Something for Newbies to Think about / TJP's Trials

[chefdennis]

This post probably should be in the Newbie area, but I'll put it here because I am pretty sure it will get more attention here, and it might benefit some that have left the business for whatever reason and are thinking about getting back in.

Most here have at least seen if not followed TJP's trials in the July 2010 Location and the August 2010 Location threads. If not, go back and look. TJ hit a deer 9 weeks ago in a 3 month old 2010 Mercedes Benz Sprinter. Accidents happen, and this example is an excellent tool for those thinking of getting into this business on minimum cash flow.

For reasons beyond TJ's and the owner of that Sprinter, it has been out of service for 9 weeks, will probably be 10 weeks before it is back in service. Now in this time, TJ isn't making a dime as the driver. But there has been 3 payments made, insurance has been paid a deductable will be paid when the truck is picked up and the misc deductions that the carrier takes will be taken from the next settlement and 1 more payment will be made before that unit makes another dime for TJ or the owner...

If the owner didn't have the money in reserves to make those payments, this accident could have had a terrible outcome for all involved,alot of people coming into this business with little or no cash reserves could lose everything that have. Luckily that isn't the situation, here. Yea it is a pain that the truck isn't running and not making any money, but the fact is all expenses still came due and were paid while no income was being generated. Both TJ and the owner will be ok, it will just take time and TJ working his tail off to get back to a good cash flow, but that lost income really can never be made up...

What I am trying to say is, it only takes 1 accident or major mechanical failure to put you out of business if you don't set yourself up in the right position as far as money in the bank when you start. Do yourselves a favor and read here and research what it takes to get started and run a business...it might save you alot of trouble or even financial ruin......

 

[layoutshooter]

Things like this can happen to everyone of us at any given time. We were down for 3 months when we lost our cargo box in a hurricane. Be prepared. We were lucky, we had some reserves. They got totally used up but at least they were there. Working hard now to catch up and build the reserves back up. Insurance is NEVER enough to cover major losses.

 

[BillChaffey]

Excellent advise. Especially with so many Companies add's saying "No up front money needed" A person could show up for Orientation with enough in their pocket for three tanks of fuel and a couple of Hershey bars. Believing first big pay day is only days away.

 

[Topcat]

WOW! I am glad I read this post. I agree. The question is, how much one have to have in reserves when one starts in this business. I guess it depends on what size truck is being run.

 

[layoutshooter]

A MINIMUM of 6 months for house expenses alone. At least that for the truck. More would be better.

 

[Topcat]

Thanks Layoutshooter

 

[layoutshooter]

Thanks Layoutshooter

You are welcome. Please don't think that we are trying to just scare people. The mistake of not having enough reserves has been made far too many times. It seldom pays off. Good luck.

 

[Topcat]

This is why I like reading EO, because you guys tell is like it is. Straight and not watered down.

 

[asjssl]

My question is why did it even get to the 10 week point..yes have money in reserve is 1 part but when your van is your bread and butter ...being proactive and staying on top of things making sure work Is getting done...sounds like to me somebody was getting sunshine blown up there backside...I sure would have never let it get to this...isn't that part of runnin g a succesful buis. Too.. Don't forgot that ....sounds like chef owns the van..........

 

[layoutshooter]

My question is why did it even get to the 10 week point..yes have money in reserve is 1 part but when your van is your bread and butter ...being proactive and staying on top of things making sure work Is getting done...sounds like to me somebody was getting sunshine blown up there backside...I sure would have never let it get to this...isn't that part of runnin g a succesful buis. Too.. Don't forgot that ....sounds like chef owns the van..........

You don't always have control on how long repairs will take. In our case it was a comedy of cascading errors that we had NO control over at all. I was on top of things. I was on the phone almost daily and at the dealer at least twice a week. Nothing could be done on my part. SOMETIMES stuff does just happen. It can happen to anyone.

 

[greg334]

I am not picking on TJ, Chef opened the door in an open forum so if this hits a raw nerve, sorry.

What real advice matters here?

I think it is that drivers need to look at the owner carefully. It isn't all about MONEY, there is a more important thing involved - respect.

See I am looking at this as a business, not a game and that an idle truck is a money loser. I see that if the owner can make payments, then he or she can secure other transportation to be used during the van's downtime. It is simply a case that vans are cheap, and vans are not CMVs. I think if the owner wanted to, working with the carrier could get a van on the road within a week.

The driver is the hardest resource to get and hold on to. Like I said vans are cheap and can be found anywhere to be used but drivers, that's another issue altogether.

As for a sprinter, I seem to know of one which hit a rodent with a rack and was repaired and on the road within a few weeks.

I don't know TJ's situation or agreement, and I am not picking on him.

 

[chefdennis]

No Chef doesn't own the van, but I have a big stake in it an am part of the decision making process, but not the primary decision maker. For whatever reason, the major problems were 1st with the dealer not ordering all of the needed parts upfront because f trying to keep the expense down and use salvagable parts and Mercedes not having a good parts distributions system in place for the 2010 Sprinter...believe me, there were phone calls made to owners of dealerships, managers of parts distribution terminals and alot of cussing and swearing along the way. Their is enough blame to go around including on the owners and my part thats for sure.

One thing, if this had happened a year from now, the parts situation would have been totally different. Keep in mind, the 2010 engne and controls are totally different then the 2009 ....Mercedes will not let anyone have the diagnostic equipment for the motors at this time, so you are at their mercy.

This accident happens in a part of the country that would have had to have the van towed over 300 miles to a Mercedes dealer that could work on it. The decision was made to take it to one of the largest dodge and ex sprinter dealers in the country to have the work done as they have a working relationship with a Mercedes / Sprinter dealer....in hindsight, maybe it should have been towed the 300 miles, but thats water under the bridge.....

Oh and one other thing, this van does not have to do anything but cover its own expenses, it is strictly a business investment, yes the expenses incurred while it was down came from out of pocket reserves, but there was in no way an issue with this affecting anything other then this investment and tJ's income...it is strictly investment and nothing else...but, that is not how it is for most people getting into this business, thats is why i started this thread...most people that enter this business aren't in that position....so yes making sure that repairs that come up are done in a timely fashion as to not have a totally devastating affect on your business is important, but so is having the reserves to get throught those situations...

No Nerves hit at all Greg...as i said there is plenty of blame to go around for all involved..less TJ, hs part was strictly an accident that can happen to anyone of us....

 

[OntarioVanMan]

Thanks Chef for this thread...to the point and honest....brutally honest for newbees that think they are going to make a fast buck, without much risk....

 

[layoutshooter]

Everyone, but newbies thinking about this business in particular, have to keep in mind the very real possibility of accidents that can lead to injury or even death.

The traffic accidents are obvious. They are an everyday thing out there and expediters are NOT exempt from them

There are other kinds of accidents. Slips, falls, dock injuries, so on and so forth.

Any accident that leads to injury has the potential to eat into those reserves, even with personal accident insurance.

This is NOT an easy business. There are dangers everywhere. It can be rewarding. It is fun most of the time. Just come into knowing the story and your eyes wide open.

 

[ATeam]

What I am trying to say is, it only takes 1 accident or major mechanical failure to put you out of business if you don't set yourself up in the right position as far as money in the bank when you start. Do yourselves a favor and read here and research what it takes to get started and run a business...it might save you a lot of trouble or even financial ruin......

Excellent post and right on the money, so to speak. There are additional benefits in having deep reserves even if you don't have a major accident or extended down time due to mechanical failure. They include:

-- The ability to get home from anywhere in the country if an urgent need to do so rises.

-- The ability to say no to money-losing loads and wait for freight that pays. People who live truck payment to truck payment sometimes end up putting money-losing miles on their truck out of desparation to raise short term cash for the truck payment.

-- The ability to be more relaxed and at peace if you find yourself sitting longer than you would like to. You might get anxious about getting moving again but you won't get anxious about losing your rig to the repo man.

-- The ability to live free of the fear of an unexpected breakdown that will break your bank. Deep reserves give you the power to manage a breakdown instead of having the breakdown manage you.

-- The ability to get out of a predator's grasp if you find yourself in it. I know a fleet owner whose truck was in a wreck on the East Coast. He had the truck towed home to Ohio where he knew and trusted the people who would make the major repairs.

-- The ability to more easily act in your own best interests if your carrier or fleet owner unexpectedly terminates you with no notice or goes out of business.

-- The ability to escape the grasp of a predator or desperate fleet owner if you happen to discover you are driving for one. If you are a thousand miles from home and your fleet owner suddenly stops paying you because he or she is a cheat, or because he or she runs short of cash, you don't have to take it. You can use your reserves to quickly cut your losses, return the truck and start fresh.

-- The ability to take some unplanned time off that you did not think you would need. Like if you had two or three runs back to back that were especially tough and you decided you had enough. If you have deep reserves, you can, in the interests of safety and maintaining a good attitude, take the time you need to get the rest you need. You can pay for a stay in a nice hotel or RV park without sweating the cost.

-- The ability to avoid the fate of the expediters presented in "Expediters Going Hungry For Real."

I once got roasted here in the Open Forum for saying six months of gross revenue is a good target to shoot for in your reserve account. I know the number is high. I also know it is a heck of a lot easier to be an expediter if you have that money than if you don't. You don't have to keep it all in a low-interest cash account but having that kind of money within reach feels a lot better than not having it.

For someone starting out for whom money is tight, six months gross income in the bank is a good goal. I think having cash to cover two or three months worth of living expenses would be the absolute minimum with which to enter the business.

 

[greg334]

I understand more now Chef, I can see where the problem is sitting, and I wasn't trying to blame TJ (or you) - actually would have liked to see him on the road.

Nevertheless, I stand by with what I said. A $5000 van is still a better alternative than no revenue at all.

 

[chefdennis]

Believe me Greg everyone involved would like TJ on the road anhis owner has learned alot from this...But TJ also knowes his owner is young and while things didn't o like everyone would have liked, he is with a good owner.....but yes mistakes were made....but with a little luck TJ will be on the road Fri....

 

[xiggi]

One of the best posts I have seen on EO. Kinda like a slap of reality across the face.

 

[greg334]

Great, I hope him a lot of luck and lots of work.

The new question I was just asked is how many of you put into your little plan (spreadsheet, note pad or what ever) a small little fund so you can capture that with every mile?

To go along with this, how many of you depend a credit card?

As Phil mentioned, there is more to it than accidents or breakdowns, like emergency travel home.

Oh and about emergency travel, does anyone subscribe to Skymed or a similar service?

The link he posted is rather odd because a few of us actually live on less than $10 a day - it is very possible to do.

 

[layoutshooter]

Phil has it right. We were far more relaxed when we had proper reserves. It was much easier to make money then. Now we have to be far more careful. Not as fun.