How Do You Figure Reefer Payback?

[ATeam]

Broompilot said,

>The single biggest item I see being overlooked here is WHAT
>IS YOUR LABOR WORTH? Expediters get out here buy a truck
>and FORGET that your time is $, we are away from home for
>weeks on end and yet many forget the value of time. One
>cannot recoup a day EVER, once its gone its gone. Thus to
>answer your question, there is alot more responsiblty taken
>on with the cost of the refere, and I feel the figure you
>asked is the bare min of acceptance with repair, down time,
>and YOUR TIME.

I'll share my view about the value of one's time. I hope others do too. We are self-employed business owners. Time can be valued in many ways.

If we bill time out by the hour, our time is worth say $200 an hour (professional consulting fee). But that does not mean we receive $200 an hour 24/7, 365 days a year.

If we contract to do a job for $1,000 and it takes 20 hours to complete, our time is worth $50 per hour. If it takes us 40 hours to complete, our time is worth $25 per hour.

As a self-employed expediter, I look at it this way. If at the end of the year, I have a $50,000 net, after tax profit to show for my efforts, that's what I received for my trouble that year. If I have zero profits to show, or a loss, that's what I received for the same trouble.

My time is priceless. Today and tomorrow, we will spend 48 hours doing exactly nothing. The truck is parked. We are resting. From a safety standpoint, this is some of the most valuable time we will ever invest, and it is time that will not pay us a dime.

I don't value my expediting time or the value of it by the hour. I value my expeditng efforts and the money I earn from them by the month and year.

Thus, I am not inclined to include an hourly time value in the reefer payback formula; though I am open to suggestions on this.

 

[ATeam]

Paul56 said,

>There is a relationship between energy and weight. The more
>weight moved, the more energy consumed. With a reefer
>equipped truck this affects ALL miles.

You are correct, but I do not know how to account for this in a reefer payback formula. Our reefer weighs about 1,020 lbs. The additional weight of a reefer body, compared to a dry box, should also be factored in. If anyone knows what the additional weight of a reefer body is, I'd appreciate you sharing it here. Making a wild guess, I'll say 1,000 lbs. Thus a hypothetical reefer weight addition would be about 2,000 lbs.

I know for a fact that if you put 2,000 lbs of freight on our truck and did not tell me, I would not know the difference from how the truck performs or in fuel consumption. Too many other variables come into play like wind, hills, etc. as I mentioned above.

Yes, it is absolutely correct that additional energy is required to move additional weight. But since quantifying that energy is clouded by so many other variables, I believe it best to leave it out of the reefer-payback formula. Readers who disagree or know a better way are welcome to offer something better.

 

[greg334]

Phil,
I think that you bring up a lot of good and valid points and I hope you can show us how this all works so some of us can understand what you are looking for.

You said “I offer real numbers from current experienceâ€. If you are offering, I am asking what are those real revenue numbers are so I can make a serious comparison to other people’s numbers in order for me to justify buying a c/d unit in the near future. All I saw were X’s in place of numbers, which was one thing that my accountant pointed out, an X mean nothing.

 

[ATeam]

>Not to be insulting to anyone but my accountant is laughing.

No insult taken, but you might want to find another accountant (no insult intended). After further flushing out the topic, I will consult my accountant too. He will not laugh.

>I too want to get into a bigger truck, maybe with a reefer,
>maybe with a lift gate but going through all this stuff does
>not seem productive and can lead to a real big stess
>headache. I made my decision not based on anything other
>than potental and maximizing the potental the best I can.

As many people do, and as Diane and I did when we made some of our truck decisions.

>It may be productive and useful for Phil to go through all
>of this, in which I hope he comes up with his models to
>justify his purchase but I may be wrong of my thoughts that
>this formula is based soley on FedEx experiences.
>
>As my accoutant said - Real numbers/stats matter in each
>case, not $xxxx.xx. The thing is as he pointed out - there
>is a seperation of each person, owner or company that is
>trying to justify the additional cost in obtaining and
>operating specialized equipment and each situaiton is unique
>to that person, owner or company where no real model can be
>created.
>
>His words, not mine.

I will look forward to hearing your accountant's opinion on the validity of the formula when I submit it to the EO community for review. Note it is not a model I seek, but a formula that can be used by any straight truck reefer owner who is a one-truck owner-operator.

 

[ATeam]

>I do agree....I think this topic has come full circle again.

With all due respect, I'd like to continue on. If the topic is too ponderous for some, there is no reason to keep reading it. Feel free to disengage.

If nothing else, humor me. I believe a meaningful reefer payback formula can be produced that is carrier neutral and can be used by any one-truck owner-operator.

 

[davekc]

Phil is correct, in that I only have past numbers. The issue in that case is that at the time this was done, revenue was higher and equipment and operating expenses were lower, not to mention lower fuel costs.

Again, if you are looking at whether a reefer will eventually pay for itself is much different than whether it is the best investment.
Comparing identical vehicles is as close as one would get.
There are way too many variables to arrive at a set and bankable formula.
Quite frankly, I don't see anything in this thread that hasn't been addressed already or would provide anything close to a set formula.








Davekc
owner
22 years
PantherII
EO moderator

 

[ATeam]

>Phil,
>I think that you bring up a lot of good and valid points and
>I hope you can show us how this all works so some of us can
>understand what you are looking for.
>
>You said “I offer real numbers from current experienceâ€.
> If you are offering, I am asking what are those real
>revenue numbers are so I can make a serious comparison to
>other people’s numbers in order for me to justify buying a
>c/d unit in the near future. All I saw were X’s in place
>of numbers, which was one thing that my accountant pointed
>out, an X mean nothing.

I put X's in place of our actual revenue numbers because where I have posted actual numbers in the past, the usual suspects rise up and say I'm not being realistic or I'm looking through rose colored glasses or I'm setting a bad example for others, or some such thing. The percentages I posted made the point I sought to make, which was reefer loads contribute to our total revenue more than dry loads do. DaveKC has not posted his actual numbers either and I would not expect him to. In another thread, Broompilot explained why he would not post his numbers in the open forum. The reasons that made sense to him make sense to me too.

 

[greg334]

Hey cool comeback!

Well what can I say Phil, I leave all the formulas up to him. I pay him to do the work so I don't have to deal with it. I have trusted him for years and only get int trouble when I don't listen to his advice. I stopped being an accountant almost 20 years ago, so I can enjoy life. But I will let him know that you invited him to look at the formula when you are done.

 

[ATeam]

>Quite frankly, I don't see anything in this thread that
>hasn't been addressed already or would provide anything
>close to a set formula.


Watch and learn.

 

[RichM]

Don't you guys think this topic is getting redundant. Phil is fishing for information to write an article or perhaps chapter 19 in his forthcoming book. There are 49 total posts for this topic, Phil has 23. After reading through 49 replies I have to wonder, What are you looking for,there are so many variables that one mans operations and revenue history are his and his alone, your operations may be totally different in nature.

 

[greg334]

>I put X's in place of our actual revenue numbers because
>where I have posted actual numbers in the past, the usual
>suspects rise up and say I'm not being realistic or I'm
>looking through rose colored glasses or I'm setting a bad
>example for others, or some such thing. The percentages I
>posted made the point I sought to make, which was reefer
>loads contribute to our total revenue more than dry loads
>do. DaveKC has not posted his actual numbers either and I
>would not expect him to. In another thread, Broompilot
>explained why he would not post his numbers in the open
>forum. The reasons that made sense to him make sense to me
>too.

I see your point but would like to see the numbers. The percentages were nice but it still made no sense.

I am wondering what, if anything could one make for a solid case to justify the cost in comparison of similar trucks within a fleet. Even though it may be impossible to make a usable comparison between similar trucks in different fleets, it is more probable to retain a usable formula because of the limiting variables involved, i.e. FCS by using similar trucks same fleet concept. Maybe you have thought of that and I missed it?

In addition, there seems to be some lost factors to be considered. What I mean is that one variable is the luck factor, for some who are in the right place at the right time they seem to do well but others don’t. I have met one WG team who has not done well for some reason and their investment has had a longer time on the ROI. I did see their numbers and I am puzzled by the lack of revenue in their case. I won’t get into their case but just use them as an illustration.

There are other factors involved and what I know will not be in the formula is the market changes, customer trends and other things – well you know where I am going with this. I know that this is not a major factor in the over all payback or ROI formula but it is a mitigating factor that has to be at least considered, am I wrong in this assumption?

 

[ATeam]

>Don't you guys think this topic is getting redundant. Phil
>is fishing for information to write an article or perhaps
>chapter 19 in his forthcoming book. There are 49 total posts
>for this topic, Phil has 23. After reading through 49
>replies I have to wonder, What are you looking for,there are
>so many variables that one mans operations and revenue
>history are his and his alone, your operations may be
>totally different in nature.

To answer your question, Rich, I am looking for a formula that one-truck owner-operators can use to calculate their reefer payback. While individual variables apply, as you correctly state, I believe a valid formula can be produced.

For most of my adult life, I have had book ideas in mind. But I have yet to write one and no books are forthcoming. If I am successful, the formula developed with forum member help received here will appear in the "Business Planning for Successful Expediters" series long before it appears in any book I may write. The series is available free of charge in "Expedite NOW:" magazine. See:

http://www.expeditenow.com/cgi-bin/...1&keyword=Madsen&template=search/_madsen.html

 

[Paul56]

>Comparing identical vehicles is as close as one would get.
>There are way too many variables to arrive at a set and
>bankable formula.
>Quite frankly, I don't see anything in this thread that
>hasn't been addressed already or would provide anything
>close to a set formula.

Agreed, there are far too many variables to arrive at a bankable formula that will work accurately for everyone.

We would lose at least 50% of our business if the truck was not reefer equipped. So in our case, it is pretty much a no-brainer since we know exactly what we will be losing. We either have the reefer and keep our customers happy, or drop the reefer and start rebuilding our customer base.

 

[nightcreacher]

Phil
I haven't read all the posts,and I'm not an ER unit any more,but when I was,I compared my bottom line with the reefer,to my bottom line without it,of course we didnt have tval then, but I did get extra pay, since I had print out capabilities.
The actual only advantage I saw was in the hot summer or cold winter,I was busy when others were sitting,as far as extra pay,yes,I did make more with the reefer trailer,in fact it netted more money than the tractor I sold to get it.
Now in todays world,with tval,and the way a new trailer has to be equiped,I'm not sure it would be worth while to
put into service a new trailer,($80000+),might be hard to recover.
Now as far as DR and Cr units,from the people I've talked to,that 30000 bucks your unit cost should be recovered in the 1st year,tval reefer units make much more than the everyday w/g straight truck units
and as I stated,just compare what your DR is doing next to your D.
All expenses paid out,your reefer units will be making more.
Just my thoughts

 

[terryandrene]

I've been pondering the ponderousness of this thread and have but one other comment. When enjoying downtime for reefer repair, why not minimize the lost time/money factor by having PM and CM done on 'other' truck components. Would this not reduce the operational cost of the 'other' part of the truck. On the other hand, will including PM work on the reefer during 'other' maintenance downtime affect operating costs of the reefer?

 

[ATeam]

>I've been pondering the ponderousness of this thread and
>have but one other comment. When enjoying downtime for
>reefer repair, why not minimize the lost time/money factor
>by having PM and CM done on 'other' truck components. Would
>this not reduce the operational cost of the 'other' part of
>the truck. On the other hand, will including PM work on the
>reefer during 'other' maintenance downtime affect operating
>costs of the reefer?

Thank you, Senator, for pondering instead of protesting this thread.

Few reefer dealers are also truck dealers. Mine happens to be one of the few that are, but I do not drive the brand of truck he sells. While he could do some PM work on my truck, I'd prefer to have Volvo do the work because they have the parts and experience. So, most of the time, reefer down time is one stop and truck down time is another. Bummer, eh? Planning your deadhead miles so reefer and truck maintenance can be done in the same city would be a way to spread deadhead expenses across both stops.

With E-units (tractor/trailers) the opposite is true. Those can drop the reefer trailer off at the reefer dealer and take the tractor to the dealer or other repair facility the same day. With a straight truck, where the reefer goes, the truck goes too.

 

[blacktiger]

I think Greg334 ran into the same team we might have. Hes was doing a reefer load for the Fed Ex and was gettin 1.08 after sittin for almost a week. If you buy the beer cooler better go with a flat rate.
if there aint no money for the beer, why buy a cooler


George.

 

[Bruno]

I think you all bring up good points on the cost of a reefer. But you can bring that point on anything you buy. the cost of a reefer for Phil was $30,000.00. So you can take that about and break it down into his monthly payments. So lets say that his truck has 60 payments. So that would be a $500.00 a month add on to his truck plus the interest of his loan.

So lets say Phil moves 3 reefer loads a month and it pays the truck $4000.00 for those loads. So now lets say you take 20% of the reefer loads and put it towards the cost of the reefer. So I would have to say that a reefer will help pay for itself.

 

[ATeam]

It has been several days since posts have been made to this topic, suggesting that it has run its course. Thank you to those who contributed to it. My next step is to review the thread in depth, develop a reefer-payback formula, run it by my accountant (a trucking industry tax specialist) to verify its validity, and share it here and/or in an Expedite NOW: magazine article.

Again, thank you to all who contributed to this thread.