Why Small Trucking Companies Are Often A Disaster Waiting To Happen

It's common knowledge that small family-owned businesses struggle to survive in commodity industries like logging, farming, and trucking. For so many people the ultimate dream would be to own a small family business doing something they really love and making great money doing it. You would have the best of everything - you're in control of your own destiny, you're making great money, and you're living your dream lifestyle.

Many truck drivers also seem to believe that working for a small carrier would be better than working for one of the large trucking companies. They envision this wonderful family atmosphere where everyone knows each other and they all take great care of each other. Unfortunately this is almost never the way it is.

We have a very romantic view of the thriving family business, and for good reason. But the reality of running one of these small, family-owned businesses is not what most people seem to think. Even way back in the day before big industry stepped in and became major players in the game these small family businesses never made much money. It really was more about living the lifestyle you loved than it was about making good money.

Farming Is Similar To Trucking In Many Ways

Dairy farming is a classic example of a commodity business, and everything about it applies to trucking and other commodity industries. I'm going to use dairy farming for my example because there are so many statistics available and it's easy for most of us to relate to.

If you look at the numbers it's clear that the number of dairy farms nationwide has dropped drastically throughout the decades as the size of the average farm has increased. Here's a perfect chart from an article called Got Milk? Possibly Not For Long If Policies Continue Hurting Dairy Farmers' Bottom Lines demonstrating that:

Here's another great chart from an article called Size matters – Production Costs on US Dairy Farms showing that as the size of the dairy herd increases, the cost of production per unit decreases:

Both are classic examples of how scaling larger makes an operation more efficient in any commodity business. This certainly applies to trucking.

Small Commodity Businesses Have Always Been Forced To Adapt

This is where the romantic notion of the "thriving family farm" breaks down. Small commodity businesses may survive for quite a long time, but they never thrive. You can look back over generations and you'll see they never have. Even eighty years ago you had advancing technologies that forced massive changes to the way farming was done.

There's a truck stop in the Midwest that has an old truck from the 1940's that was purchased by a farmer. There is an original letter displayed next to the truck that the farmer wrote to the dealership he bought it from.

The farmer said he was really happy with his new truck because it used to take him three days with a team of three horses to take a load of hay to town, but now he can take three loads in one day with his new truck.

Imagine the reaction his farming neighbors must have had! Many of them probably thought the guy was a lunatic for spending that kind of money on a truck. Others probably saw the writing on the wall and knew their business would have to change drastically in order to stay competitive.

I'll bet word travelled 100 miles in every direction within a week of this guy taking his first hay to market in his new truck. It was a total game changer. Bigger tractors, bigger trucks, bigger plots of land, larger herds - commodity industries have always been an endlessly changing game where the smaller less efficient guys are constantly being squeezed out by the larger more efficient guys. You either continuously evolved to stay in the game or you died a slow, torturous financial death. This was no different in 1940 than it is today.

You Must Understand The Nature Of The Business

You absolutely must understand the business you're getting into and what it's going to take to survive, and hopefully thrive, for the next 10 years and beyond. In any modern commodity business it's extremely simple to do that. You have a huge amount of historical data that can easily be projected forward for 10 years or more. You can look at charts like those I've posted above until the cows come home (see how I did that?) to understand the profits and capital expenditures you can expect based upon the size of your operation and the technology you intend to employ.

The Majority Of Small Business Owners Put Themselves In A Bad Position

What's interesting to me is the sheer quantity of people willing to put their hat in the ring as a very small company, and intend to stay a small company, even though it's plain to see that a small company has no chance of making very much money in a commodity business.

According to a Wikipedia article called Family Farm:

In 2012, the United States had 2,039,093 family farms (as defined by USDA), accounting for 97 percent of all farms and 89 percent of census farm area in the United States

According to Trucker.org Reports, Trends & Statistics:

According to the U.S. Department of Transportation, as of June 2017, the number of for-hire carriers on file with the Federal Motor Carrier Safety Administration totaled 777,240. Of those:

• 91% operate 6 or fewer trucks
• 97.3% operate fewer than 20 trucks

So as you can see, even though we have decades of data that clearly demonstrates at what scale you will either barely survive or potentially thrive in a commodity business, over 95% of the people in those businesses have put themselves into the category that will barely make enough money to survive at all. Only a very small percentage of those involved in these businesses have any chance at actually thriving.

But make no mistake about it - scale alone does not guarantee anything. You must also have leading technology, cutting edge management, and continue at a large scale for a very long period of time to become financially stable and actually thrive.

Why We Recommend Working For Large Carriers

Now that you have a better understanding of why it's so difficult to survive and thrive as a small business in a commodity industry it's easy to understand why at Trucking Truth we highly recommend working for one of the large carriers. They have decades of success at the highest level in one of the most cutthroat industries in the country. They have their operations dialed in and they have the money and expertise to continue to thrive for decades to come. The large carriers have:

• The best technology
• The nicest equipment
• The sharpest management
• The biggest customers
• The best pay and benefits
• The nicest perks
• The greatest variety of opportunities
• The strongest finances

Over 95% of the businesses in farming and trucking are barely able to survive, if they survive at all for much longer, and many thousands of them will go bankrupt each year. So when you choose a company to work for it only makes sense to put yourself in the best position possible by going with one of the large carriers.

As a huge bonus, these large successful companies also have their own paid CDL training programs which we strongly believe is the very best way to get started in this industry. I've written an article about this topic and you'll find it here:

Why I Prefer Paid CDL Training Over Private Training

Think Hard Before Buying Or Leasing Your Own Truck

If you do consider starting your own trucking company, you have no one to blame but yourself for the outcome. There is no mystery surrounding what it takes to survive and then thrive in the trucking world. If you're going to throw your hat in the ring as a small carrier without a financial plan and a tactical plan for scaling larger then don't cry the blues when inevitably you find yourself hanging on by a thread. It should have been obvious to you that's what was going to happen. Don't blame the government, don't blame the large corporations. Thriving in a modern commodity business like trucking is an exact science. You either understand the economics of it and know how to properly manage your growth for many, many years to come or you die a sad death.

Rick, who is one of our longest active members and one of the most knowledgeable people you'll ever find (we call him Rickipedia!) made an excellent point about the potential for failure with any small business:

The advantage of the big guys is volume, [which] means they can afford to price the smaller guys (rate-wise) out of the market, thus retaining the market. The biggest problem the small guys have is under-capitalization - always has been, always will be.

Small guys can't afford to make any mistakes because they lack the money to cover them. The way most small guys manifest [their lack of funding] is the inability to do timely repairs. They [often] skimp on repairs with used parts and the like, because they simply don't have the money to buy new [parts].

Don't Say We Didn't Warn You

The trucking industry is loaded with owner operators, lease drivers, and small fleet owners who are bitter, miserable, and broke. They're endlessly complaining, blaming, and criticizing others for their failures when in fact the formula for success in this industry is right there sitting in plain site for all to see. If you fail to understand what it takes to thrive in this industry or you fail to execute on a long term plan for growth then that's on you.

If you're determined to own or lease your own truck then it's on you to understand what you're getting yourself into. You are never going to get far as a small business in a commodity industry. You are not going to be "The Big Boss Man" living the dream. You're going to be struggling to make a living, overwhelmed with responsibilities and headaches, and working twice as hard as the company guys yet still probably making far less money to boot. So don't kid yourself. Learn all you can before taking the plunge. The information is out there so use it and learn from it.

That being said, we strongly recommend that drivers avoid buying or leasing their own truck!

We feel that the best path to success in the trucking industry is to become a Top Tier Driver for one of the major carriers and stay with your carrier for a minimum of one year, preferably longer. Your goal should be to prove that you're one of the best drivers in the fleet. You want to learn how the company operates and develop strong relationships within your company so you'll get the best freight, the most miles, some special favors from dispatch, drive new equipment, and remain firmly planted at the top of the pay scale.

There are no mysteries about how the trucking industry operates. It's very clear what it takes to be successful as a driver or as a business owner. It's your responsibility to set your goals, do the research, and find the best path to achieving those goals. In the end you're almost certainly going to get what you deserve, and you're going to earn every penny the hard way. There is no faking it in this industry. There is no easy path to success. Prepare yourself well and be ready for a big challenge no matter what path you decide to take.

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