Many new trucking companies close their doors within the first year of operation. Why? There are a few of the common mistakes that I’ve seen owner-operators and small carriers make, and as a result I’ve seen a huge number of them close their doors before their first anniversary.

Below are four of the most common mistakes a trucking company might make – plus ways you can avoid them.

1. Growing Too Quickly

Running a small fleet is a daily challenge that requires patience, organization and hard work. However, some owners jump out and hire too many people to help them through this process. Hiring people is often the single largest expense for a company – in trucking, it’s usually only surpassed by fuel costs.

Outsourcing simple tasks will allow you to focus on what you’re best at: hauling freight. Good examples of items that can be outsourced: back-office functions, payroll processing, human resources and marketing. You can also use a load board or a dispatch service instead of hiring a salesperson. Most of these services can be handled by experts at a much cheaper rate, while also ensuring that you meet all state and federal guidelines related to these functions.

Before hiring staff members, see if your current staff is overwhelmed and often working overtime. Ask them to outline all of their tasks for the week, plus how much time they spend on each task. Ask yourself: Are these tasks essential to meeting our goals? Can we eliminate this task? Can we outsource this task? You’ll need to answer these questions, so that you don’t outspend your revenue.

2. Not Meeting “New Entrant” CSA Guidelines

The “new entrant” guidelines state that all new fleets filing for DOT registration will be audited WITHIN the first 18 months. Many new entrants assume this means that they have 18 months to meet all of the guidelines before they are audited, but I’ve known many fleets that were audited on month 3 and were shut down for 30 days until they met all of the requirements. This temporary shut-down almost always results in bankruptcy.

New entrants will AUTOMATICALLY FAIL the CSA Safety audit for the following violations:

Alcohol and Drug Violations

• No alcohol and/or drug testing program
• No RANDOM alcohol and/or drug testing program
• Using a driver who refused a required alcohol or drug test
• Using a driver the company knows had a blood alcohol content of 0.04 or greater
• Using a driver who failed to complete required follow-up procedures after testing positive for drugs

Driver Violations

• Using a driver without a valid CDL
• Using a disqualified driver
• Using a driver with a revoked, suspended, or cancelled CDL
• Using a medically unqualified driver

Operations Violations

• Operating a motor vehicle without having the required level of insurance
• Failing to require drivers to make hours-of-service records

Repairs and Inspections Violations

• Operating a vehicle declared Out-of-Service for safety deficiencies before repairs are made
• Not performing OOS repairs reported in driver-vehicle inspection reports (DVIRs)
• Operating a CMV not periodically inspected

See the full list of carrier requirements at the FMCSA website.

3. Not Having Enough Insurance Coverage

Most fleets realize that they need liability and cargo insurance, and most fleets generally meet the base guidelines. However, it’s also important to have coverage for physical damage of non-owned trailers and general liability protecting your drivers or others when the truck is not involved. Some examples: customers slipping or falling on your premises, erroneous delivery of products resulting in damage, actions of a driver at loading docks, truck stops, etc. Some fleets, based on size and type, may also need Workers Compensation coverage – too many fleets are not carrying enough in this area.

Not having enough insurance has left many fleets with the inability to pay for damages. They just purchased enough to meet the minimum requirements and didn’t fully understand the long-term effects of their decisions.

4. Not Understanding Your True Costs per Mile

You need to know both the fixed and variable costs to operate your business. Fixed costs are the expenses you incur even if your truck isn’t running, like truck payments, insurance, building rent, etc. Variable costs are what you spend to move a load: fuel, tires, maintenance, etc. Starting out, you should have enough cash on hand to cover your expenses for 3-6 months, since you’ll need to cover these costs before money starts coming in. Plus, your business might not grow as fast as you expected at the beginning. Knowing your costs per mile will help you manage that cash flow.

The cost per mile and other financial reports are also a good barometer for the financial health of your business. It’s best to understand your basic cost per mile based on the annual mileage and annual expenses for all of your vehicles. The simplest way to do it is divide the annual costs by the number of miles run that year. The challenge is to accurately allocate ALL of the expenses – the key reason many fleets don’t survive. All too often, new fleets do NOT take the time to understand their expenses, document their expenses, and then fully understand their cost per mile. They then accept nearly any rate just to get a load. Over time, this model gets them upside down with their cash flow. Before long, bills aren’t getting paid, drivers aren’t making the amount of money they need, and the entire business starts to collapse from within.

Most years, van volumes and rates fall in July and pick back up again in August. The timing is off this year. Rates and volumes mostly held steady this past July, but loads and rates dropped off last week. We could still see another rebound in a couple of weeks.

So, where can you find a load for your van right now? The top five markets for load posts on DAT TruckersEdge are Atlanta, Chicago, Elizabeth NJ, Dallas, and Indianapolis. There were more loads in Northern New Jersey last week, and Indy had a good week, too. The other three markets (Atlanta, Chicago, and Dallas) lost traction, but they are not moving out of the top 5.

Darker colored states above have higher load-to-truck ratios, meaning there’s less competition for van freight in those states.

The rates below include fuel surcharges and are averages based on real transactions between carriers and brokers.

RISING

43 of the top 100 van lanes saw prices go up last week, but most of the increases were small.

• Biggest gain last week: Philadelphia to Boston up ▲10¢ to $3.19/mile (That rate sounds great but you have traffic and tolls on I-95, plus it can be tough to find a load out of the Boston area)
• Second-biggest gain last week: Chicago to Buffalo up ▲8¢ to pay $2.26/mile on average
• Seattle and Denver had the biggest improvements in volumes last week.
• Rates didn’t change in Denver, but Seattle prices got a boost
• The bad news is that the Seattle average was still just $1.19/mile outbound.

Also, some truckers are getting loads from FEMA this week to bring emergency supplies to the flood zones in Louisiana. That can be dangerous work, and it’s hard to find a load back out, so be careful out there.

FALLING

• Los Angeles rates dropped to a 6-week low last week, an average of $2.07/mile.
• The lane rate from L.A. to Chicago dropped ▼17¢ to just $1.16/mile, which makes your trucks more competitive with the railroad, but that’s just not an attractive rate for 2,000 miles
• Memphis to Charlotte fell ▼14¢ to just $1.67/mile
• Charlotte to Buffalo rates lost ▼22¢ to $1.95/mile, the first time that lane has averaged less than $2.00 in a while.
• Trucking Success partners with DAT to offer a special on the TruckersEdge load board. Sign up for TruckersEdge today and get your first 30 days free by signing up at http://www.truckersedge.net/promo123 or entering “promo123” during sign up.

Recent blog posts about the DAT survey on driver detention have yielded lots of comments, including sad stories, but also recommendations for brokers as well as carriers.

Bottom line: When carriers and brokers work together effectively, they can help reduce excess detention and its impact.

The graph above shows responses from 257 carriers surveyed

Communication is Key

Many comments emphasized the importance of communication. Reader Bob Farrell noted that both the carrier and broker need to communicate more:

Carriers should know the ‘game rules’ in advance and notify the broker when they: 1) have arrived. 2) have been placed to the dock. 3) are approaching the end of the free time (i.e., at 60 minutes, 90 minutes, etc.).

Likewise, Farrell says that the broker needs to notify the customer that the time window is closing. Another commenter, Chris, pointed out:

If you speak with your broker, they can help most of the time. They just don’t want to have the conflict and potential loss of income. Drivers think load by load, brokers think about overall volume from the customer.

Need for Documentation

When detention does occur, having the proper documentation is critical. Catherine Mallery, a 3PL, says:

We have a standard detention policy that outlines free time, rates per hour, and necessary actions/documents to qualify for detention. Each customer has their own policy and we have to manage all these expectations to try and recover detention. 

Many carriers, however, complained that getting detention pay is nearly impossible, even with proper documentation. Mitch writes:

What about the broker who tells you they can’t pay detention without the in and out times being stamped on the bill of lading, and the dock worker tells the driver they do not stamp bills with in and out times?

Julie, who identified herself as a former owner-operator and now a broker, said this about detention pay:

We tried putting it in our contracts, but now shippers don’t want to sign our contract. They want us to sign theirs, which of course doesn’t include detention. 

More on Driver Detention

• DAT Survey: Carrier responses
• DAT Survey: Broker responses
• Blog: 63% of Drivers Detained More than 3 Hours
• Blog: ‘Detention Is Killing Us’

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Trucking Success partners with DAT to offer a special on the TruckersEdge load board. Sign up for TruckersEdge today and get your first 30 days free by signing up at http://www.truckersedge.net/promo123 or entering “promo123” during sign up.