>Here we are looking at getting into the business and then we
>read this information. Talk about intimidating with making
>a major move in careers and lifestyle!
>
>Someone please put my mind at ease that starting up in this
>business is the smart thing to do. I'm tired of the
>office/corporate world and this expediting is right up my
>alley!
>
>Kitty Litter and Ms Puss
Thank goodness you're figuring out the cyclical nature of the business BEFORE you jump in. That's what good research can do for you. You're doing a good job using EO as you make your plans.
I trust you've seen here and in other threads the importance of being well-captialized before you start. I suggest that while buying new or used equipment is an important choice, having the capital to carry you through the slumps trumps most everything else.
How much capital is enough? A good business plan will tell you, as will the financial professionals that review it (banker, truck-wise CPA).
While there are many ways to run an expediting business, some are profitable and some are not. Naturally, you must be profitable to succeed over the long term. So you should write your business plan with long-term profitability in mind. That includes some money-losing, and break-even months as the business cycle plays out.
The expediter that has the financial resources to make his or her truck payments on a very expensive, brand new truck will be standing long after the expediter that bought a used truck for a fraction of new, if the used-truck expediter has no resources to carry him or her through the slumps.
It's less about your equipment and more about your capitalization. It's less about your carrier and more about your cash flow.
In plain language, given the expenses you expect to have on the road (personal, business, and anything else you can think of), how long can you survive with no new money coming in?
Note that if you are in a fleet owner's truck you have little capital of your own at risk. That will help you get through a slump, but it's vital for you to also know that your fleet owner has the reserves to make his or her truck payments. Otherwise, your fleet-owner's lender may send the repo company to snatch up the truck you are in.
When the business slows, it will slow for everyone. Drivers in fleet owner trucks will quit because they are not doing as well as they hoped. That's a double whammy for a fleet owner, especially one with multiple trucks. Not only have revenues slowed because of the slump, the fleet owner has lost a team, which reduces revenue to zero. If the fleet owner owns multiple trucks, he's (she, them) really stuck because he can only drive one truck himself, and then at decreased revenue because of the slump.
In such a case, you may be in a position to buy a truck cheap! But it takes capital (money) to do it with. Again, capitalization is key.
If you have figured out that expediting is the lifestyle for you, it's going to be tough to do anything else until you have at least given expediting a whirl. In that sense, expediting is the right thing to do. Whether or not you do it successfully will be a function of several things, capitalization being one of the most important.
Allow me to share a bit about how Diane and I (straight truck team) put our minds at ease regarding the cyclical nature of the business.
(1) We did a ton of research before beginning. We estimate we spent 750-1000 hours studying the business, interviewing expediters, attending trade shows, visiting truck stops, etc. To your credit, you seem to be doing much of the same.
(2) While we quit our jobs, we did not burn our bridges when we entered expediting. At any time, we could have returned to our house, booted the house sitter out, and picked up our old careers more or less where we left off. Diane could have got hired again. I could have picked up where I left off with my old business (after a rebuilding period) or started a new one.
(3) We began in a truck someone else owned (fleet owner). That gave us the freedom to return to our old lives while availing us to the coaching our fleet owner was willing to provide (some fleet owners are better than others in that regard). It also gave us the opportunity to learn the business before making a truck purchase of our own. And it gave us the opportunity to learn about ourselves. We proved to ourselves that we could live happily together in a truck and on the road. We produced our own real-world numbers we neeeded to do our own real-world long-term business planning.
(4) Before committing to a major truck purchase, we restructured our lives and finances to accomodate that new financial reality. That restructuring enabled us to save more money (as in deposit our weekly expediting earnings in the bank) than we've ever saved before. That's the money that will help us purchase our new truck and also serve as reserves to get us though the slumps. And of course, we expect to continue building our reserves with the new truck. Our restructuring is such that we eliminated all debt and most expenses from our lives. We did so by selling our cars, house, and household goods (except keepsakes). The only debt we'll have in the future is the truck loan, which we expect to pay off years ahead of schedule.
(Please note that I did not say we sold our house to pay for the truck. People sometimes leap to that errant conclusion. We did not sell our house to buy a truck. We sold our house because we no longer wanted or needed it. Our residence is now modest rental property with someone else responsible for maintaining it. As we're fond of saying, "The truck is our home; the nation our back yard.")
I'm not suggesting such radical lifestyle changes for you. I'm simply sharing why we're at peace as our brand new, fully-equipped, and very expensive truck makes it's way through the manufacturing process. It will arrive before the snow melts and the payments and high insurance costs and all other operating expenses along with it. It will also give us the ability to keep the 40% of the gross we now pay to truck owners (a husband/wife team) for the use of their truck.
In a word, we're at peace because we've saved and will continue to save enough money from our expediting earnings to carry us through the industry contraction that will certainly come.
While we have additonal resources to also fall back on, we are loathe to do that. It's our strongly held belief that expediting should pay for itself in good times and bad. We've done our research and business planning. We've been on the road nearly a year and a half. We've established ourselves as top producers. We know the business. We know ourselves. We are confident that expediting will pay its way and ours in the years ahead.
Listening to you speak and seeing you do the good research you are doing, a big part of me wants to say, "YES! Go for it! You too can succeed as an expediter!" Diane and I remember well how long those days in the office became once we got bit by the expediting bug. We feel your pain!
But unless you are well capitalized, or have a plan to quickly get that way once you hit the road, you should think twice before jumping in.
Finally, if you have not already done so, I urge you to take some vacation time and make plans to attend the Mid America Trucking Show in Louisville, KY. The show dates are March 31 - April 2. I suggest you attend all three days, all day long. The show is huge and there is much to learn. Even if you attend all three days, you'll not be able to take in the entire show.
Of special interest to you will be the expediter section. Plan on spending at least one full day there. You'll see numerous expediter trucks on display. All the expediting carriers will be there with their recruiters, recruiting packets and sample contracts. EO will have a booth there and you might run into some of the folks from these forums. And there will be a bunch of plain ordinary truck drivers milling about - 50,000 or so - that you can strike up conversations with as part of your research. Some of those drivers will be expediters.
Here's the link to the truck show site:
http://www.truckingshow.com/
