It’s not just a question of survival during these times of low freight volumes and freight rates. It’s time to take advantage of the many opportunities coming down the road. The last year was one the hardest on small motor carriers since the Great Recession of 2009 and 2010. But like any hostile environment, the truckers who have prepared for it will be the ones who emerge stronger.
There are some prognosticators who say we’ll be out of the treacherous waters by the third quarter in 2020, but others are saying the economy will not return to 2018 levels for several years. With that said, we won’t know we’ve made it through the tough times until we can look back, see what we’ve been through, and look ahead to a clear road. There are too many variables: conflicts in the Middle East, the elections in November 2020, severe weather, or events unknown. The business of trucking will continue, but even the best economists can’t predict the future. So the best plan is to prepare for the worst; while expecting better economic times.
Eight things you can do to protect your small motor carrier’s financial from the woes of riding out the ups and downs of a cyclical business. stability
Develop a Capital Reserve Plan:
Be sure you include in your hauling rates an amount above your Break-Even Point which, within 36 to 60 months, will set aside at least 1 ½ times your annual fixed costs.
When times are good (lots of tonnage), go for the gusto, take all the tonnage you can handle. When tonnage is lean, this is the time to start looking for freight that not only will fill your trucks today, but also develop long-term hauling contracts for the future. Take advantage of the extra time you’re not hauling or dealing with loads or trucks to cultivate new business. Every business has its good times and slow times. Be prepared for the slow times by having a marketing strategy in place to search for new business or reevaluate your current customers.
Track income and expenses.
Over time, you will see a cycle develop. This will make it possible to anticipate and project your monthly income and expenses. Like it was said earlier, every business has its ups and downs. Most fluctuations occur at approximately the same period every year or because of specific events. By tracking your income and expenses, you will begin to see certain events or times cause an increase or decrease in one or the other of these. Then you’ll see a pattern develop from which you can plan.
Plan to make the best of the slow times.
By anticipating the lean periods you can devise special efforts to attract loads. For the extremely sluggish times, you might consider using these intervals for training, equipment repairs or vacations for you and your personnel. Sometimes you just can’t ‘beat a dead horse.’
Create various alternative revenue sources.
Examples: Doing short or local hauls might be a way of generating the necessary income to keep moving. Volunteer your services to local charities when time permits; charitable goodwill is some of your best PR. You never know what contact can be made which will become a consistent hauling contract. Be creative; the idea is to add additional revenue sources to diversify from where your operating capital originates.
Continue to upgrade your skills.
Search out new techniques and technologies that can enhance and improve your company’s services. It can be anything from special equipment that provides a higher level of service to your customers to new software which creates more efficiency in your operation. Review and improve existing techniques and equipment. Take courses ranging from stress management to business management and customer relations. Review your financial data with your tax advisor or accountant to see where improvement is needed. Review and revise your Business Plan. (Note: You should review your business plan monthly and revise it as needed, or at a minimum, once a year.)
Stay in touch with current and former shippers, brokers, drivers, dispatchers, insurance agents, and anyone else who has a direct effect on your business. Join an online industry networking group. The discussions that ensue will help you focus on what’s happening in the industry. Stay on top of trucking industry news and what is coming down the pike in new rules and regulations from local, state and national regulators. Track what’s happening in the industries of your customers, know what events are going to affect what they ship or manufacture.
Remember, you are in charge!
In reality, most of what happens in your business, are within your control, if you know what lies ahead. You can’t control certain events, but you can be prepared to steer around them or take a different route to reach your business’s financial destination.
Trucking is a cyclic business. It’s always going to have its ups and downs. We can’t control many things which affect our business: weather, fuel prices, regulations, competition, etc. What we can do is prepare for worst-case scenarios, control and manage what we can, and have a strategic plan if business begins to waver and fall. The most important part of this plan is to understand a motor carrier must be capitalized before it can grow.
You’re the guide for that capitalization point. You must constantly track your expenses, know your break-even points, base your rates on what it costs you to do business and set money aside for your company to grow. But above all, having your company capitalized will prepare it for the worst, so you’ll make the best of it during lean times. If 2020 is going to be your year, it will be because you put the effort forward to stay ahead of your business. You controlled costs, developed strategic relationships with shippers, brokers, and others in the industry through networking took charge of your destiny and created a means towards capitalizing your company.
Timothy D. Brady © 2020