I’m sure all of you guys that own trucking company or your are doing business as owner operators are noticing that profit margins in trucking business are going towards historic minimums.
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Simply there is a lot of trucks in the market that keep the load prices down and all because trucking business had a reputation that it is profitable over the last let’s say 5 years.
picture showing multiple loads in one trailer Source: www.hotlinefreight.com
That is only small part of the picture why trucking business is going down when it comes to profitability even though the industry is going up in all other cases.
The challenges Trucking industry is facing are:
But today everything is changing and the winds of changes are blowing this way. 2015. was a record year when it comes to deliveries of brand new trucks. Historic records are set and there has never been more trucks on the roads across USA.
Some people would say this is good but I would disagree and I’m sure you guys that have been in this business for year would disagree too. The only thing that brokers are paying attention is the load price – they wan’t to rip you off and I have heard a lot of talks that trucking companies are driving below the profit margins.
Trucking industry profit on average now is set to few percents meaning that if your company has a annual gross income of $1.000.000 the net profit (after taxes and amortization) would be in the area of just $50.000 which is we should all agree low.
Now days huge number of trucks was also caused by historically minimum interest rates which made truck dealers and truck leasing companies compete among each other offering better terms. Simply said in some cases with zero $ downpayment you were able to finance or lease a truck worth $140k.
That as a circumstance had that you can’t drive a car on highway because it is packed with class 8 trucks.
But as said earlier winds of changes are blowing and in less than 12 months situation has changed dramatically. Due to such a low load prices there is a lot trucking companies going bankrupt and even more of them are either creating losses or will bankrupt.
The only solution is to fight and work hard and do what ever is possible to stay in business and go trough this rough period. It is expected that small signs of improvement could be visible these first days of spring but nothing really good is not expected before the next year.
The key players are expecting that market will consolidate and that a lot of new and not professional trucking companies wii go out of business which could be a great opportunity for older trucking companies to position themselves in a better way on the market.
Now that we are familiar with current situation and we know what we can expect in near future it is time to regroup and make a plan how to make more out of what we have and simply where to find that extra dollars we need to make in order to stay in business and make for honest living.
It definitely is a way to better profit margins and a way to increase company profit. Less than a load freight really is a way to higher profit but company that operates in this field needs to be more focused, concentrated and experienced if they want to make that extra money.
There is a lot of things that are complicating this kind of business but in an easy way I could say that if you think your standard load procedure is complicated and in a lot of cases it doesn’t end up the way you planed – now multiple that by 5 for example because in LTL freight each load can cause up to 5x more paperwork and requires a lot attention from dispatchers.
In simple words said your each load can have instead of one pickup and delivery it can have 5 load pickups and 5 deliveries. In my experience operating reefer loads can be complicated. I have a friend that is driving a reefer from Vancouver to L.A. and he has around 20 delivery places in L.A. so this could easily become a night mare if the staff is inexperienced. What is your experience guys? Share it with us please.
However there is always “If”. If the company wants to step in to this business you should prepare not only yourself but also your staff. Stepping into this requires higher level of trucking company efficiency and operational speed.
It also requires to have procedures who is doing what in company because when the phones start ringing and brokers start asking for POD’s or any other document if not properly set up you can easily turn this into nightmare.
Take care of this details and focus your work on them prior stepping into this arena and you will be able to execute all task in few minutes:
The most common phrase used in LTL is expect the unexpected meaning that there is a lot of times that something is not going to be as planned. If you have a load that requires 20 drop offs that is very easy to understand.
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