Almost two full years into a freight-market slowdown, every owner-operator has struggled with the question of how to control costs and win better freight. On Thursday, a webinar hosted by Overdrive nailed down some concrete strategies to address exactly that.
The session featured 2021 Small Fleet Champ Jason Cowan of Silver Creek Transportation, Overdrive contributor and business coach Gary Buchs and owner-operator Ilya Denisenko, in his first year of authority as ICV Express. All shared strategies to survive and thrive in this down cycle, and the next one, too.
The webinar enjoyed support from the now-combined companies of Bestpass, Fleetworthy Solutions and Drivewyze, expanding on Bestpass’ well-known toll collections utility to offer safety, compliance and efficiency solutions in a single technology suite. (During the webinar, company Marketing Manager for Brand and Enterprise Ethan Quimby revealed that a rebrand for the combined companies is coming soon.)
To begin, host and Overdrive Editor Todd Dills set the stage with the ugly reality facing owner-ops: Rates have steadily slid since early 2022, even as costs have risen. According to ATBS, who partners with Overdrive on the Partners In Business series, average owner-operator income has fallen as a result, losing nearly $10K by yearend 2023, after a high-water mark approaching $75K in 2021.
Some enterprising owners simply hauled an extra load or two a month to combat rising costs and the decline in profit margins, which served as a kicking off point for the discussion.
In Overdrive‘s Partners in Business seminar at the Mid-America Trucking Show in March, ATBS shared this chart illustrating the average income impact of just a single extra load moved per month, after an owner’s already met all fixed costs. The hypothetical, based on ATBS client average numbers, shows one single-day-achievable 500-mile run per month would get close to giving that average owner back all the profit lost since the high-water income year of 2021. Two extra loads a month? That would give it all back in full, and then some. During the Thursday session — register to catch the replay in full at this link — panelists called out limitations of the notion, but also ways to adjust operations to make it possible.
‘Location, location, location’ — limitations, possibilities
A savings account packed with cash could handily defend against a market downturn, but short of that, Buchs offered a simple maxim: “Location, location, location.”
Look at “load to truck ratios for regions and times of the year,” he said. “Really, it’s a kind of no-cost management thing. You don’t have to pay for a location you go to.”
Not only that, but finding a comfortable, high-demand region in which to either base or operate your business will reduce “downtime risks because you’re closer to the shops you know,” he said. “It reduces downtime because you’re closer to your core customers that you built your foundation on.”
Spending more time owning your backyard, so to speak, will boost time efficiency, making those extra loads realistic “because you’re working in a smaller region and seeing those customers more often to build relationships,” Buchs noted. Building those relationships could be as simple as telling a customer or potential customer, “Hey, I’m going to be avail at X days and X time if you have something come up.”
“When thinking about that extra load, mentally we go to Friday or Saturday” hauls when you’d normally want home time, but Buchs said the difference-making load “might be that Monday morning delivery at 5am that you loaded on a Friday or Saturday.”
Denisenko carefully places his feet when hauling across the country, mostly staying east of Amarillo, Texas, and in areas within a day or so’s haul of his home in Chapel Hill, Tennessee, where “fuel prices aren’t too bad,” he said. The focus on costs represents a core competency of his operation.
“I basically always plan for the worst-case scenario,” he said. He budgeted in advance of starting his business to be able to break even on as little as a $1/mile — a worst-case he envisioned. He applies that logic to buying a truck, too.
“What’s the worst that could happen with a big expensive truck? Everyone is scared of it breaking down,” he said. So he drilled into the history of the 2020 Volvo (with specs for the best fuel mileage he could hope for) that he ended up purchasing — the ECM, an oil sample, and more. He’s found a community of fellow enthusiasts and specialists he mines for insight and advice on equipment and other business decisions.
“On a weekly basis I talk to people like Kevin Rutherford and consult with him and other experts, people that specialize in every kind of engine,” he added.
Part of Denisenko’s journey has been documenting his path on Twitter and other social media, something that’s yielded dividends as his professional network has grown more in one year than many owner-ops see in a decade.
Boosting revenue, cutting costs, or just plain surviving
Jason Cowan’s Silver Creek Transportation commands close to 40 trucks now. Cowan has all the direct customers that a single-truck owner-operator might dream of, but he knows that, once you land a customer, the next step is keeping them.
“If you have a small downturn,” said Cowan, “the service and loyalty you have will make the customers hang in there” rather than “get out in that deep water.” But going on two years now of sliding rates, long-term relationships will strain. Even your best customer will absolutely “come back and say, ‘We love your service, but we’re leaving 50-75 cents on the table, so we’ve got to do something.'”
You’re forced to take a hit, in other words. That’s when he might bring an OTR truck in for more local loads to boost revenues, or adjust the way his load planners think about revenues. “Instead of me telling them, ‘Don’t take a load less than $2/mile,'” he analyzes revenues incoming and costs going out and switches up, determining the gross dollar amount he wants planners to get out of each unit.
On the cost-cutting front, when you’ve got no choice but “hang on” in a long downturn, Cowan noted it comes down to things no one really wants to do like “extending maintenance intervals” in some cases, and “tightening belts” wherever possible otherwise.
[Related: Parasitic costs: 15 ways to eliminate and save, build value as an owner-operator]
Beyond that “there are times in business where you just have to have cash from somewhere,” he said. “It either comes from reserves of retained earnings or a line of credit you can tap into.”
That’s all helped by keeping a level head when the money is good. “When times are good,” Cowan said, “you think it’s never going to be bad again, but when it’s bad you get to thinking it will never be good again.” Neither of those statements is true, of course, and realizing that will help put the importance of saving in perspective.
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Still, it’s Cowan’s imperative to impress upon his customers that there’s value in seeing the same face at the dock every time, if an operator knows what he’s doing. “The sweetness of low price” comes really fast, “but the sour taste of bad service lasts a lot longer,” he said.
As for boosting revenue, Buchs recalled his days leased to Landstar.
“Don’t confuse revenue” with simply racking up miles, he said. “We’re conditioned often to think as owner-operators in long haul” that miles equals gross revenue, which leads to profit.
“One thing I learned at Landstar” from company statistics analysts, he said, is that, on average, owners who “haul two or more loads in a week, those are more successful than [owners] hauling” fewer loads per unit of time. The average at Landstar at that time, he added, was about 1.7 or 1.8 loads a week. Buchs targeted even shorter runs, reaching for a single load for every per diem day. He ended up averaging “about 0.7 or 0.6 loads each per diem day.” It did wonders for his earnings.
Shorter runs may seem like more hassle than they’re worth. “But shorter loads often pay two, three, even four times the rate” of longer loads, he said. “If you manage that pickup [and delivery] with communication,” you can get loaded, then unloaded faster, and at once turn greater revenue more quickly.
Because even if you have a highly efficient operation in a good spot, you still need to sell yourself.
Or register to catch the replay of the hour-long roundtable in full here.
Find more information on a myriad of owner-operator and small fleet business topics in 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. Follow this link to download the most recent edition of Partners in Business free of charge.