It's not just a question of survival during these times of high fuel prices and low freight volumes. It's time to take advantage of the many opportunities coming down the road. The first three quarters of this year have been some of the hardest on small motor carriers since deregulation in 1979. But like any hostile environment, the truckers who have prepared for it will be the ones who emerge stronger.
There are some prognosticators who predict we'll be out of the treacherous waters by the start of 2009. Others say the end of '09 or the beginning of 2010. 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, 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 the best.
But there are ways to protect your small motor carrier's financial stability from the woes of riding out the ups and downs of a cyclical business. Following is an updated list of “8 Things To Hold On In Lean Times.” The original version was published in 2002 and appeared in Driven 4 Profits — An Owner/Operator's Guide to Keeping More of the Money You Earn.
- Develop a capital reserve plan
When figuring out your hauling rates, be sure to include an amount above your break-even point that will allow you to set aside at least 1 1/2 times your annual fixed costs within 36 to 60 months.
- Market constantly
When times are good (lots of tonnage), go for the gusto, take all the tonnage you can handle. When tonnage is lean, start looking for freight that not only will fill your trucks 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 to re-evaluate your current customers.
- Track income and expenses
Over time, you will see a cycle develop. This will make it possible to anticipate and project monthly income and expenses. Most fluctuations occur at about the same period every year or because of specific events. By tracking income and expenses, you will begin to see that 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
You can devise special efforts to attract loads by anticipating the lean periods. For the extremely sluggish times, you might consider using these intervals for training, equipment repairs or vacations for you and your staff. Sometimes you just can't ‘beat a dead horse.’
- Create various alternative revenue sources
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. Be creative; the idea is to add additional revenue sources to diversify from where your operating capital originates.
- Continue to upgrade your skills
Search new techniques and technologies that can enhance and improve your company's services; for example, special equipment that provides a higher level of service to your customers or new software that 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.)
- Network, network, network
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 industry-networking group that meets at least once a month. The discussions that ensue will help bring you into 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 is 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 cyclical business and will always have its ups and downs. We can't control many things which affect our business, but we can prepare for worst-case scenarios, control and manage what we can, and have a strategic plan in place if business begins to waiver 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.
Contact Tim Brady at [email protected] or 731-749-8567.