per week. Hey, I'm going to set aside 300 bucks a week automatically and it's going to be dependent on the age of your truck, what kind of freight you run. It's all very dependent on that, but it's really important that you get in tune with saving enough for maintenance because major mechanical failures are very expensive. Not only that, but it's a big time consumption project.

I hear there's not enough parts, there's not enough mechanics, there's just not enough available to get that done. We're hearing an average downtime of 10 to 21 days for mechanical failures, so yeah, sure, maybe you saved up the 10 grand to pay for that part and that repair, but did you have enough to cover your home costs for that two or three weeks? Maybe not, and so it's important that you have that big nest egg right now because not only do you have that big repair bill, but your home bills don't stop. Really think about that and really consider your maintenance fund right now because again, it's the number one cause of failure. Number two is health issues, and then number three is tax and financial issues. But by far maintenance is the biggest cost failure right now. Make sure you're setting aside money in your maintenance account, probably up it.

This is going to continue to be a problem. Part shortages aren't going away. Qualified mechanic shortages aren't going away anytime soon, so this is going to be a problem for the next couple years and I really encourage you to save money not only for your mechanical failures, but that downtime you're going to experience when it does happen. Because we know in trucking you're going to have problems. It's all there is to it. Are you going to be ready for it? And if so, you're going to survive whereas others won't. I think those are the two big takeaways and we got more to go through here, but controlling your fuel costs and making sure you have a big, big maintenance reserve right now are the two things you need to start with to make sure your business is going to be successful for the long term.

Different look at it here, this is just maintenance on the left. This is the chart we just saw. This is the people out on their own authority. They are up to 19 cents a mile, so that just shows you the power and purchasing power of working for a motor carrier. I'm not advocating for that at all, but if you're out on your own authority, what I'm telling you is you're going to have longer down times, you're going to have more expensive parts and it's going to cost you more. If you're out on your own authority, just be prepared to save more money for maintenance because it's going to be harder for you than it is for somebody running on a motor carrier.

Maintenance costs over time, and I'll go kind of fast through some of these end slides here, but maintenance costs over time. I look at 2008, 2009, we saw a big dip here in terms of maintenance. That was deferred maintenance. People weren't making enough money to service their truck and were deferring it and then once they got caught up, it was a huge spike in maintenance cost. I don't want you all getting in that scenario where you're not comfortable and you're putting off maintenance because that's going to run you out of business. We saw the same thing in 2019. There was a big dip here in maintenance costs, not a big dip, not as big, but there was a dip, people were deferring it, things got better and the cost went back up. Again, I just encourage you all to really take that and use it to your advantage and save money now. Things haven't gotten bad yet, we don't know if they will so use this time where it's still pretty decent to save up money because if things do get bad, it's going to be harder to save at that time.

Net income, the fun part, what were drivers making? This is our average client. Our average client was down 1.5% over the last year in terms of net income or down just about a thousand bucks. Our average client was pulling in just about $69,000 or just over that. Again, you can see on the bottom right here, it's really broken out. The people on their own authority saw a pretty big drop, flatbed saw an even bigger drop, but dry and reefer saw pretty consistent rates and even up a little bit. Again, we think miles were down 11%, almost 11,000 miles a year, but net income hasn't really faltered much. That tells us things are still pretty good. I know it's come down a little bit, but if you're running 11% miles, 11% less loads, you think your net income would be down 11%, but it's not. Again, that's why I say we haven't felt too much pain yet, at least on that contract side, and that hasn't really impacted people's habits yet. But again, you all have the ability to control that now and I encourage you to really get a handle on that.

Interesting one for me here, I was looking at data and on the bottom here I saw our average client was netting about 77 cents a mile. That's pretty cool to know. The average IC is pulling in, after all their expenses, 77 cents a mile. That's pretty darn good. I think the average company driver's anywhere from 45 up to maybe 65 cents a mile, so you can still make a really good living, a better living as an independent contractor. That was an average. We have contractors making $1.00+, some making $1.50 net a mile. It's great to see because that's the American dream. You became an independent contractor so you could run your own business and you can still do it very successfully.

This is another thing to show the quality of life, although it's still tough and your job's still difficult to be away out on the road, it's gotten better at least over the last 20 years. Back in 2003, our average client was running almost 140,000 miles a year to make $47,000. Well, right now our average client is running 90,000 a year to make almost $70,000. Glad things are getting better. I know it's still not easy, but it is getting better and that's just great news for everybody. The average ATBS client was at $70,000. If you've been with us over a year, you're making about $95,000 take home income. That's just great news. The other thing I wanted to highlight is our top third, our top earners are making about $165,000, so hats off. That's awesome.

Last couple things I'll talk about here. This is just real quick and this will be shared, but this is our averages. This second column here, our averages, our average client was pulling in 90,000 miles, pulling in $69,000, 77 cents a mile profit. Our top 10% clients though were running really hard. They were running 127,000 miles, they were netting $220,000 or $1.74 a mile. That's why I say keep working hard, keep doing what you're doing because you can make a lot of money doing what you're doing. Just keep your head down, work hard, take that extra load, especially while things are still okay. That extra load is almost pure profit, so work your butt off now because there's money to be made.

Todd Dills: Hang in there, everybody. Big thanks to Mike Hosted and the folks at ATBS for everything put into this one. As I noted up top, you can run through a video version of the podcast that includes Hosted's slides, charting all the numbers he talked about. Find it via the post that houses this podcast for September 30th, 2022 at overdriveonline.com/overdrive-radio or find it via Overdrive's YouTube channel. We'll go live at our Facebook page, too, a couple days after the original airing, likely by October 3rd.

Again, anyone with winter fuel gelling experiences in the past and or experience with Howes diesel treat or diesel lifeline or other fuel treatments, tell us your story to win a prize pack, including a bottle of both Howes diesel treat and lifeline products, and more from the company. Dial 615-852-8530 and tell us your story with a message. We'll be in touch to make sure we've got the right shipping information for you if you do. Again, that's 615-852-8530.