How Choosing the Right Resources and Partners for Your Business Can Help You Do Better in Trucking
When you are building a business as an owner operator or small fleet owner you have thousands of critical decisions to make. Two of the biggest are how to get loads and how you will get paid for them.
There are plenty of others too – but if you get these two wrong you won’t have to worry much about the rest because you won’t be in business long enough for it to matter much.
Where and How to Get Loads
In general, you first have to choose to either get your own authority or to lease on to another trucking company/motor carrier and operate under their authority. This is not always a simple thing either. There are potential benefits and liabilities with each approach.
Getting your own authority offers the most freedom and the most potential for maximum profit. It also offers the most risks and responsibilities you will be taking on too if you go this route.
Independent Owner Operator
First, there are all kinds of filings and fees that you must take care of before you can even get and haul your first load. Take time to learn what needs to be done and then either do it all yourself or hire a company to do it for you. Even if you intend to hire someone – remember it is still your business and your responsibility to make sure it is all done right. So you still need to learn the basics of what needs to be done anyway.
It is also CRITICAL that you become familiar with the regulatory requirements and set up your management control systems including policies and procedures along with systematic and compliant record keeping systems.
I cover all that and more in my courses and I will be covering it here in future articles and posts as well.
For now, let’s assume you have already done all that – and you have your truck, trailer, DOT/MC numbers, general liability insurance, physical damage insurance, and cargo insurance – all paperwork has been set up in your office. You have a DQF (qual file on yourself) and it contains all required forms all properly filled out. You have an accident register, maintenance files and you are also in a DOT-compliant drug and alcohol testing program – with paperwork to prove it from day one, and you have a negative pre-employment test result on yourself.
You have plates, IFTA decals, annual inspections and all the rest and your equipment is properly marked – all required items are compliant and you are ready to roll.
Now all you need is a load, right?
Here comes another critical decision. Where to get your loads from. Your choices include;
- Load Boards
- Freight Brokers
- Dispatch Services
- Shipper Direct
The best of them all is shipper direct – relationships you build with your own customers over time and which involve no brokers or others between you and them. The problem is that this is also potentially the hardest and most time consuming way to get loads initially. It takes time to find them and then to sell them on using your company. That is even harder when you are brand new and have no track record yet.
I recommend that you do start working on getting some loads direct as soon as possible – but do so in combination with the other methods. They will result in immediate loads for you to haul and get some revenue coming in and give you time to build a track record too.
Load boards are everywhere these days and they vary. Some are great, some are crap and most are in the middle of those two extremes. I like DAT primarily and it is currently what I recommend you start with. Then there are many other load boards and services you can take a look at, try and see how they work for you. Just be careful not to put t0o much emphasis on any one resource by itself.
There are some free load boards that are useful and even DAT will give you a free trial to get you started.
Freight Brokers are a necessary evil – whether you love them or hate them – they are here to stay and they do provide a useful service to both shippers and to motor carriers. Yet they do vary considerably. Some will treat you very fairly and are honest and will pay you quickly and in accordance with your agreement with them. Others are flat out liars and will rip you off nine ways from Sunday – and play games with you where they win and you will lose, if you let them. So research any broker you are considering – then be careful dealing with them, hold them accountable to their agreements and do not continue to use any broker who is a game playing liar.
A common game is to offer you a load – but tell you they have to check on something – get you to commit to the load and then they come back and say the load was canceled. In truth it was not canceled – they just kept shopping it to other carriers until they found one who would haul it even cheaper than you so they gave it to them. Next, they will offer you a replacement load at a much lower rate. Often they will have caused you to wait so late in the day that you are then either likely to be stuck with no load at all – or their crapy low paying load. Neither is a good choice.
There are plenty of very good and very hard working brokers and freight agents – find them and use their services. Build good relationships with a few of them and use them over and over again. Likewise, as you find the other gutterballs – and you will – put them on your naughty list and never use them again.
Dispatch Services and Freight Brokers
In some respects for all practical purposes – a dispatch service operates in some ways much like a freight broker or agent does – in the eyes of the trucking company. Though from a legal standpoint they are not at all like them from that point of view. A broker is an intermediary – meaning a middeman. That also means when they approach shippers they do so on their own behalf and negotiate the highest rates they can per load, for themselves – then they approach carriers/owner operators to haul the loads and perform the actual transportation service and try to get them to take a lower rate. The lower the rate they pay the shipper the more of the overall fee they keep and the more profit they make.
The broker never actually touches the load but rather handles information, paperwork, and communications. remember at all times, they are motivated to get the highest fees they can from the shippers and then make sure they get the lowest rate they can from you as the trucking company/owner operator. The difference is their money. That how they get paid. See how that works now? Keep in mind the lower price they can get you to haul it for the more they make per load – and that is a powerful incentive.
To make matters worse – they are experts at their craft if they have been a broker or agent for very long at all – and chances are that you are not. Not yet anyway – unless you come from a sales background yourself and learn trucking very very quickly. Otherwise, they are more accurate with their numbers and they are far more skilled as negotiators/salespeople than you are – and that means you will often lose.
I say often because there are some good brokers (a few at least!) who will not take unfair advantage of you for a short term profit because they are looking at the bigger picture. They want you to be successful so you keep trucking and they want you to keep getting many of your loads from them. They need drivers and carriers to haul freight so they can stay in business and stay profitable themselves. Building a long term relationship makes it a more consistent and more stable way to do that – for you and for them.
Yet again, not all share that mentality. Others don’t care about doing business with you on a long term basis and want to rip you off as much as possible until you wise up and stop doing any business with them – and since they are constantly seeking new streams of new inexperienced and or gullible carriers/owner operators – they just keep on doing the same thing to more carriers/owner operators on an ongoing basis.
A dispacth service is your representative and handles things for you. Often they are paid a percentage of the total freight rate – so they have a direct incentive to get as high a rate for you as they can so they also make more money. That’s one key distinction.
Dispatch services will still use freight brokers, load boards and may have relationships with shippers direct so they can negotiate a rate with them on your behalf. They are effectively your representative in many ways, and they handle all the faxes, emails, paperwork and many of the other things that must be done behinds the scenes so you can focus most of your efforts on moving freight.
Knowing How to Get Paid is Critical to Your Business
Often from the time a shipper receives a bill for services from the owner operator/carrier they will wait 30 days – or more – before they send payment. Even then often that payment will be in the form of a paper check which must travel through snail mail and be delivered to you – then you have to take it to the bank and it must clear before you have access to that money. This takes a lot of time overall – 30 to 45 days or even more.
If anything is wrong with your invoice – they will kick it back – usually also after holding it for many days. Then when you correct it and resubmit your bills the process starts all over – and it may be another 30, 60 or even up to 90 days before you ever get paid! Even then some of them will not pay you and you will have to do collections to ever get a dollar of your money. You still need fuel, and you need maintenance, repairs and other things not to mention you probably have equipment payments (truck and maybe a trailer etc.) and will have insurance payments – plus your own paycheck so you can eat and pay your personal expenses and bills.
You can see the problem here now if you think about it – yet you might be surprised at how many people get into trucking as owner operators who do not realize this until they are living it – and then it is a crisis!
One way to deal with this problem is to use a factoring company.
A factoring company will take your fright bills/invoices and they will pay you almost immediately at the time they receive them from you. So you deliver the load late in the evening today, and then – first thing in the morning, you sent the paperwork to the factoring company by scanning it to them using an app on your phone, and by the next day if not sooner your money is in your account. How sweet is that!
There are different contracts and different options with some factoring companies and of course, they do not work for free. They take a fee for providing their services and the fees vary by factoring company and by the choices among the plans they offer in some cases. Be sure to do your homework and choose a good factoring company and a good plan – and know what it is really costing you. Still, all in all – this is a powerful tool to help solve a serious cashflow problem.
That’s especially true when you are a new company and resources are more limited and cash is tight to begin with.
As you grow and become better at what you do – you will build up cash reserves (if you are smart) and then you will be able to do more and more of your own freight billing and avoid the fees of factoring. But even then, always remember it can be used as a way to get fast cash when you need it and it is a good idea to maintain a great relationship with at one or two factoring companies at all times.
Leased On Owner Operator
As you can see from all that we covered above – being an independent owner operator motor carrier has a lot of variables and a lot of critical decisions that can make or break your business quickly.
Another route is to buy your own truck and then lease on to another motor carrier and operate under their authority. There are both benefits and drawbacks to doing so.
The benefits include the fact you do not need to get your own authority, nor will you require most of the insurance because the carrier you lease on to is going to provide most of it for you most likely. However, almost all of them will still require you to carry some insurance on your own too. Usually, that will include physical damage or bobtail insurance, for example. They may also require or strongly encourage you to have some kind of medical disability coverage too.
They may provide plates or assistance with plates and most of them will supply you with trailers to use, or at least a way to get a trailer easily.
These benefits are not free. The company can provide them to you because they are going to keep more of the revenue you generate as their compensation than what you would keep on the same loads if you were an independent owner operator with your own authority.
In addition to all that, they will exert more control over you. You are operating under their authority so they have risks because of you which they will try to mitigate by requiring you to follow their policies and procedures.
They may also exercise different types of control over the loads they choose to make available to you.
A better version of dispatch – in my humble opinion anyway – is self-dispatch. That means they put their loads in some kind of internal load board and you log in and take whatever loads you want if you are fast enough to get it before another driver does – just like any other load board.
The downside is that you usually can not go to any other load boards or sources of getting loads because you are contracted to them only – and that means you are more or less captive while you are there. Of course, you cancel your lease and move on – but until you do that – you have given up much of your control to them and you are not an independent owner operator, not by a country mile.
having said that – there are many owner operators who prefer this arrangement and it is all they will ever want to do. Others can’t stand that level of control and they will never be happy with anything less than their own authority and complete independence.
So which is better? That depends on you and what you want. It is just a matter of choosing the best route for you right now and then going after that with solid information so you can make better and more well informed decisions all along the way.
Transpot Resource Solutions
That’s where Transport Resource Solutions can help you. I founded this company in 2008 to help you make better decisions by providing specialized information, training, services and other resources which can help you build your own trucking business successfully. Be sure to consider joining our Trucking Business Success Facebook group if you are not already a member. You can do that HERE and you might also want to check out some of my courses on Udemy.