Small Business Review: Continuing education

Feb. 1, 2013
Building a business is an on-the-job learning process

There are no guarantees when it comes to making money as an entrepreneur. It’s a learning process that continues every time you pick up a new skill or knowledge. Each enterprise develops a life of its own, equally as true in trucking as in any other small business. The hardest lesson to learn is that it takes years to grow a start-up to the point where it’s generating a sustainable profit and enough revenue to cover costs.

What needs to occur for a business to be successful? You need to establish to the public and your customers that you know what you’re doing. This is called developing trust. Without it, any business is dead in the water. And trust takes time to establish.

Understand that product and service pricing must exceed the costs necessary to provide them. This includes generating a profit that carries the company to sustainability and growth. Too many new micro-trucking companies try to take shortcuts by letting shippers (and brokers) establish their rates and hence, their revenue. They’re depending on the shipper to determine what they get paid. The shipper is looking to pay the lowest price possible, but in negotiations, he’s clueless as to what it costs the carrier to provide the service being requested.

The carrier will be left short if he relies on “what others are charging.”

Another ‘fail’ for many new carriers is they think all they need to do is set a rate per mile and stick to that rate—no matter what. That’s a mistake. Why? The answer is a mathematical fact: The fewer miles a truck travels, the higher its cost per mile because of the fixed cost factor. So, the cost per mile range of a truck can be a huge spread, from over $300/mi. down to $1.40/mi. in a single day, depending on whether it runs 1 mi. or 600 mi. in that day. If you add in a day of sitting, the cost per mile for 600 mi. increases by 50¢ the next day.

It is also important to know your market and its trends. In my view, the biggest mistake many micro-carriers make is they try to find the best paying freight out of an area without looking at what it will take to get good paying freight out of the next area. In micro-trucking, it’s all about consistency in freight and knowing the ups and downs of the different legs within your freight lane. In other words, it’s what you gross at the end of the month, not just maximizing the revenue on each load.

As Yoda, the very wise and powerful Jedi master in Star Wars, eloquently taught Luke Skywalker, “If no mistake have you made, yet losing you are ... a different game you should play. No! Try not. Do, or do not. There is no try.” What you put into your operation is directly relative to what you’ll get out of it.

Effort, knowledge and skill are required for success … so stop trying and do.

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