Now more than ever truckers must know their operating costs to survive

| Wednesday, March 19, 2008

As diesel fuel prices continue to rise, many owner-operators are desperate to find ways to cut costs to make up for dramatic increases in fuel costs and low freight rates.

The national average for diesel fuel has gone up to $3.974, according to the U.S. Energy Information Administration, which is an increase of more than $1.29 since this time last year.

During the past week, almost 65 percent of truckers who responded to Land Line’s Web poll indicated they have paid $4 per gallon for diesel.

OOIDA member Ken Simmons of Discount Trucking Inc., in Crosby, TX, has these words of advice for owner-operators who are struggling to stay afloat right now: “Make sure you know what your cost of doing business is before you accept a load.”

“Figuring fuel is pretty easy to do, but figuring in all of what you really need to run your business is harder,” Simmons told Land Line. “You have to educate yourself on how to run a business and make money.”

He said marketing is also key for owner-operators to make sure potential customers know about their trucking business.

“You have to have some way to get the word out that you are in business for yourself,” Simmons said.

Besides owning his trucking company, Simmons said he started a freight brokerage a few years ago to “augment” his company’s regular trucking schedules. However, he said he runs his brokerage a little differently than most.

“We pay more than the prevailing rate because we want our freight moved quickly, and we want it moved by someone who knows what they are doing,” he said. “We also pay our bills within 10 days.”

He said many owner-operators turn to freight brokers to find their loads, but Simmons said the majority of brokers know exactly “where the freight rates are anywhere in the United States and know exactly what the minimum is that they need to offer to get that load moved.”

“Owner-operators rely on freight brokers for their loads, and freight brokers are getting that freight moved as cheap as they possibly can. So owner-operators are then running for a smaller freight rate than is generally available in any particular market,” he said.

He said many owner-operators believe brokers take only 10 percent off the top, but Simmons said that simply is not true.

“Let me assure you that brokers make way more than 10 percent. Brokers make the difference in what they charge their customers and what they have to pay the truck driver,” he said. “Your point of profit is your truck driver so brokers are going to find the cheapest carrier they can to move that load and maximize profit because they are business people.”

Another crucial factor for owner-operators struggling to make money right now is checking credit on brokers before they take a load to make sure they will get paid for their loads.

“In a way, truck drivers are extending thousands of dollars’ worth of credit to a broker, so it is important for them to check (a broker’s) credit first for nonpayment complaints,” Simmons said. “Some don’t and then find out the hard way that their broker has stiffed other truckers, too.”

OOIDA member Joseph Frazier of Satsuma, AL, has made two important business decisions in order to survive the high fuel costs and low freight rates: He’s saying no to cheap freight, and he’s slowing down.

Right now, Frazier said his Freightliner is getting about 7 miles to the gallon just by keeping the speedometer at 63 or 64 miles per hour. He is leased to Fikes Truck Lines, which is 100 percent owner-operators. Frazier said he gets 100 percent of the fuel surcharge, which helps him out. Fikes bases the surcharge on 5.5 mpg, so he is able to keep the difference as profit.

“I see these owner-operators blow by me and I keep telling them, ‘Just look out the stacks and look at all that money go right out them stacks,’ ” he said. “Some say they won’t be passed by a Swift truck or a J.B. Hunt truck, but that’s OK by me, as long as they miss me.”

He said he can run all week on three tanks of fuel, depending on where he’s going and how heavy the load is. Others are using four tanks during the same time frame, he said.

“That’s about a $600 savings, and that could be a paycheck right there,” Frazier said.

Frazier, who has been in trucking for nine years since getting out of the military, pulls flatbed. He said he knows what his bottom-line freight rate has to be to run, which he said is right around $1.65 now.

“Just say no to cheap freight. It hurts me some weeks because cheap freight is all that’s out there. But if you plan for it, you can make it,” he said. “Guys that have been out here long enough know where the freight’s at. They know where the good-paying freight is.”

Frazier said it’s also important to lease on to a company that has only owner-operators because many companies that have company trucks will take care of their company drivers first.

“If you lease on to a company that has 700 company trucks and 200 owner-operators, guess who they are going to take care of first. Then they are going to turn around and give you the freight they want you to haul,” he said.

On occasion, Frazier said, he has had to take a brokered load, but he said he doesn’t like to and makes sure he doesn’t have to go far.

“I just got off the phone with my dispatcher, who said to me, ‘Well, we might have to go on the broker board.’ I said, OK, but if I have to grab a brokered load, it doesn’t go more than 300 miles because I’m not going to burn fuel going 900 miles for $1.20 a mile,” he said.

– By Clarissa Kell-Holland, staff writer
clarissa_kell-holland@landlinemag.com