Trucking is a risky business. The one who knows this better than anyone else is the owner of a small trucking company. Equipment is expensive to acquire and maintain, revenue is elusive, (here one day; gone to a cheaper hauler the next), and the liability risk is astronomical with one’s drivers constantly one vehicle away from a lawsuit eleven hours a day. Added to this, anyone with a CDL and a few thousand dollars can be hauling freight in just a few weeks, regardless of their knowledge of the business of trucking. So what separates the men from the boys, the women from the girls, when it comes to succeeding in trucking? 

Succeeding in trucking isn’t only what your credit rating is or what your company’s Dunn & Bradstreet® Report looks like. It has to do with what you know, how much revenue your company produces against your costs, what your accounts receivable look like, and also the quality and diversity of your customers must be considered. Being successful is not robbing Peter to pay Paul, but managing your assets: cash, equipment, property, accounts receivable, customers, employees and contractors, with a plan. This plan must include being prepared for the lean times, equipment breakdowns and replacement, and covering the daily cost of operations while waiting for customers to pay. This strategy must not let growth out-pace capacity, and above all, there needs to be a vision of building the company’s net worth. 

• So know where your profit begins. The worst mistake owners of many smaller trucking companies make is allowing others to determine their hauling rates. Allowing your competition or your customers to tell you what you should be charging is the first step to business failure. Has a truck repair shop ever asked you what you’d like to pay them to fix your truck? Don’t do the one thing that causes more failures in trucking than any other—don’t let someone else set your hauling rates. And the only way to set profitable rates is by knowing your break-even points.  
• Be willing to listen. Top trucking company managers have an ear to the road. They always have their antennae out for new and innovative cost-savings ideas. They thrive on the input of their drivers, dispatchers, safety and sales people. If you’re wearing all of these hats, keep searching for other experts, the ‘been there-done that’ crowd, for information which will help you become a leaner, tighter and more efficient hauling organization. Look for information outside the hauling side of the industry and stay on top of the trends and news from your shipper’s perspective—walk in the other man’s shoes—your shipper’s and freight broker’s.  
• Know your customers. Besides knowing what services they need and want, you must know the risk they represent to your revenue-producing capacity. What’s their credit rating? How’s their paying history? What are their projections for growth? What are their weaknesses? Are there problems on the horizon for this company or their industry? Labor troubles, foreign competition, recalls, product or patent lawsuits? In other words, anything that could interrupt your customer’s ability to provide you with loads. The old saying, “Don’t put all your eggs in one basket,” applies here. A single customer shouldn’t represent any more than 25% of your total revenue or accounts receivable. Shipping customers are the core of your business, so it’s best to be continually finding new business. Constantly develop relationships with companies, brokers and individuals who can provide you with new hauling opportunities.

Next week in this blog, we’ll cover three additional business risks small motor carriers face and the solutions to these perils. It’ll include when and how to issue credit to your customers, how to make sure you own the company and it doesn’t own you, and finally how to think like a banker so you’ll be bankable.

Good loads and good roads, everyone.

Timothy Brady
©2009