Seasons Greetings / Introduction / Economic Question

[IronCondor]

Merry Christmas to all -- and special best wishes to those who are still in service today and those who will be returning to the road tomorrow!

We haven’t been formally introduced but I know many of you quite well. I have been monitoring EO with great interest for some time, reading back nearly two years in the General Expediter and Truck Talk Forums as well as the entire Newbies Paradise and Ask The Recruiter Forums. Those of you who have stood the test of time are truly special, a rare breed apart! The fact that you are willing to share your experiences and observations with others is a testament to your confidence in who you are and what you do. I am proud to know you.

My name is Scott but IronCondor better suits me. I decided to mark Christmas Day 2008 by coming out of the EO shadows to finally register. I am currently flat on my back suffering serious lower-lumbar facet problems that make a short walk to the bathroom an E-Ticket ride into a world of unimaginable pain. If I am lucky, my neurosurgeon will soon earn his keep and I will eventually be able to return to an active life – and resume my plans to start a new business with my wife as an expediting team.

I am new but I am well past the questions about the differences between types of trucks, team vs solo, fleet driver or owner-operator, and whether or not one can “make a living” in expediting. Fortunately for me, I don’t feel any need to rush. In fact, time may be my best friend in starting my expediting venture. Still, I consider myself a committed and concerned new member of the community. As such, I am focused on and very concerned about the impact of the current economic crisis on the expediting industry.

I have a background in strategic planning that has often afforded me a glimpse into the future, although I admit conjuring my fair share of dire visions that never came to pass. That said, few would argue that the economic issues we are currently facing rival the worst since the 1930s. Even giving the new administration advance credit for making all the right moves to avoid another Depression, I believe we are in for a difficult 18 months. Clearly, whatever hits the industrial complex will be felt hard in the expediting industry. A big part of the problem is the excessive use of leverage and the lack of liquidity both of which are also expediting industry issues. With freight rates under pressure and volume threatened across the boards at a time when vehicle fleets are at or near maximum levels, this economic crisis could result in a very serious shakeout.

The expediting industry could easily experience multiple carrier and fleet operator failures, along with declines in the number of number of independent owner operators. Time is the greatest enemy of highly margined enterprises facing rapid declines in revenue. How many carriers, fleet owners, and owner-operators have the reserve capital to carry themselves for six months or more under double-digit declines in revenue? The incredible rapid, deep drop in fuel prices is telling us this is serious. Unlike shallow recessions marked by rapid turnarounds, we are facing a huge and sudden worldwide drop in industrial demand.

If survival becomes the watchword of 2009, the future of the expediting industry will belong to those who had the foresight, good sense or luck to be: (1) light on debt; (2) long on equity; and, (3) deep in reserves. There is a lot of talk on this site about the value in having a business plan, but not much on need for contingency planning. Assuming the core value of a business plan is control, what happens when the original premises go up in smoke? If you wait for the bank to tell you it’s over, then where is the control?

A wise man once observed: It’s a lot less important who brought ya to the dance, than it is who’s takin’ ya home.

The idea behind this thread is to initiate a positive stream of shared ideas that may be able to help soften the landing for everyone, by facing the future together.

Have you revised your business plan for 2009? What changes in revenue assumptions are you making? Is your DH strategy effected? Will you stay out longer? Have you factored in a point at which too low means, no go?

Would you buy a new truck or add to a fleet in this environment?

What advise would you give your best friend who is thinking of getting into expediting?

What advise would you give your best friend who just started expediting six months ago?

IronCondor

 

[ATeam]

My name is Scott but IronCondor better suits me.

Does IronCondor refer to a favored trading strategy? Just curious.

I decided to mark Christmas Day 2008 by coming out of the EO shadows to finally register

Welcome!

I am currently flat on my back suffering serious lower-lumbar facet problems that make a short walk to the bathroom an E-Ticket ride into a world of unimaginable pain. If I am lucky, my neurosurgeon will soon earn his keep and I will eventually be able to return to an active life – and resume my plans to start a new business with my wife as an expediting team.

Bummer about your back. I hope things work out well. Regarding your plans to start a new expediting business with your wife, you did not say why you wish to do so. What draws you to expediting?

this economic crisis could result in a very serious shakeout.

The shakeout is well underway.

If survival becomes the watchword of 2009, the future of the expediting industry will belong to those who had the foresight, good sense or luck to be: (1) light on debt; (2) long on equity; and, (3) deep in reserves. There is a lot of talk on this site about the value in having a business plan, but not much on need for contingency planning. Assuming the core value of a business plan is control, what happens when the original premises go up in smoke? If you wait for the bank to tell you it’s over, then where is the control?

Diane and I did not get into expediting to maintain control. Control is not a core value of our business. We got into the business to make money and achieve certain personal goals. Prosperity and freedom are our core business values. To the extent that control is necessary for prosperity, we stay in control by running a debt-free operation, having only minimal personal expenses, running only profitable loads and continuing to bank our profits. The greater your debt, the less control you have.

Have you revised your business plan for 2009?

No. Our goals, core values, assumptions and practices remain the same.

What changes in revenue assumptions are you making?

Revenue was lower in 2008 than in 2007. We assume it will be lower still in 2009, perhaps as much as 50% lower, though there is no way to know.

Is your DH strategy effected

Record-high fuel prices conditioned us to be more careful about deadhead trips. We no longer make trips like going to Wal-Mart one day to pick up a few things and going to a truck wash on the same weekend while we wait for a Monday pickup. Now we will wait to pick up supplies and get a truck wash until the stores are more on route. That behavior is not likely to change as fuel prices decline.

Otherwise, our deahdead strategy remains unchanged. The idea is to deliver a load, wait in that area for 24 hours, and if no freight comes to us, we think about relocating to go after it. In these slower times, we may become more willing to relocate sooner, since if a load offer does not come on the way to the delivery, or shortly thereafter, it will not make much sense to wait where freight is tyically slow anyway.

Note that we are in a FedEx Custom Critical White Glove reefer truck. Our deadhead strategy makes sense because we can haul freight many other trucks cannot. Taking a load to a slow area has been OK for us because the specialty freight we haul is often offered to us from a greater distance. We do not need to be in a known-busy express center to expect a good load offer. Still, in these slower times, it may be better to move sooner toward a good express center.

It varies. If we deliver in a remote location on Tuesday, we might be OK staying put for a day. If the delivery was on a Thursday, we would probably leave immediately for a busier area in hopes of getting dispatched out of there on Friday and being under load over the weekend.

Weekend freight is less frequent than before. The other advantage of being in a busy express center is psychological. Once there, we know there is nothing more we can do to enhance our chances of getting good load offers. While it costs money to get there, it feels better to be in a high-probability place than out in the boon docks. Managing your attitude is as important as managing your money.

(While there is always more you can do, like getting your own authority, chasing outside freight, reconfiguring your truck, changing your business model, etc., we have neither the need or desire to do so. When I say there is nothing more we can do, I mean there is nothing more we can do within our present carrier relationship. Freight has not stopped, it has slowed. We are still making money. We are not desperate.)

Will you stay out longer?

We already stay out for long periods of time, ideally going home only for Christmas and essential business or medical reasons. The freight takes us home a few times a year and we then may or may not take a day or two off depending on how we feel. That is the ideal. In 2008, we fell far short, going home for family events, a truck driving contest and a vacation too.

While we have no desire to go home as much in 2009, we will have to for a couple weeks because Diane needs to complete continuing education courses to keep her law license up. Dental visits (braces) will continue for the first half of the year. We are looking forward to getting back to the way we used to do things, which is go home only for Christmas and rely on the freight to take us home every now and then.

Home is a nice place to be but money is made on the road.

Have you factored in a point at which too low means, no go?

Absolutely. That has been the case since the first day we entered the business. Three years later when we bought our own truck, we have made every effort to understand our operating costs per mile and per day. If the freight doesn't pay, we don't play.

Would you buy a new truck or add to a fleet in this environment?

No.

What advise would you give your best friend who is thinking of getting into expediting?

If he or she was my best friend, I would be happy to share our information but would give no advice. To preserve the friendship, the decision must be my friend's to make.

If a stranger was asking, I would SUGGEST waiting for the recession to end before jumping in, and then starting in a fleet owner's truck.

If we were newbies researching the industry today, we would keep the jobs we have. Not because we have less confidence in ourselves, but because we would have less confidence in any carrier and fleet owner we may choose.

With a freight slowdown and industry shakeout going on, the risks of carrier and fleet owner failure are higher. Among those that are not likely to fail, the risks of revenue-reducing policy changes are higher. Said risks will pass with the recession. We would wait for the recession to pass before jumping in.

What advise would you give your best friend who just started expediting six months ago?

After someone has been in the business for six months, and if he or she is reasonably perceptive and intelligent, there would be no need to give advice. Expediting is not a difficult business to understand. The friend would know the business as well or better than most other expediters and be well aware of what is going on.

A lot would depend on the friend's situation. Are you driving a fleet owner's truck? What kind of reserves do you have? What are your long term goals? What kind of shape is your fleet owner and carrier in? What career opportunities do you have outside of expediting? etc.

In general, if you are not making money in expediting now (negative cash flow, creditors to worry about, financial goals not being achieved) and do not have the resources to carry yourself through a prolonged recession, I would say this is a time to cut your losses and get out of the business. If you are in a losing position, time is not on your side. Staying with it will only make things worse.

If I had an expediting friend in a losing situation, I would offer emotional support. Failing in a business is not easy. It hurts. I would suggest to my friend that there is no shame in failure beyond the shame you give it. It is better to try and fail than to never try at all.

Knowing what you know now, not only about business but about yourself as a businessperson, you can learn from your experiences and move on to a better day. The sooner you get out of a losing situation, the sooner you can move on to something better.

 

[Humble2drive]

What advise would you give your best friend who is thinking of getting into expediting?

IronCondor

My wife and I recently left the professional white collar world behind to persue the different lifestyle that Expediting offers. We do have friends that were shocked at first by this move but they are now showing more and more interest. It has become clear that we are enjoying this adventure and not suffering financially.

I would give the following advice:

1) Drive for a Fleet Owner first!!!!!!!!
We were dead set on buying a truck immediately simply due to emotional reasons vs financial. The good people here on EO helped us to rethink that strategy. We are now very happy to let someone else bear the financial risks while we attempt to perfect our business plan.
2) Have cash reserves.
This is vital for an o/o but just as important when driving for a fleet owner. We had a recent medical crisis and needed to return the Fleet Owners equipment and take some time off. We had the cash reserves to make this a stress free break. We have met other drivers who are operating on negative cash reserves and are living in emotional panic every time they sit waiting for a load. It may be unrealistic for some people to start out with any cash on hand. In this case I would advise them to put money in the bank first before spending it on gps, cb, tv, video games, dvds, meals out, etc. etc.
3) Have an exit strategy.
I make sure to keep up with continuing education requirements in order to have the option of returning to my profession if this goes bust.

Wait a minute!!

I just heard the c-link beep. We are now on our way to Vegas for a Monday load which will deliver in California. We will take advantage of a weekend in Las Vegas. Later