Updated: Oct 5, 2022
By: Todd Amen, President and CEO of ATBS
As Bob Dylan sang in 1961, “ The Times, They Are a-Changin’ ”. The big thing we can take away from a 60 year old song is that the times do change. We’ve been in a robust bull market that has favored truckers for almost two years. In fact, history will show that nearly every segment of trucking has had record earnings during this time, from company drivers to Owner-Operators as well as trucking companies themselves. During times like this it’s natural for businesses, big and small, to become hyper focused on revenue. Companies get more choosy over the loads they take, the rates they accept, the lanes they run, and the customers they do business with. All of this is in an effort to maximize revenue at a time when their services are in high demand. This typically leads to companies forgetting about the expense side of their business, and they stop managing the business as a whole during boom times.
By some accounts and recent media stories, the times are changing. Reductions in spot market loads and rates can be considered leading indicators that the market has moderated and things are going to slow down a little for truckers moving forward. Some of this news gets sensationalized into headlines that say there will be record bankruptcies and all the small independent businesses created during the boom will go bust. Having been in business for nearly 25 years, and having lived through multiple “changing times” with over 150,000 small business owner-operator clients, we know much of the negative news is simply headline hogwash. But that doesn’t mean we don’t need to react to changing times.
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In early March 2022, we saw one of the greatest shocks to the trucking industry that’s ever been experienced. Fuel, the number one cost for an owner-operator, spiked by $1.15/gallon in a two week period. This led to an average 20 cents per mile (approximately $400/wk) increase in operating costs. The previous largest two week spikes in fuel were a $.40/gallon increase in 2005 from Hurricane Katrina, and then again in 2008 at the beginning of the Great Recession. So our spike this March was 3X larger in magnitude than any previous experience. Understandably, this led to some small business owner-operators saying they couldn’t sustain the cost increase, and they were going to either park their trucks, give them back to the banks, move from the spot market to a stable carrier, or return back to being company drivers.
Fortunately, fuel has since leveled off giving fuel surcharges and market rates a chance to catch up to the increased cost. Prior to this extraordinary fuel spike, the consensus was that 2022 would be another really good year for trucking. Most of those fundamentals are still in place, but there is a great unknown on what rising interest rates, high nationwide energy and fuel costs, and overall record inflation will do to our economy. There is little argument that over time these negative factors will decrease consumer purchasing power, thereby reducing demand for goods and services. This ultimately means less freight being shipped on trucks. The big question is when and how long until we feel the impact? Either way, the times are likely changing.
So what does this mean to you, the small business owner-operator? It means you get to exercise your right as a business owner to manage your business. The good news about being a small business owner is that you can take action today that will impact your business literally overnight. If you are a large business with thousands of trucks, taking these same actions is like turning the Titanic, it literally takes months or years to make big business shifts.
So let’s consider some actions you can take today to positively impact your business:
1) Change your mindset from focusing only on revenue (high paying loads in very specific lanes) to a more all-encompassing business owner mindset. This involves a more comprehensive look at the revenue generated as well as managing the cost side of the business to maximize your bottom line.
2) A more comprehensive revenue mindset
Consider running lanes and routes you haven’t previously
Don’t just focus on the highest rate per mile; focus on generating the most revenue per day over a sustained number of days. This may include accepting some substandard rates that get you into a market where rates are higher.
Don’t sit and wait (layover) hoping for a better rate the next day. The average O/O has business and personal fixed costs of $240/day. If you sit 2 days waiting for a load that pays more per mile, you’ve dug yourself a hole of $480 that is harder to get out of.
Manage deadhead and out of route miles. When loads were paying over $3/mile and fuel cost $2.75/gallon, it might have made sense to deadhead further for a higher paying load. Today it’s reversed, loads are under $3/mile and fuel is over $5/gallon so your cost to deadhead is much greater for lower pay.
Run an extra load every week or every other week. In 2021 the average ATBS owner-operator ran 8% less miles because they were making more money with high paying loads. When things start to slow down, we all have to work a little harder to make the money we desire.
3) Manage your costs
Understand your fixed and variable costs and how they play into your breakeven point. These are complicated calculations that your ATBS Business Consultant can help you attain from your ATBS Profit Plan and monthly Profit and Loss statements. You can reach our ATBS business consultants at 888-640-4829.
Fuel has quickly become a cost you need to manage every single day
Take advantage of fuel discount programs!
Programs offered through your fleet if you are leased on to a carrier
Programs through independent networks
Get better Miles Per Gallon
There are tons of strategies to maximize fuel economy
The two highest bang for your buck strategies are to slow down and to idle less.
With fuel over $5/gallon, managing these 2 areas can easily result in saving over $10,000/year.
Maintenance costs have spiked up to $.12 - $.18 per mile. If you are leased to a fleet, take advantage of their buying discounts for parts and labor. If you are independent, shop and negotiate with a specific maintenance facility that will provide you discounted quality service.
Look at all other costs and consider which ones are necessities and which ones can be trimmed or cut.
A motto passed down from our grandpa who was a farmer is “tough times never last, but tough people do!” We are currently far away from tough times, but it does feel like “ the times are a-changin’ ” a little. It is always best to think ahead and be prepared. Don’t hesitate to reach out to ATBS if we can help with your business in any way.