Outsourced equipment acquisition/maintenance for zero-debt operation -- STS Delivery Service's leasing model

Updated Aug 23, 2022

Outside of five Sprinter vans doing expedited deliveries and serving high-school football uniform cleaning and refurbishing services for the Riddell company, STS Delivery Service owns none of its vehicles. That's not, however, because the fleet relies on owner-operators. All 23 drivers with the Columbia Station, Ohio-based fleet are employees.

Instead, STS has found its sweet spot in truck equipment management by using full-service leasing, said Brian Sullivan, who co-owns the business with his wife, Karen Sullivan. That approach, in addition to an emphasis on building strong relationships with customers and drivers, has enabled the company to prosper, operating with zero debt and continuing to grow amid the supply chain turmoil of the last year. For the second year in a row, STS is among 10 semi-finalists for Overdrive's 2021 Small Fleet Champ award. 

Brian and karen sullivanBrian and Karen Sullivan“I started the business by purchasing used equipment,” said Brian. The costs were great on the front end, but the back end “cost a boatload of money” as maintenance and repair costs mounted. “I got sick and tired of paying that service bill.”

Besides the financial costs, there was the ongoing hassle of drivers’ emergency calls in the middle of the night, and being exploited for road service and repair costs when the provider discovered he was based in another state. Now both routine and emergency maintenance and repair calls are handled by Penske Truck Leasing. With his entire fleet model years 2019 or newer, downtime is kept to a minimum.

Penske provides two straight trucks and 23 Cascadia tractors, and Sullivans just added two more. The fleet is around 80% daycabs, he said, with four-five sleepers for his over-the-road drivers, who run on a straight all-miles-pay system, including deadhead.

sts sleeper tractorAmong STS' sleeper tractors is this Cascadia -- regional runs are compensated on an hourly or miles basis, depending on which method nets the operator greater income.

Local daycab drivers are paid hourly, with more regional drivers paid hourly or all-miles, depending on which option ends up earning them more. STS employs a dedicated dispatch/back-office manager tasked with making the determination on a load-by-load basis, as hauls are entered into the Digital Waybill custom TMS the fleet utilizes. “If it’s more than a 184-mile run,” said Sullivan, “it ends up usually being more paid by the mile.” 

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The company’s trailer fleet is full-service leased as well, through a variety of companies. Since this time last year, that’s grown from 35 to 55 dry vans as Sullivan has capitalized on his principal customer’s needs in new lanes where the trailers are preloaded for drop-hook opportunities. That principal customer produces steel drums/totes, and Sullivan’s also added some new business this past year as well, developing relationships with an eye toward future sustainability. 

Overdrive small fleet champ 2021 logoThis is the eighth of 10 Small Fleet Champ semi-finalist profiles that will be run here on Overdrive prior to announcement of the finalists later in the month of October. Access all of the profiles via this link. The final winner will be announced at the Nov. 4-6 conference of the National Association of Small Trucking Companies in Nashville, Tennessee.In contrast to the economic conditions that existed at the time of our profile of STS in summer 2020, the market has turned dramatically in truckers’ favor, but Sullivan keeps his focus on the long term with regard to rates and customer management. He hasn’t requested rate increases just as a result of increased demand/tight capacity. “I’m not going to turn it down if somebody offers me double the typical rate to haul something,” Sullivan said, noting his company does use C.H. Robinson as a broker on occasion for return freight. “We do not go overboard with customers” on increases. True, “fuel’s gone up” considerably over the last year, as have some other costs, he added. Yet with the full-service-leasing arrangements in place, “until I put on new equipment, my cost stays just about the same besides the fuel. I’m not here to call all of my customers to increase my rates just because capacity’s tight.” 

Do that, he feels, and you run the risk of straining the relationship. “When it’s not as tight, of course, they’ll ask me to lower my rates” if he’s doing that, Sullivan said. The way he approaches it, he feels like a longtime customer is more likely to reciprocate and keep rates steady. 

STS began operating in the year 2000 with a focus on parcel delivery service. When a customer expressed a need that required a tractor-trailer, he bought used equipment. As business grew, he began experimenting with truck leasing. “It just worked out,” he said, so he sold the used equipment.

The fleet still does parcel delivery, but its primary business is truckload. Much of it is new steel drums, IBC totes (large plastic intermediate bulk containers) and cleaning supplies.

With its five vans paid for and no truck or trailer debt servicing, the leasing model also has enabled the company to operate with zero debt and chalk up strong financials. STS is projecting to end 2021 with revenue of “6.2 or 6.4 million,” up nearly 50% from 2020 and more than six times the $900,000 in revenue earned in 2017, when the business really began to grow.

“The last few years we’ve been growing like weeds,” Sullivan said, despite his own well-remembered contention a few years back that he would like to stay at 10-12 trucks. They’re not doing anything dramatic like putting on multiples at any given time, however. 

STS daycabOne among the daycabs in the STS fleet.

“I have conversations with customers” about potential new lanes or new freight, Sullivan said, and “we’ll put an ad out that we’re looking for a driver. Drivers often refer others to us -- word of mouth is probably the best way to do it. We might add one truck this week, then maybe next month I’ll add maybe one or two more. If we have too much fleet -- I’ll send my calls out to my customers, particularly my principal one.”

That kind of measured growth has served STS well over the course of the pandemic, and the full-service lease approach to equipment acquisition and maintenance is “not the cheapest, but I believe it’s the most efficient.” In his case, he has enough scale and a well-established reputation that enables strong rates to cover the costs of leasing.

Good rates also translate to excellent driver pay. Sullivan said his drivers average about $70,000 a year. “Some are in the six figures that are over-the-road guys,” he said. 

STS pays a portion of medical and dental insurance, up to “about 70% of the cost” now that Sullivan and company renegotiated their insurance contracts in the last year. “The employee cost has gone down,” he said. The company also matches 100% of Simple IRA retirement contributions up to 3% of gross pay.

NASTC logoThe National Association of Small Trucking Companies is sponsoring this year's Small Fleet Championship program. Finalists receive a year's worth of membership in the association, with access to a myriad of benefits from NASTC's well-known fuel program to drug and alcohol testing services and more. All will be recognized at the association's annual conference, where the winner will be announced in early November. Find more about the association via their website.Sullivan feels that in the labor market that exists today, smart owners “do something different” than the competition. He answers that dictum by not focusing on fancy equipment or sign-on bonuses but rather to “give guys more incentive to stay with us. The IRA is one way to do that, the medical is two, and our pay is very, very competitive.” He cites some of his over-the-road drivers bringing in a six-figure income as evidence of that. 

Freight is another component of that package, being driver-friendly: mostly drop-and-hooks. There are no weekend deliveries, and most regional runs get the driver home by evening. 

“We like to have trucks back within a day to be able to service customers here that we’re dedicated with,” Sullivan said. When a broker is needed, STS uses C.H. Robinson principally, with some outbound hazmat work originating in his area with them, but mostly for return trips.   

The freight and lanes STS hauls in are as competitive as any, Sullivan said, so the company has strived to build strong customer and driver relationships to stand out. “I’m the only salesman here,” he said of this primary mission, and “I oversee all of the operations.” Karen, as president, handles all accounting.

Brian said he would advise a one-truck independent looking to add trucks to make customer-relationship building the top priority. Beyond that, he advises the basics: having a business plan, knowing costs thoroughly, being careful in buying used equipment, being diligent with preventive maintenance and adding no more than one truck at a time.

“I’m not looking to be one of the big guys,” he said, though he can’t count out the likelihood of further growth, even with the lag in new builds today. “It’s gotten to the point where I’ve ordered my tractors already for 2023 to guarantee them. Trailers are even worse. If I try to rent a trailer now the cost is double” -- from a prior $300 a month to now more than $600 in some cases. 

He’ll know when it’s too big. “It’s just tougher to control that way, and you lose the family atmosphere.”

A unique customer for Sprinter-van service

sts sprinter vanOne among STS' five owned cargo vans for expedited/local delivery of various kinds.

During the Fall high-school football season, STS Delivery Service uses its five owned cargo vans to serve a unique customer in the Riddell sports-equipment company. These last several years, after high-school football games, STS is the fleet that picks up the uniforms and equipment from the schools and delivers them to Riddell’s service location for cleaning and refurbishment as needed. "They play on Friday,” said Sullivan, and “we pick up bags of their uniforms after each game, bringing them back to Riddell’s main campus” for washing, pressing, stitching and refurbishment as needed. “We’ll then run them back two days later.”

It’s no charity project, be assured. 

“I do a little trucking work” with Riddell, too, Sullivan said. Conversations over the years happened, and one thing led to another, he added, a testament to a successful owner’s eye out for opportunity. 

[Related: Missouri-based Hoewing Trucking expands dump business with farm work to spur growth]

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