You’re enjoying your first cup of coffee in the morning as your device starts up and you start your first search for loads. It’s a new day of lower-than-desirable interest rates. You keep asking yourself: When is this cycle going to end and when will things start to improve?

You negotiate the best price, but then realize it’s time to do a reality check.

For many, trucking is not just a job, but also their passion, their life’s work and identity. We spend our entire lives chasing a dream, which is sometimes not what we imagined. The latest economic downturn has us re-evaluating our business model. We spend hours improving our skills, sharpening our pencils to reduce expenses, and finding new revenue streams only to realize that the expenses are eating into the razor-thin profit margins that were present just a few months ago.

We must, however, find a way of being successful and profitable so that our dream remains viable.

When we were negotiating rate structures with customers, it became clear that accepting a lower rate per kilometer today in the hope that we would ask for a more expensive price next week is a way to fool ourselves and pretend that we have made progress. A shipper will assume that we will move their product for the same price as we did this week. Why wouldn’t they think so?

Here’s our dilemma: If my truck is running below my cost then I have a finite amount of time before I run into a financial liquidity problem. If my truck is running below my cost, there is a limited amount of time until I run into a liquidity issue. Carriers who operate in this manner and hope for better times create more of the problem. Each week, an operator offers a lower rate to a shipper. They run below cost and draw on their cash. The shipper expects the same low price at the next request. The carrier will eventually be unable to provide service and the shipper will have to pay someone else’s rate (which is probably higher, but who knows in today’s market).

If it can even be called a plan, it’s not a good one to burn cash until the market is saturated and rates rise again. What else can an operator do?

Service limitations and loyalty are both clear, but don’t give up on either

During a long-lasting downturn, such as the one we are experiencing, we can clearly see the limits of service and loyalty to shippers. Many, perhaps even the majority, are willing, in exchange for lower rates, to take on risk with shipments. There are still shippers who will value your services and are willing pay for them. Look for ways to maximize your opportunities within their company and help them in all areas of their businesses.

Prioritize those customers who are loyal to you as a carrier.

[ Related: Leave Trucking Better Than You Found It: Work Hard on Real Relationships across the Board]

Understanding your costs is easier than ever. To fully understand where your business stands in terms of profitability, you need to know your cost per mile as well as per unit of time (per hour, per day). Think creatively and maximize those rates while looking for ways to cut costs. Is it more profitable to outsource tasks you could do yourself, or to stop using a route that is not profitable? You can easily do without a difficult customer or one that is not profitable.

Don’t let fear drive your decisions about your business.

We must be careful not to confuse activity with achievement. The old saying that you can’t earn when the wheels aren’t turning isn’t always true. You can increase your bottom line profit by doing less non-profitable work. This will reduce maintenance, tire wear and fuel and insurance expenses. In difficult times, it may be better to run a few high-paying loads in order to cover your overhead than run mediocre freight for the entire month.

Consider a brokerage service for loads that do not fit into your lanes or to make the most of your office staff. You can also generate revenue if your operation offers mechanical services.

Although most small fleets and owner-operators don’t have the luxury of parking equipment and hoping for rates to rise or expenses to drop, taking a balanced, long-term approach to business decisions can have a positive impact on revenue and profits.

In business as well as in life, surviving the storm and regaining the sun is a great win.

Don’t give up hope, stay focused and keep going. There are better times ahead.

[ Related to More cheap freight curves in the future: Better ways of assessing rates and revenue, costs, and emotions]

Find more information on load revenue/cost evaluation and customer management in Chapters 3 (“Understanding your revenue and costs”) and 18 (“Going independent”) of the updated

Overdrive

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“Partners in Business”

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