I’m sure all of you guys that own trucking companies or you are doing business as owner-operators are noticing that profit margins in the 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 the 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 a small part of the picture of why the trucking business is going down when it comes to profitability even though the industry is going up in all other cases.
The challenges the Trucking industry is facing are:
- Low barriers to getting into the business
- Lack of truck drivers
- More and more trucks on the roads are lowering the profit margins
- ELD mandate rule will affect the industry as of 2017.
- The number of available loads is not growing at the same rate as the number of trucks
How Profitable Trucking Business Really Is?
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 have never been more trucks on the roads across the 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 some years would disagree too. The only thing that brokers are paying attention to is the load price – they want 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 an 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.
Nowadays, a 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.
Source: newharvesttransportation.com
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 low load prices, there are a lot of trucking companies going bankrupt and even more of them are either creating losses or will bankrupt.
What is the Solution?
The only solution is to fight and work hard and do whatever is possible to stay in business and go through 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.
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Hey! I'm George J.Magoci and I will send you a FREE eBook where you can learn 12 secret steps how to make $950 more truck/month.
The key players are expecting that market will consolidate and that a lot of new and not professional trucking companies will 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 the current situation and we know what we can expect in near future it is time to regroup and make a plan on how to make more out of what we have and simply where to find that extra dollar we need to make in order to stay in business and make for an honest living.
LTL Freight Is A Great Way To Make More Dollars per Mile
It definitely is a way to better profit margins and a way to increase company profit. Less than a loaded freight really is a way to higher profit but the 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 of attention from dispatchers.
Source: www.governemntfleet.com
In simple words said your every 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 nightmare if the staff is inexperienced. What is your experience guys? Share it with us, please.
What You Need to Know Before Going Into LTL Freight
However, there is always “If”. If the company wants to step into this business you should prepare not only yourself but also your staff. Stepping into this requires a higher level of trucking company efficiency and operational speed.
It also requires to have procedures for who is doing what in the 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 a nightmare.
Take care of these details and focus your work on them prior to stepping into this arena and you will be able to execute all task in a few minutes:
- Train and teach your drivers how to behave in a stressful situation
- Maintain your trucks because you have multiple loads to deliver in time
- Maintain your equipment especially reefers because any issues will cause huge costs
- Train your dispatchers and educate them to be more efficient and stress-resistant
- Use advanced software for route optimization. It can save a lot of time and money.
The most common phrase used in LTL is to 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.
