Updated: May 5
During the month of April, the downturn in the economy has not spared the trucking industry, and there has been a significant slow down in the freight market. In the beginning of the COVID-19 pandemic, freight was still plentiful as consumers were clearing out grocery stores due to the uncertainty of how our country would be affected. However, as the nationwide shutdown has continued, freight demand has dwindled. Nobody is sure how long it will take for the economy to open back up, and even when it does, it will take time to get everybody back to work and back to “normal”.
In this article, we want to share some ways for you to manage your trucking business during a down freight market. Now would be the best time to start looking at your operation and identify areas where you can generate and save money. By following these tips, you can help make sure you get yourself and your trucking operation through the downtimes. In addition, by getting into the habit of managing your business for times like these, you’ll reap the benefits in the future when the market gets better.
Be flexible with your operation
If you have been an owner-operator for a while, you know that the market goes through its ups and downs. You might also know that the best way for your business to operate during good times might be different than how it needs to operate during bad times. With freight rates dropping, it’s time to look into how your business will operate best right now. This means looking into different types of freight or areas of the country that you may not usually operate in but might have higher demand during a slower trucking market.
On the flip side, if you found a market during the beginning of the downturn that is helping you stay successful, there is a chance that operating like this isn’t going to stay profitable forever. You may have to be flexible and look ahead to different markets if the one you are operating in looks like it isn’t going to continue to work out for you based on changing conditions. Don’t allow yourself to get trapped in a situation that was once profitable, but is now a place where you won’t be able to make enough money to keep your business afloat.
Most importantly, you have to stay informed and understand the market changes as they are happening. You can do this by; talking to other drivers about what is working for them, listening to trucking-specific satellite radio shows to stay informed, asking the fleet you may be leased to about freight changes, reading trucking blogs, and looking at data from Truckstop.com and DAT.com.
Overall, be flexible and know that what’s working in the present may not be what works best for you in the future.
Understand your financial situation
During difficult times, it will be more important than ever that you are completely aware of your finances. This means keeping an accurate and up-to-date profit and loss statement and knowing your break-even point. If you don’t already do these things, now would be the best time to start. Your profit and loss statement will allow you to see areas where your business is operating well and areas where you can improve. From your profit and loss statement, you will be able to come up with your breakeven point, which is how much money you need to make to at least cover your costs. With that breakeven point, you can look at it on a per day, week, month, and yearly basis.
With that breakeven point in mind, you need to be realistic with your revenue expectations and know that you may not earn as much as you would during a really strong economy. This means you can't be picky with your load selection. You aren’t going to be able to choose loads based on whether or not you think it’s “cheap freight.” You need to use your break-even point as your guide in deciding what loads to take. Your decisions will have to be made looking at the big picture and deciding whether or not you’re earning a profit on this load, and if not, is it getting you to another area or to another load where you will be making a profit.
A great place to start would be taking a look at this guide to help you make the best freight decisions as an owner-operator.
After you have looked at your financial situation and analyzed your profit and loss statement, you will know areas of your business where you are able to reduce costs. One number that will surely jump out at you is fuel, as it’s one of your biggest expenses. Luckily, fuel is one of the biggest expenses that you actually have some control over. Even though you can’t control the price of fuel, which is very cheap right now, you will be able to have some control over how much you are using. We have an entire article dedicated to the top 20 ways for truck drivers to improve their fuel efficiency. These are changes that you will be able to make immediately in order to save money on fuel.
Unlike fuel, truck and insurance payments are costs that you may not have much control over. However, there are other non-essential costs that you will be able to try and reduce. Food and drink is one that comes to mind. These are obviously essential to stay alive, but going out to eat every night isn’t. If you can, try buying groceries and cooking for yourself in the truck. Buying groceries can be a lot cheaper, and healthier, than eating out at restaurants for every meal.
Other non-essential costs might be; unnecessary upgrades to your truck, service providers you aren’t using, and a variety of personal things you might be spending money on that you don’t need. We just recently published an article about personal spending and provided six ways to cut your spending in order to save money.
Preserve your cash
Along with reducing your costs, preserving your cash is important so that you have enough money to make it through the difficult times. Look for all sources of cash in your business and personally so that you can increase your cash reserves. You can start by looking for places where you could delay or reduce payments. This can include vendors where you spend money in your business like truck payments, insurance coverages, and maintenance work. Check to see if you can delay or pay for some of these services or products in 60 or 90 days instead of 30 days. On the personal side, many mortgage and utility companies are offering delayed payment terms during the COVID-19 crisis.
Are there other places you might have cash such as excess maintenance reserves, stockpiles of parts or supplies, things sitting around your house that you don’t need? M