April showers have come and gone, the weather has finally warmed up, and it’s time to shake off the winter blues. This is the time of year when the world renews itself. The trees change their foliage late in the year and renew themselves, bursting with a new cloak of leaves, when spring weather brings warm sunny days. A new crop of grass peeks through the mat of last year’s growth. Everything is new and greening up here on the homestead. It appears we are done with the snow, so I can put the scraper blade back in the barn and remount the mower deck on my old John Deere. Mowing grass is a lot like riding a bicycle – you might not do it every day, but you never forget how to do it.
This is also the time of year when we make a lot of changes in our personal routines. We pack the heavy coats and gloves in the attic for another season, and some of us will trade our galoshes (rubber over boots) for flip flops or other more comfortable shoes. I’m not one of those drivers, as I wear boots year round. If you see me wearing flip flops, don’t look too closely, because I am probably going to or coming from the shower! On a more serious note, this is when we get out of our comfort zone and stretch the limits of our business plan. All of us have noticed the drop in the availability of refrigerated freight, and the rates have made a downward turn, as well. After attending the MATS (Mid-America Trucking Show) in Louisville, Kentucky, I am confident I made a good choice by changing up my “normal” routine.
For the regular readers of this magazine, you know me as a produce and refrigerated foods transporter. If you have seen me in the last few months, my trailer has made a dramatic shift, as it now “identifies” as a skateboard. For the new readers, that is what we called flatbed trailers, back when drivers used the C.B. radio. Hardly a day goes by that someone doesn’t ask if I bumped my head and hooked up to the wrong wagon. I reassure them my trailer has an “open air solar powered reefer unit” and it hauls cold rolled steel. Yes, I’m changing things up this spring. Out with the old and in with the new, or something like that.
As a driver, I am not new to this open top thing. I spent years dragging flatbed trailers coast to coast, hauling everything from steel to oversized machines and large wheeled vehicles. In those days I was leased to SSC (Schneider Specialized Carriers) out of Rochester, Minnesota and Des Moines, Iowa. They were a highly respected outfit, previously known as I.T. (International Transport). The same thing happened then as is happening now. When the rates jump around and money gets tight, the smart money tends to group together.
In other words, “buyouts” and/or acquisitions of smaller companies by the large conglomerates occur. That’s what happened to SSC – it was purchased by Schneider National Inc. of Green Bay, Wisconsin. The excess terminals and older equipment were liquidated, along with duplicate services and unneeded personnel. At the time, we were all sad to see a great company fade away, but in the course of time, the asset base and core business was strengthened. There will always be those who disagree with this assessment, but I made money.
Making money is the reason most of us are out there running down the dotted white line. The rest of them are just rich kids showing off, with their tricked-out show trucks. Just kidding! I’m well aware of what it takes to have one of those “Pride In Your Ride” show trucks. I talked to quite a few of them at the truck show, and the theme I heard most often this year was, “It’s tough out there.” Fuel is still high, insurance costs have not gone down, and the shippers are working hard to recoup their losses from last year, when freight rates got crazy. There are too many trucks in the system, and far too many of them don’t know how to operate a business. Yes, if you own a truck, you are in business. It’s not just your job, and you should be making more than the cost of operating it.
I hear some drivers tell me they are doing alright. Then, when I ask if they have money set aside for major repairs or replacement, I often get that deer in the headlights look. I know how pricey that can be, since we just rebuilt everything from the fan blades to the drive shaft (that’s a quick way to spend 50K without any guarantee of return on investment). Did I mention I helped do most of the work? Phil Knowlan did much of the engine work, but I assisted him to keep the cost of labor in a reasonable range.
I have had a few people see me with the new trailer and assume I sold the old one. When I tell them no, they want to know if I will sell it to them, and for how much, since I’m not using it. First, let’s set some ground rules. Just because you have an asset, you don’t need to dump it to get something else. This is especially true if it’s paid for. I like to use the example of the shoe store. If your furnace quits and you need a new one, you wouldn’t sell the roof to buy a new furnace. So, why would you sell off your tried and true equipment just to experiment with a possible future one? That simply doesn’t make any cents (yes, I spelled that correctly). It also wouldn’t make sense to sell your inventory (shoes) at or below cost to cover the new heating system. In the trucking industry, I see this done every day. Too many drivers are conned into “trading up” or sold the bill that by trading in they will beat the tax man. If you are getting this kind of advice, maybe you should “trade in” your financial advisor.
I bring in tax advice because it’s an essential part of most decisions involving money. Not just money spent, but also money earned. How we earn that money is your business. You should be making those decisions, not some salesman who is only in it to make a quick buck. He doesn’t care if it is a good choice for you, he only looks to see if he can benefit from your misfortune. Besides, if I were to sell my wagon it would be “For Sale” not on sale. It has great value to me, especially if I need to use it later. The difference between dumping it now (capital gains) and replacing it in the future (interest on loan) can be the difference between winning and losing, or renting, leasing, or owning.
This brings me to my next point: if you lease or rent equipment in the time of change (possible start up), that’s when you can experience some tax savings. Once again, I’m not your accountant, so check any decisions you make with your local tax laws. Your accountant should be an active member of your company’s financial team. I know many of you consider yourselves owner operators and a one man show, but you should still have at least three other people involved in your business plan. Who? They should be your financial advisory council, and it should include your banker, lawyer, and accountant. These are all services you are paying for, but the real question is, do you use them, and are they familiar with your entire operation?
I decided to change my scope of operations and work closer to home. Part of that choice was to have more time to kick around the house. Another part had to do with falling freight rates. My westbound freight had become soft and, let’s be honest, this was not the year to be operating in the northwestern states. Can you say snow bound! I lost the motor in my trusty Peterbilt, so a major crossroads had to be faced. Do I retire, sell off my equipment, and settle up with the tax man, or re-power the old truck and commit to a few more years? I have to admit, I struggled long and hard with that question. The falling freight rates were the most difficult to accept. I also feel a level of responsibility towards the guys I have spent the last five years working with. They were there when I needed support, and their freight kept the wolves away from my door. I’m not abandoning them, but I did see the need to expand my horizons.
Shopping the freight boards for weeks, not days, and over a period of a couple months, I was seeing some good opportunities in the local steel markets. Once again, this has been out of the normal scope of our operation, but not something we haven’t done before. I had some help making my decision when I was rebuilding the motor, watching the day to day operations of a few drivers, working the steel shipments. During that time, the opportunity to rent a trailer and work with their buyer, not a broker, also presented itself.
I chose to work with them for a few reasons. First, I’m not accustomed to rates based on hundred weights, we are more used to dollars per mile, and when the load only goes a very short distance, it’s easy to shortchange or cut the rates. They (the buyer) rate the load on how much it weighs, not how far it goes. Not wanting to be “that” guy, I decided to rely on someone else to show me the ropes. Something about teaching an old dog new tricks. There was also a quality trailer available to rent, with all the necessary equipment including chains, binders, straps, corner boards, timbers, and a rolling tarp system. This saved me a lot of dollars, should this not work out. Plus, it’s all tax deductible in the year I use it.
Along with the financial help, I have been relying on them to keep me operating within the range of personal safety. Changing up your freight can mean you need to be more physically involved in the loading and unloading process. I forgot just how old I am! The first week I was convinced they were trying to eliminate the competition… me! After a couple weeks, however, I’m now more comfortable working in this environment. I have set the trailer up to accommodate me, and I’m getting more familiar with the requirements of the shippers. That too is a consideration when changing your work. I’m not in bad physical shape, but I’m not as young as I once was, either. I’m learning to pace myself so I can continue doing this. Note to self: your revenue is based on what you finish, not what you start!
This is for the drivers who never moved a 50,000-lb. steel coil, loaded eye to the side (suicide), or rebar stacked six feet high and 60 feet long. It’s a serious business, and your life (or the lives of others) is dependent on your ability to do it correctly. It’s easy to fall into the attitude of “I got this.” Maybe you do, maybe not, however, we don’t want to find out the NOT! Change can be a good thing, but please take the time to learn or relearn the rules. For me, I needed to freshen up on chain requirements and tie down procedures for the different types of iron we are now hauling.
The rules of 20 years ago are not all the same as today, and what we did for wheeled vehicles doesn’t apply to large coils and such. The biggest change I’ve noticed is the working relationship between the shippers and receivers. Can you say “refreshing” – they are not your average food warehouse workers. I have not met one grumpy or disrespectful person, and they appear to like their jobs, and the drivers who load and deliver there, too. I’m sure there are some out there, but I haven’t met one yet.
As my body readjusts to the rigors of throwing chains and straps, I hope to ease the pain in my checkbook. So far, I’m not seeing the gross revenues we saw last year, but then I’m not running four-plus thousand miles a week, either. My fuel cost is only a fraction of what we were paying. The miles we run are mostly over two lanes, so that increases my MPG due to slower speeds. In the course of all things, it’s not the gross dollars that will tell the story. I still need to watch my costs of operation and do the things that increase my bottom line. For me, at this time, renting a trailer is more advantageous than ownership.
My intention is to find out what type of trailer is needed to do the work I’m doing, and then make the decision to purchase, or possibly continue to lease long term. Should I choose not to stay running flats, I still have my old trailer in the yard, available to pull loads in the slow season. Or, who knows, the rates may come back up if enough operators make more bad decisions. For now, I’m chain-ging things up and securing our future to the deck of my soft-side reefer, one load at a time. Should you question if you are on the right road and you see opportunity present itself, explore your options, run the numbers, and see if it’s right for you. There could be money to make, in changing it up, 10-4!