Dumb Question

[arkjarhead]

I guess this is a dumb question, and the only reason I'm asking it is to hear the keys click on keyboard but here goes.

I wonder could a company be successful in keeping their drivers happy if they didn't do all the little baby sitting duties? You know like paying out all the advances and what not just to keep people moving because they don't have proper reserves. I wonder how much reserve a small company would need just to cover advances? Not including covering settlements that would most likely need to be paid before the customer paid the carrier.

 

[x06col]

Been my experience that the better you learn em, and the more business savy you share, and the more tools you provide, the sooner they will leave and start their own company.

Also, the better you pay them, the more time off they want, insteada making a nest egg.

I'd suggest for every ten trucks you have contracted, you need a minimum 100K reserve to take care of their pay demands and the lag of reciept.

 

[fatboy1]

What would the ateam say?

 

[arkjarhead]

What would the ateam say?

I'm sure we'll never know.

 

[moose]

The questions is what came first ?
the revolving door , the cash reserve ,or the low pay scale.
this is actually working well for the large carriers .
as this practice allow them to recruit 'non business suvey partners'
if they wait for the ones with the cash reserve , they will find more qualified expeditors on the entry level , and will have to pay them accordingly.

same goes to the escrow account windrow weekly instead of being deposit in advanced .

this is actually not a dumb question at all .

 

[davekc]

I think that 10k per truck is what I would put that number at as well. Then again, some just say sell everything you own.

 

[jelliott]

Good question. If you anticipate that a truck runs for a week and then turns in his paperwork. Then it is billed and sent out 2 days later and give 3 days for the post office. Assuming this the customer has a bill in his hand 2 weeks after the truck ran his loads. Lets assume the customer pays in 30 days, although 45 to 60 is more likely. But if he cuts the check in 30 days and sends it out. You wait for the mail, and then deposit funds. Check should clear in 2 days and funds available! In this scenario we are looking at 7 weeks. If a truck ran 2500 miles at 1.25 per mile (just using round numbers) this is almost $22,000, not including fsc which will only increase this number. Now a carrier will have one, 2 or even 3 weeks holdback so this would bring down the cash need a bit. But the carrier will have to pay the owner operator, fund fuel, pay insurance, staff etc before he gets paid. If we assume a carrier has a 5% net profit margin, and a 2 week hold back, they would need approx $15k per unit (again this does not include fsc which will increase this number).

 

[davekc]

Good question. If you anticipate that a truck runs for a week and then turns in his paperwork. Then it is billed and sent out 2 days later and give 3 days for the post office. Assuming this the customer has a bill in his hand 2 weeks after the truck ran his loads. Lets assume the customer pays in 30 days, although 45 to 60 is more likely. But if he cuts the check in 30 days and sends it out. You wait for the mail, and then deposit funds. Check should clear in 2 days and funds available! In this scenario we are looking at 7 weeks. If a truck ran 2500 miles at 1.25 per mile (just using round numbers) this is almost $22,000, not including fsc which will only increase this number. Now a carrier will have one, 2 or even 3 weeks holdback so this would bring down the cash need a bit. But the carrier will have to pay the owner operator, fund fuel, pay insurance, staff etc before he gets paid. If we assume a carrier has a 5% net profit margin, and a 2 week hold back, they would need approx $15k per unit (again this does not include fsc which will increase this number).

Very true. That is exactly what forces some to give up a percentage and use a factoring company.

 

[jelliott]

So true, and that is slow and sure death. Even if a great carrier could operate at a 5-8% net margin, you can not afford to give a factoring company 50% or more of your net profit. Everyday we get so many faxes from factoring companies that are now "handling" carriers receivables. I just shake my head. These guys are barely legal loan sharks. But as the banks keep tightening credit more and more carriers are having to turn to them to stay alive. It is very rare that you see a carrier ever get strong enough to leave factoring. More often they end up out of business in time.

 

[arkjarhead]

Then again, some just say sell everything you own.

I think that's a bad idea, and for some reason I think you do to. This discussion has been eye opening to say the least. I knew carriers had some form of reserves, but I had no clue. It's something that is very rarely discussed.

 

[jelliott]

The grass always looks greener on the other side. That scenario is a "best case" look at it. If the customers are paying 45-60 days which is more and more common, you may need almost twice that much in reserve. If you only have a one week hold back like we do, that will increase the cash needs even more. My best advice is true in every part of this business. If you are not properly capitilized, don't do it. That goes for becoming a carrier or becoming an owner operator. To many people don't follow this and end up getting burned or burning other people in the process.

 

[davekc]

The grass always looks greener on the other side. That scenario is a "best case" look at it. If the customers are paying 45-60 days which is more and more common, you may need almost twice that much in reserve. If you only have a one week hold back like we do, that will increase the cash needs even more. My best advice is true in every part of this business. If you are not properly capitilized, don't do it. That goes for becoming a carrier or becoming an owner operator. To many people don't follow this and end up getting burned or burning other people in the process.

And that there is why I operate the way that I do. As for "selling everything", that was a constant recruiting tool from years past by a few goofballs.

 

[x06col]

The operative words in my post were "a minimum of". It is really way too bad that so many really don't understand, or care for that matter, what it takes to support you.

That is precisely why when I had too much business for two trucks to begin to handle, I decided to help some folks to help themselves and add some trucks. Well, I got soooo fed up with the leakers and clowns after a couple, three years, that I had two trucks when I retired.

Seems Ark, you learned a valuable lesson bout folks, how are you going to handle the baby setting in the future? Give em funds before they do anything but git to the shipper and load the truck?? Or, require them to perform and earn it. IT IS A REAL DELEMA FOR THE CARRIERS, WITH ALL THE CLOWNS OUT THERE!!!

 

[arkjarhead]

Seems Ark, you learned a valuable lesson bout folks, how are you going to handle the baby setting in the future? Give em funds before they do anything but git to the shipper and load the truck?? Or, require them to perform and earn it. IT IS A REAL DELEMA FOR THE CARRIERS, WITH ALL THE CLOWNS OUT THERE!!!

In any other business or line of work you wouldn't expect to be paid before payday would you? I don't really see why the trucking business should be any different. You either want to be a business person or an employee. If you want to be a business person then be able to cover your expenses with your reserves. If you want to be an employee get a job working for someone else and let them cover the expenses.

 

[xiggi]

In any other business or line of work you wouldn't expect to be paid before payday would you? I don't really see why the trucking business should be any different. You either want to be a business person or an employee. If you want to be a business person then be able to cover your expenses with your reserves. If you want to be an employee get a job working for someone else and let them cover the expenses.

Many construction type jobs get enough dollars to cover material. Some sales people get a draw against commissions and there are other times it is done. On the other had why do many employees have to wait two weeks before they get paid for work already performed.

To bad it isn't that simple. If it wasn't necessary to compete with other companies and keep the number of trucks on the road you need it wouldn't be done. The companies have the deal with the shippers should it the truck owners really have to wait several weeks to be paid when they have no control over the billing or choosing customers.

You can really look at this many different ways.

 

[arkjarhead]

Many construction type jobs get enough dollars to cover material. Some sales people get a draw against commissions and there are other times it is done. On the other had why do many employees have to wait two weeks before they get paid for work already performed.

To bad it isn't that simple. If it wasn't necessary to compete with other companies and keep the number of trucks on the road you need it wouldn't be done. The companies have the deal with the shippers should it the truck owners really have to wait several weeks to be paid when they have no control over the billing or choosing customers.

You can really look at this many different ways.

I'm not so much talking about payment of a settlement. I'm talking about advances. There's a big difference between someone who has to takes advances on every load and stays in the whole, and someone who has enough reserves that they can cover their operating expenses to take the load they've accepted. I think we've all known at least one person that stays in the whole so to speak because they take so many advances on settlement a that when they get it they can't cover things while running until settlement b comes in. So they take advances off of that settlement and it's a slippery slope. Isn't that called robbing Peter to pay Paul?

IMO, if all these people are saying a carrier needs to have at least 10 grand on hand per truck that is leased on wouldn't it make you think that a responsible O/O would have similar reserves to operate their business and not expect gimmes from someone else?