New Article From Old School About Buying Or Leasing A Truck

Pat, you're obviously a smart dude and you're clearly thinking everything through, observing, learning, and formulating strategies. Most importantly, you understand that a lack of cash is what kills off most businesses when they invariably meet tough times or face forks in the road. But Old School absolutely nailed the crux of the matter with his insights into the difference between profits and cash flow, and the difference between growing larger and growing your profits in proportion to your revenues.

I even bought another business much larger than my current one and incorporated it into my existing one, but it didn't ever produce more profit for me. I started with a pick-up truck and some skills, and ended up with real estate, a fleet of trucks, and some really great employees and customers. I was the picture of success! To anyone looking from the outside that is. I knew the real picture, and the success, or apparent growth of my business was not equaling the kind of profits that it needed to for long term stability.

That scenario right there is what scares the life out of every business owners that has been in the game for a decent amount of time. There's never any difficulty growing an established business. But somehow it always seems that as the bucket gets larger, so do the leaks in that bucket, so that in the end the only thing keeping you alive is that you're pouring more money into the bucket than is currently leaking out. But that's not the profit bucket. That's the cash flow bucket. If you could plug up those leaks it would lead to more profits. But that's a big if, unfortunately!

All of these "rich" business owners people see are rarely rich at all. In fact, they're often financed to the hilt or pouring all of their incoming cash right back into the business. At the same time they're trying to figure out how on Earth they're going to sustain everything. They're wondering how much more risk they'll have to take when they face that next major change in the business climate or the next catastrophe happens, and they know it's coming.

You said something that was a little alarming to me:

One truck operations can make a comfortable living. 2-9 truck operations struggle more than one truck. Once you hit that magical 10+ trucks things get easier.

Even without the word "magical" I would have been alarmed. But the idea that suddenly things are easier because you're larger is exactly the opposite of what Old School just spelled out with his business. He cut a check and instantly more than doubled the size of his business, and yet had nothing more in profits to show for it in the end. That's the struggle every business owner faces.

My family owned a pizzeria. We could grow it as much as we wanted to, no problem. The more marketing we did, the more customers we had, the more food we sold. Problem is, as you grow you need more infrastructure to support it, and sometimes it's things you've never needed before. You do some of your own marketing, you grow a little, but you realize your marketing costs are outgrowing your profits. So you decide you need to hire a new employee to handle marketing.

Then you've grown significantly, you're still not really making any more profits, but now you can't manage the book work yourself and you hire a new employee to manage the books. Then you start running out of space and you realize you need to rent a larger building to make all this food, and pay workers for putting in more time because it takes longer to prepare all that food.

Now you have this big machine going and it seems like you're having a ton of success, and you are generating cash, but by God in the end that damn bucket is leaking just as fast as the cash is flowing into it. You have all of these revenues, tons of employees, several locations, a gigantic marketing machine, everyone loves your food, but there just doesn't seem to be any way to cut expenses so that your profits stay in proportion to your revenues.

I've said it many times - you could turn any business over to a bunch of monkeys and they could grow the revenues. But can they grow the profits in proportion to those revenues? That's always the golden question.

continued.....

I owned a tree service for a couple of years after a huge ice storm came through and devastated the trees in Western New York.

At first it was mostly ground work, just cleaning up the mess. Easy work, easy money in the bank. But quickly the work became actual tree work, which I had never done. So I bought a bunch of climbing gear and hired a climber to help me learn to do the work. Most of my profits of course went to the climber and the gear I needed for myself. I was doing the groundwork. I figured once I started doing the climbing and paid for the gear I'd be keeping those profits.

But then I had two new problems. For one, to get enough work coming in to make a profit I had to spend more on marketing. For two, when I transitioned to climbing I would have to hire a ground guy. So I increased my marketing budget, started doing the climbing, and hired a ground guy. Now most of my profits were going to the ground guy and the marketing but I figured if I could get more work coming in I could make more profits.

That in turn presented two new problems. For one, we didn't have the equipment to do more work. We didn't have a chipper, which is very expensive, and we didn't have a big enough truck to haul off the waste. The second problem was that more work was going to require even more marketing.

So I compromised. I bought a bigger truck, but not a chipper, and I did more marketing. So now my profits were mostly going to the marketing, the ground guy, and to pay for the truck but I figured once the truck was paid for I would make a bigger profit.

As you can probably figure out, this cycle of growth never ends, and somehow never turns into more profits. I would have needed a chipper next, then another ground guy, and always more marketing. At some point you're going to grow to a certain size and now you're butting heads with big, established players in the game and now the only way to grow is to steal their long term business. Not only that, but now they've taken notice of you and they're going to target you and see if they can't squash you out of the way like they've done already to many, many other challengers.

I got out of the business for the same reason Old School did. I could have grown almost indefinitely and sustained a living for myself, at least for a while, but it's always such a tenuous situation that the risks quickly outweigh the rewards and you realize after a while, "Wow, I have tons of equipment, employees, marketing, and work going on. This gigantic machine is just churning away but in the end I'm not getting anywhere. I'm just spending more and taking bigger risks to produce more revenues, but the costs increase at the same rate as the revenues and in the end I have nothing much of anything left over."

You realize that one major bump in the road - a lawsuit, a seriously injured employee, an illness or injury that sidelines you personally, and the whole thing might go to zero just like that. Then you've put in all of those years of work and struggle and sacrifice and you don't have a penny in the bank or a piece of equipment to show for it.

And for what? In the end you're taking all of this risk and managing this huge machine while making little or nothing more than you would be as an employee doing the same job you're doing now.

What you've done, in the words of the mentor at the small business seminar I attended, was made the mortal mistake of "buying yourself a job". That's all you've done. You've bashed your head against the wall fighting and scrapping and taking risks and managing this huge machine and the only thing you've really created is a huge cash eating machine.

Like Old School said, from the outside it appears you're at the pinnacle of success! Look at me and all my fancy stuff! Wooo Hoooo! But the reality is you're in control of a cash-eating beast that has to be continuously fed, and things have to keep going nearly perfectly for that to happen. Like Old School said:

I can assure you that every time you start getting close to having that fifty grand socked away, you are going to see some need for it that will grow and improve your business plans and strategies.

He didn't say you'll see an "option" for spending that money. You'll see a "need" for it. In other words, you can't sustain the machine without fueling it and the bigger it gets the more fuel it gobbles up.

Profits vs Cash Flow. It's one of the most critical things to understand about being in business.

Tony (Older Newbie) said about his friends:

I know how they live and have seen their expenses...and their real bottom line.

Has he actually seen their tax statements with his own eyes? The true profits, that "net income" line on the official forms they've submitted to the Government? Or has he seen the fancy equipment, been told by his friends how well they're doing, and determined they must indeed be making a killing?

I'd bet a million bucks he never laid eyes on the actual form that went to the government and if he dared ask his friends for it he wouldn't have those friends anymore, just like Brian stomped out of here angry with me for asking him for it.

Don't go ruining that illusion people are putting forth. They have all kinds of money and time and equipment in this gigantic machine. If you dig down to the heart of it, their net income over time, you'll expose that facade and reveal the truth they don't want anyone to know - that they're running this huge, shiny machine but producing very little in the way of actual profits in the end.

If you dig down to the heart of it, their net income over time, you'll expose that facade and reveal the truth they don't want anyone to know - that the whole thing is shiny and huge but producing very little in the way of actual profits in the end.

This right here...

This is what we are talking about when we speak of the emotional aspect or connection with being an owner operator. We like, or we get ourselves "attached" to things that are big and shiny. Whether it's just the image of our operation, or even the equipment itself.

Having that image, or for some it is just their personal satisfaction that they accomplished this themself, tends to cloud over our good reason and causes us to hang onto an image of success rather than allowing us to really face the facts of the very measurable results of our efforts.

Profits are measurable, but not by growth, cash flow, or even swollen bank accounts. Some of these trucking companies have zero debt, millions in the bank, and yet very high operating ratios, and very miniscule profit margins.

Tony (Older Newbie), I can see you totally get the big picture here. Your experience with your own business over the years and your intelligence have given you fantastic insights into everything that's going on with your current situation.

What I've taken notice of after reading everything you've said from beginning to end is that you started out by saying you're "frankly near starvation" but after that you've said:

"Now it's not all been bad. I'm in the midst of back to back runs that are going to net me over 3300 miles this week! And by the time I get through I'll be close to 4000 miles in about 8 days so I can't complain..... I do the grunt work without complaining and have in fact been getting good miles, especially for a new guy, despite my frustrating experiences. "

You've also made numerous mentions of how negatively you feel toward the office personnel and corporations in general, like:

Actually it's frustration with the way a huge company with almost 10000 drivers works...or doesn't work......I just think that it's not always about how well we new drivers do our job, it's also about how huge companies with huge driver pools manage to take advantage of and manipulate new drivers. If the livelihood of those in the office really depended on them getting it right as much as our job as drivers does, I suspect there would be a lot less turn over at big carriers and generally happier people all around.

Now what's interesting is that you're a long time freelancer, so you work and think differently than they do in large corporate environments. I'm a freelancer myself. I work for myself, by myself, and have never had more than one employee in any business I've run. I'm a bootstrapper. I like starting with nothing and building it into something. For this website I do absolutely everything - I've written all of the code that runs it, I run the servers, I record the podcasts and write most of the articles, and fortunately I'm doing the mentoring but with a lot of help from a ton of obviously amazing people here in the forum. I had some help at times but I'm back to being a one man operation.

The feeling I get right now about your situation is that you're actually having fantastic success as a rookie driver only about 9 months into your career, but you're maybe focusing too hard on that cynical perspective we all harbor toward large corporations and the frustrations you're facing with some of the lesser performing office personnel.

Hey, you're preaching to the choir my friend! Don't get me started about some of the business tactics corporations use or my intolerance for people who perform poorly. I'm right there with ya.

I loved what you said toward the end:

I will look harder in the mirror to make sure the guy I see is the one I want others to see and know

If you're getting great miles and your driving reasonably good equipment then you're doing fantastic for only being nine months into this thing. You say you're getting everywhere on time, you're moving your appointments forward, and you're managing your clock well. If that's the case then I would agree that you're performing like a Top Tier Driver.

Now naturally you'll continue to learn a lot of tips and tricks and techniques as you go. I feel there are roughly three levels you reach as a driver. You're basically in survival mode your rookie year. Just don't hit anything and learn all you can. From years one through three you're really honing your skills, you're learning deeper insights into the industry, and you're becoming seriously savvy in the ways of making money at this.

It's not until about years three through five that you really reach that highest level where you're becoming a true Godfather Of Trucking, the elite level amongst Top Tier Drivers. A Ninja.

So you're going to continue to improve for some time to come, albeit at a slightly slower pace as the learning curve becomes more shallow.

One of the big things you'll notice about guys like Old School, for instance, is that no matter how many years they put in they still remain highly motivated, highly efficient and productive, and yet they're laid back and have a fantastic attitude toward it all. Does he get really aggravated sometimes? Oh hell yeah. We all have those moments from time to time. But they tend to be few and far between, and when they do happen the recovery is quick and complete.

I know you've probably noticed that most experienced drivers can be put into one of two categories - we'll call them "The Buddhas" and "The Gripers."

The Buddhas always seem to be laid back and relaxed. They almost always have a smile, they never seem rushed, and no matter what the circumstances they seem to just take in all in stride.

The Gripers are a bundle of nerves who always seem to be hanging on by a thread. They're high strung, they look burned out, and you can feel the tension when you're around them. They don't seem to be taking any of it in stride at all.

continued.......

I've always noticed this about older people in general. Think about anyone you've met or known above the age of maybe 60. Aren't most of them either the kindest, most pleasant people you'll ever meet or just incessantly negative and grouchy?

Where's the middle ground with experienced truckers and older people?

Trucking will throw 1,000 variables at you every day, and a thousand blessings at the same time. We all tend to "keep score" in life. We either have a positive bent, or a negative bent, and over time the score adds up on one side or the other and our attitudes and our thinking tilt heavily toward that side.

It sounds to me like things are actually going really well for you but you're frustrated with some of the negative variables like underperforming office personnel or extended waiting times at the docks. Hey, we all get that and we all agree with your sentiment. But are you maybe letting the negative side take over a little bit and cloud out the fact that you're performing marvelously and getting great miles even though you're still a rookie? Maybe things aren't bad at all when you look at the big picture, only when you focus on the negative variables.

None of us can remain unaffected by the people we're surrounded with, and I can honestly say that in my lifetime I've never been around a group of more negative people than truckers as a whole. That's the God's Honest Truth. What an incessant bunch of complainers and gripers and crybabies truckers can be. It's appalling. I'm a relentlessly optimistic and positive guy, always delighted with the course of my life and excited about every new day. So it's painful for me to be around negative people. It affects me the same way it does anyone else - negatively.

If you take a step back and assess the big picture of your career thus far and the treatment you've gotten from your company, and truly try to be objective about it, how would you say things are going for you right now? Are you getting solid miles? Are you driving decent equipment? Are you learning more each day? Are you getting to know some of the people that work in the offices so you have people in positions of authority to help you when a matter needs attention? You know that last one is super important.

I'd love to hear from your most objective stance how you feel about your situation currently. What's going well, what's not going well, and what would it take for you to be truly happy out there by the time you hit that one year mark?

As a long time freelancer I know you're a tough guy who likes to push hard and make things happen. I also know you expected excellence of yourself and you don't tolerate incompetence very well. I'm the same way. Sometimes I find myself pushing too hard and gripping a little too tight. I get worn out, frustrated, overworked, and my work and attitude start to suffer. Maybe things are going pretty darn well for you overall right now but you're just pushing a bit too hard and gripping a little too tight. Maybe you need nothing more than to take a short break, clear your head, and get your mind balanced more toward that positive focus "The Buddhas" develop over time.

I'd love to hear your thoughts.

Ok ... there is one thing that makes the smaller trucking companies fail: The cost of insurance. Why is that important in what I am going to say is that a lot of smaller guys come with no business plans in place, think they can game the system by interchanging vehicles , violating all kind of DOT codes on the highway, and be successful: They always end up failing. So an owner who understood that Maintaining a good FMCSA score was his key to success, that is an owner that came already with a well thought plan. What small owners do not understand is that everything they do on the road , the insurance companies SEE and by the time no company wants to insure you , that is when they realize that being a wise guy was to their disadvantage, yes they made a lot of money for a short time then boom gone like a wind. Saw a company go from 100 trucks to one because what happened: safer rating got turned into conditional kicking auto liability to 18k per truck not including physical damage and cargo whereas the guy who kept it clean is paying 2k per truck. So this guy came after haven done his homework : I have to maintain clean safer ratings, my drivers will be hourly 1099 or W2 drivers so that they are not out there killing my insurance and FMCSA score because they are trying to pile up miles, my O/Os get terminated after 3 violations, I will hire a team of salesmen to go out there and look for direct contracts with the companies I will be delivering for , only my O/Os will be doing OTR and I will minimize the loads I get from brokers : IT WORKED. So that is how one goes from 1 truck to 100+ and make 7 digits a year.

Cornelius wrote:

He concentrates on getting dedicated contracts with major companies.... its not about the size but the cleverness of his business plan

Okay, all the BIGS do that and are successful at it. Very profitable though...? My definition; very profitable is 40% GPM. Rather unheard of in any commodity type business. Please explain what is so clever about his business plan that makes it very profitable. Curious, that's all.

Brett and Old School,

Thanks for the advice and frankly a little head tuning so to speak. As you both said it's easy to get discouraged and out of sorts, especially when you're by yourself most of the time as I suspect you both understand. I have been pushing pretty hard, holding on a bit too tight and yes, my frustration got the better of me for a time...but in general I'm a pretty easy going guy who's trying to figure it out like the rest of the folks around here. I certainly don't know it all and will be the first, or one of the first to admit it and ask questions. Guess that comes from being humbled once or twice in one's life; and age. And you're both right about big companies. Yes there is a huge safety net that exists when you drive for one of the big companies. What I meant by smaller, just to clarify, is not the company that has 10 or even 100 trucks. I meant perhaps a more specialized carrier....say a company that specializes in flat bedding...which is what I really want to do. By the way, I spoke with my fleet manager today, to get a real perspective on how I was doing, where I needed to improve or make changes. He was in fact very complimentary and is very happy with my productivity...in fact said "keep doing what you're doing...you're doing great!" so... I guess I should step back more often and "look at the big picture" a bit more than I have been. The quarterly miles, pay and productivity is a great idea to see where you really are. So I'm going to do that. Anyway, I've taken a lot of space here and just want to say thanks guys, and keep up the good work. Tony

Hey Tony, that's all fantastic news! Man, you're only nine months into this career. By all measures it sounds like you're doing absolutely fantastic at this point and you're certainly going to get even better in the coming months and years. It sounds to me like you have a good enough understanding of time management and enough experience now that you should be shooting for maybe 2,700 - 3000 miles per week on average. Anything down around 2,300 or so and you should be giving dispatch a little bit of the ol', "Hey, you guys are starving me out here. What's a guy gotta to do make a living around here? Can I get some miles please? That was terrible. You're letting me down. I lost a lot of money and I don't understand why."

It's like you have to get on them sometimes. They have a lot going on, just like drivers do. If they let you slip through the cracks a bit and fail to keep your miles up where you want them then you should let them know they're letting you down and underperforming a little bit, but say it in the right way, and I know you know what I mean by that. Kind, but firm. Like, "Hey, I love ya, but I'm ready to kill ya right about now! Let's get these wheels turning!"

Also, stop in the office sometime and start getting to know some of the people just above dispatch, like fleet managers and operations managers. Ask them some questions about how the company operates. Ask them how loads are distributed amongst drivers. Ask them how pre-plans are handled. Ask them how much authority each person in the system has - the dispatchers, the load planners, the fleet managers, and the operations managers. Get a feel for how the company operates so when things aren't going as you expect you know who you can call and say, "Hey man, I've been stuck in the Northeast for a week and my miles the last two weeks have been terrible. Do we still run to Texas or California or any of those far away places a guy might want to go? Cuz I sure could use about an 1,800 mile run right now to fill up my empty wallet!"

And of course ask them for any suggestions on how you as a driver can help them keep you busy. Cuz that's their job - to keep you busy. But obviously they rely heavily on you to make your appointments on time and communicate your availability to them. So anything you can do to help them is certainly going to help you.

You really want to learn how the system works within your company and who the players are. That's how you'll learn about the special divisions that exist which most drivers don't even know about. That's how you'll get better equipment assigned to you, and when you have something really big and special coming up that you'd love a couple of extra days off for, you'll know exactly who to talk to and they'll know who you are.

Keep us updated with how things are going for ya. We always like to know how things are progressing and of course we're always happy to help out in any way we can. But it doesn't sound like you need much help. You seem to have things under control pretty well. Just keep at it. There's still plenty to learn, but it's going to become smaller, more subtle things as time goes on. You've probably made most of the big mistakes you'll make and learned the hardest lessons already. Now you're going to really start honing your craft.

I just finished reading this whole thread, WOW.

I know my name was used a couple of times. I have never hidden the fact that I'm a lease operator with Prime. And yes, as someone stated (Brett I think) I have my own reasons for being a L/O and not a company driver. And yes, I have also stated that I do a little bit better than I would as a company driver. Now I have not given my $$ info to Brett or Old School, but I also can produce that if I so choose.

Now, like Brian, I have other sources of income. So to give my tax info would not be accurate because of that other income. Showing my earnings statement from Prime with all my numbers showing my info before taxes should be enough to to validate anything being asked as to how well or not I'm doing from my trucking side of things.

So, with all that said, ask away and I will be more than happy to show you Brett my end numbers from the trucking income.

Just an FYI, I just finished being out for a month with my wife as a rider in my truck. So I did not keep up with TT during that time.

Ernie

May I ask what are your reasons for leasing vs being a company driver. If by your own admission you are not doing much better than you would as a company driver, then why take on the additional headache and risk? It is not like you have purchased a truck and you at least have the emotional attachment of it being 'Your truck'.