When is a D is better than a C

[ATeam]

It can be lengthy in detail, but for the purposes of a single post, I will try to summarize. Length may constitute boredom and the key points are missed.

I too will be brief. ROI is a figure that can be twisted to mean pretty much anything anyone wants it to mean, depending how it is spun. Therefore, in and of itself, ROI is a meanless number. It is only meaningful when taken in the context of other business health indicators and the assumptions on which ROI are based are not only known, but valid in a given context.

Being the wordsmith I am, I can easily construct a spin that will sound just as good and look just as impressive as DaveKC did above. I will not do so because it would be just as vulnerable to a third spin by yet another opinion holder about what ROI is and how important it should or should not be.

Supporting my point is a quote from Investopedia, a financial web site that defines ROI, and by the way, one of many such sites that offer a variety of views about ROI. Because ROI can be defined or "factually supported" pretty much anyone wants to say, ROI is essentially a meaningless number when applied to a one-truck expedite truck business like Diane and I run.

DaveKC lives and works in a different world than we do. One in which ROI is more important. To each his own. I don't want his life and he does not want mine. We both share from our experience and knowledge here in the Open Forum, leaving readers to freely determine the value of what we write.

From Investopedia:

"This flexibility (of how ROI is calculated) has a downside, as ROI calculations can be easily manipulated to suit the user's purposes, and the result can be expressed in many different ways. When using this metric, make sure you understand what inputs are being used."

 

[ATeam]

What kind of profit are you left with after paying for a $255,000 rig? What you doing that you need to pay that much for a truck?

Well, according to some here in the Open Forum, we are left with no profit whatsoever with a $255,000 CR-unit. We are living in a world of self delusion, happy and comfortable in our full-featured truck, which we do not realize is taking us on a ride straight to financial ruin. The truth is, life sucks as an expediter in a full-featured truck. There is absolutely no way anyone can be happy, healthy and successful in a truck like ours. Do not follow our path. It will be the end of you for sure!

 

[RichM]

Dave you nailed it right on.An investment should generate the maximun return based on known factors. Now if I want to erect a 5 million dollar motel my demographics have told me that I can expect 80% occupancy based on my location and lack of competition. Calculating anticapted revenue vs operating expenses leaves a profit of 1 million dollars. This gives me a ROI of 20%. So I do it. The following year here comes MR Patel to erect a larger motel with more features. My occupancy rate drops buy 20% but my operating expenses only drop 5%. So my ROI is now less that anticpated because of my competition.

This senario can and does apply to this industry especially a specialized unit.

 

[ATeam]

This senario can and does apply to this industry especially a specialized unit.

RichM, you are absolutely correct. Your comparison of a $5 million dollar hotel business to a one-truck expediting business is especially informative. Diane and I are headed to the poor house for sure. Specialized units are the kiss of death.

 

[greg334]

ROI is a figure that can be twisted to mean pretty much anything anyone wants it to mean, depending how it is spun. Therefore, in and of itself, ROI is a meanless number. It is only meaningful when taken in the context of other business health indicators and the assumptions on which ROI are based are not only known, but valid in a given context.

You know Phil, I sort of agree with you but I don’t.

I seem to be a lone voice here on this site when I make serious suggestions. I seem to think that my business experiences have more to do with making sure others just don’t get into things blindly and do the right thing. I see others get trapped in opinions and banter between experienced and semi-experienced owners but the solution is to listen, learn and then use the tools that you need to have to make decisions.

So…… for all of that babbling, I always recommend to anyone who wants to start a business, any business and if they especially have any major expenditure like $250k or even $100k outlay for a truck to get two things – a lawyer and an accountant.

Not a tax preparer, not a financial advisor but a real accountant with real credentials and experience.

You use them as tools to make decisions, not to keep track of you money. You pay them to advise you to find ways to be successful.

It takes time to find both a lawyer and accountant but it is worth the time taken.

If you are lucky, you will get one who knows the industry, transportation and will help you direct your information gathering. When I got into this messy business, I left ROIs, depreciations and a lot of other terms in my accountants lap and he gave me three choices and how to be successful, I took one that was not the easiest but don’t regret it because my truck is really my truck, paid for.

Being the wordsmith I am, I can easily construct a spin that will sound just as good and look just as impressive as DaveKC did above. I will not do so because it would be just as vulnerable to a third spin by yet another opinion holder about what ROI is and how important it should or should not be.

OK….. If you say so…… yes you can spin things any which way you want but again business has not changed in some 250 years, the terms and the way people look at things have not changed but management has. You can say one thing, Dave can say another but truthfully, my accountant and other accountants have a consistent message – they are closer to Dave than most.

Well, according to some here in the Open Forum, we are left with no profit whatsoever with a $255,000 CR-unit. We are living in a world of self delusion, happy and comfortable in our full-featured truck, which we do not realize is taking us on a ride straight to financial ruin. The truth is, life sucks as an expediter in a full-featured truck. There is absolutely no way anyone can be happy, healthy and successful in a truck like ours. Do not follow our path. It will be the end of you for sure!

I don’t know about others, but to me you seem to be doing the right thing for you.

Would I recommend someone to follow your footsteps? No way.

You do what you do and have success at it but others may not – they have to come up with their own plan for a successful business.

 

[davekc]

Ateam quote
"This flexibility (of how ROI is calculated) has a downside, as ROI calculations can be easily manipulated to suit the user's purposes, and the result can be expressed in many different ways. When using this metric, make sure you understand what inputs are being used
=================================
When looking at a one truck operation, you know within margins what the numbers are and how they are applied.
There is plenty of historic data available to get within a margin.

For example, when you sell your truck, the market will bear a numbered average on the wholesale/retail market. Pretty much like selling a car and determining its value. It isn't a exact figure, but historic data will put your price in the margin.

Same with rates. If one buys a new truck for say $125,000, that $255,000 truck has to generate considerably more to arrive at the same numbers. Or.....if I purchased 2 trucks at $125,000, the revenue generated would far exceed a single WG unit. Won't know right to the penny, but it will fall way out of any margins

 

[ATeam]

As I said, Dave, we live in two different worlds. ROI is important in yours. It is not in mine. 'Nuff said.

 

[jaminjim]

And how in the heck does one calculate ROEF?

(return on enjoyment factor)

 

[greg334]

And how in the heck does one calculate ROEF?

(return on enjoyment factor)

It is from posts like this one that you get a real return on enjoyment.

 

[LDB]

Not a tax preparer, not a financial advisor but a real accountant with real credentials and experience.

I'm going to expand on that to add my opinion that you find a real accountant with credentials and experience in the trucking industry. John Turner is mine, at The Trucker's Accountant but there are others well qualified.

I suspect you'd go to a cardiologist for things to do with your heart and an oncologist should you be so unfortunate as to need cancer care and a neurologist for delicate brain work and a surgeon for your appendectomy rather than going to a general practitioner for all those varied things. You should be just as choosy with your accountant and pick someone who specializes in our industry.

 

[cajunbuckeye]

lost n confused

i have been driving for a major carrier for the last 28 mths.
big truck , with 53 ' trailer's . iam considering getting into a sprinter van. i guess i have had enough of the super trucker's
and want to make a major change. in my life and family. where does a person start ?

and can anyone tell me how many miles can you put on a sprinter engine ? verses a big truck

 

[RichM]

Cajun you are in the wrong forum and thread for the info you asked for. I suggest you post your request in the Newbies forum.

 

[davekc]

Ateam
As I said, Dave, we live in two different worlds. ROI is important in yours. It is not in mine.
==============================
If return on investment means nothing in your world, I am quite ok with that as I have no vested interest.
For the benefit of the new folks, I would advise mentioning that in some of your essays as that would be a important issue to the majority. Many or lets say most, go into business looking for some type of return.

Certainly agree with Leo. Find someone that is skilled, and well versed in our industry whether an accountant or lawyer.
Not a place for H&R Block or Mo Money Taxes.

 

[arkjarhead]

.
Not a place for H&R Block or Mo Money Taxes.[/QUOTE]

You just hatin cuz I got some new shoes, this is how we do. That comercial is so funny in a crazy way I guess.

 

[tblount]

What kind of profit are you left with after paying for a $255,000 rig? What you doing that you need to pay that much for a truck?

Looking through your eyes... which are looking for profit, it doesn't make sense... however, as with all issues there may be another point of view. Perhaps the guy decided that rather than buying a $255,000 motor home he would get a small one with a cargo box attached and let someone else pay his fuel and food cost and travel. Maybe he was cooped up in an office cubicle for the last 40 years and now he wants to see the country.

 

[tblount]

If one buys a new truck for say $125,000, that $255,000 truck has to generate considerably more to arrive at the same numbers. Or.....if I purchased 2 trucks at $125,000, the revenue generated would far exceed a single WG unit. Won't know right to the penny, but it will fall way out of any margins

The same logic could be applied to the choice between buying a $20,000 used van vs. a $72,000 used 22ft box truck. While you have a lot more options for loads and maybe 10 - 20% higher pay per mile with the 22 ft truck... you have to make $1,000 extra PROFIT every week to break even at the end of the year.

If you factor in more than double fuel cost for the big truck since it gets half the fuel mileage and has to get more miles evey week to make the higher payments.... and you factor in much higher insurance rates, tire and repair cost - for the big truck.... it's at best a tie.... even though the big truck will have a higher resale value at the end of the year.

So, if the PROFIT is going to nearly the same in the long run, the difference really comes down to other factors.... like sitting around longer waiting on a load and less comfort in the van and more hastle with weight stations and from "the man" when you are in the big truck.

Am I right? Does a 22ft truck really make $1000 more per week after the higher expenses of running it? All I know for shure is that it was tough when I ran a moving company for 6 years.

 

[Tennesseahawk]

Am I right? Does a 22ft truck really make $1000 more per week after the higher expenses of running it? All I know for shure is that it was tough when I ran a moving company for 6 years.

That would be something to ask someone who ran both. Highway Star, please pick up the white courtesy phone.

 

[x06col]

I been tink'in, an tink'in on this question, an, I can't tink of an instance when a C unit would be better'n a D unit.

IF, camping is THE consideration, let me type that, ten or twelve feet AIN'T whatcha wanna go camping in.

 

[highway star]

Highway Star, please pick up the white courtesy phone.

How many times do I have to tell you people, if my office door is closed, and my silicon enhanced, bleach-blond receptionist is not at her desk, DON'T FREAKIN' BOTHER ME!!

If the choice is between a van and a D-unit, and making money is the true goal, as opposed to just being a paid tourist, it's D-unit all the way. Hands down!

 

[tblount]

How many times do I have to tell you people, if my office door is closed, and my silicon enhanced, bleach-blond receptionist is not at her desk, DON'T FREAKIN' BOTHER ME!!!

You got me thinking.... If I could get my boss one of these he may stop riding my ass. On second thought... If I had one I probably wouldn't hear his whining.

!

If the choice is between a van and a D-unit, and making money is the true goal, as opposed to just being a paid tourist, it's D-unit all the way. Hands down!

Ok... I believe ! Now it would be good to know how many extra miles/hours you have to work every week to break even with the big truck... or is it simply that getting so much higher pay per mile that the same number of hours in the big truck cover the higher expenses ?

When I was a kid I went with my mother to the grocery store and we ran into a man who had done some handyman work at our house. She aske him how he was doing and he said that he had bought a paperwood truck and that he made $90 last week "PURE PROFIT" but expenses ate it all.

I don't know the difference in freight rates for C vs D loads so I'm asking the experts if in an average week you have to work longer in the big truck to cover expenses that are eating into the "pure profit?"

I guess the question is really as simple as this... can you really MAKE more money *per hour * in a bigger truck or are you just getting in more OVERTIME because more loads are available?