My communication with many owner operators since the first quarter of 2020 ended has revealed little more than unfavorable offers for loads and little hope for improvements. The economic data doesn’t provide much guidance or reliable information. Broad economic forecasts are at best guesses.
may see a slight increase in rates one week as some owner-operators play the waiting game. Then, if a load or two is promising, more carriers will jump on it. This increases competition, which pushes rates down.
In today’s business environment, the rapidity with which load information is posted and accessed can be a double-edged blade. Fast information flows present opportunities, yes. The wide range of tech platforms, including brokers’ apps and traditional load boards, seems to make riskier for an owner-operator to determine who can be trusted.
In response to these risks, we either react too quickly (missing this or that great load) or untimely (missing out).
Many owners have told me that they “don’t have the time” to do the math to determine if the load will be profitable. “All I know that I need money!” “I need it now.”
I’ve written about the value of putting the legwork into knowing what your time is worth. I’ve written about the importance of doing the work to know what your time is really worth and asking other questions to encourage individuals to pursue a sound approach for revenue/cost management. I know that sometimes the questions can be difficult to answer. It can be difficult to reduce a problem to a single number. It’s difficult to put pen to paper to figure out the value of a property when it is so emotionally charged for an owner.
Math is hard, but controlling emotions is even harder
Our rationalizations and actions are often laced with a great deal of pride. Like oil in water, our personal biases are brought to the surface. If an owner operator shares that his cost is higher than what others think the “normal” cost for every owner-operator should be, then he exposes himself to ridicule. What is the effect? It’s a chilling effect, I know. It stifles open communication and information-sharing.
I’d like you to consider rates from a different perspective and answer these two questions yourself.
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What is your acceptable rate of return?
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Why?
Most owners will answer the first question with a simple “I need $1,000 per day” or “at least $5,000 per week” or “… $1.880 per mile.”
The second question is a conversation starter because few owners can answer the same way. Why do you use this rate? You might be able to simplify the cost and load evaluation by asking yourself.
It’s unlikely that all owners will understand the business practices necessary to discourage the acceptance of unprofitable, risky loads. It’s hard to get owner-operators to agree to refuse to haul “cheap cargo” when there is no industry-wide definition of what low freight means.
Owner-ops weigh in on the question: Who is really hauling cheap freight? Owner-ops weigh in]
We can do ourselves a great favor in the current market by having a greater percentage of owners communicate and support each other, with a commitment to learn, and doing the back-office tasks to estimate costs more accurately.
Profit margins are razor thin. At best, it is riskyto rely on outdated cost estimates that are based on stale and old information. It matters where an owner gets information. Gross revenue (loads incoming) is the easiest thing to observe — and one if not of the biggest influences in this business.
Load details are often absent, but revenue prospects are what draw us to the load boards. For example, a higher rate is posted than is typical for the market for a group of two or more LTLs. The broker may not include deadhead miles between pickup and delivery locations. This can make the rate per mile look better than it is. Owner-operators are more likely to book a load without knowing the truth.
It’s a given that the miles posted will always be lower than the distance the operator must navigate on the ground. This, of course impacts the time spent on the load. Do we dare question how much time will be lost due to detention during load evaluations?
Owners are often forced to chase down data points such as this when evaluating quick loads. We also use them in our overall cost evaluations. Not only do we pull them from settlements, but also from other sources (credit cards statements, separate accounts). It is difficult to make a quick and accurate cost estimation. Fuel prices are the first thing we mention when asked about costs. They also make up the majority of headlines. Fuel cost is relatively easy to estimate (again, as long as you know the actual miles required for any load).
[ Related to Calculate the cost of any load in relation to time and not just miles]
What makes up a cost estimate?
The answer is “It’s complex.”
We all rationalize to support what we think will be our cost. We all struggle to use old and stale information that has been fed to us in the past. The rest of the logistics (brokers, customers) operate with contracts that provide some degree of certainty.
The final question is: How can we do it?
[ Related Delivering a modicum consistency in a turbulent marketplace]
Find more information on load revenue/cost evaluation in Chapters 3 (“Understanding your revenue and costs”) and 18 (“Going independent”) of the updated
Overdrive
/ATBS-coproduced
“Partners in Business”
book for new and established owner-operators, a comprehensive guide to running a small trucking business
sponsored for 2024 by the Rush Truck Centers dealer network
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this link to download the most recent edition of Partners in Business free of charge.