What Successful Trucking Companies Are Doing Now to Combat Falling Rates
Whether you’re just starting out or taking your trucking company to the next level, every trucker is challenged to master a number of critical business skills for trucking success. So working in a new trucking economy, where do business owners need to focus now? Read on for advice you can put into action now to drive up new opportunities in 2020.
We’re joined by President of Commercial Fleet Financing (CFF), Matt Manero, for Part 2 of our interview. In Part 2 of our interview, Matt shares insights on how he’s seeing trucking businesses succeed in this new economic environment.
DUKE.AI: The supply and demand economics of trucking in 2019 have gotten very tough. What has changed and how can the trucking community better understand what they can do about it?
MM: Trucking businesses are experiencing over-capacity in 2019 with more trucks on the road. Because those trucks need to be put to work, trucking companies will continue to put those trucks to work but at lower rates. Unfortunately, those rates are being driven down to keep as many trucks utilized as possible. Rates can certainly continue to go lower, but they can’t go too much lower.
DUKE.AI: Do you have any examples to illustrate how the new economic factors are playing out in daily trucking?
MM: Talking to a customer recently who’s pulling dry van trailers, he hopes for $1.50 a mile. That rate was $2.10 earlier in 2019. That $0.60 a mile is a huge difference, so how do you make up the income? Well, you can make it up hauling volume, or you could contract. You could not buy as many trucks or you could sell some of your trucks.
The economics of trucking are hard. It’s something we haven’t been able to figure out if you consider that typically when the economy slows down, so does trucking. Yet the current US economy isn’t slowing! Retail sales are great, our sales are great, restaurants are busy. People are buying stuff at the stores; they’re remodeling their bathrooms. The current economy is an example of how much over-capacity we had in 2018 and that is just now settling into 2019. It’s not letting up. That’s made trucking a tough space to be in.
DUKE.AI: What insights do you have for Owner Operators who continue to be concerned over their ability to earn a healthy living?
MM: In 2017 and into 2018, we saw a lot of people get into the trucking industry because they could just go to the load boards and pick up freight they could make a profit on. Well, those rates from the load boards have gone down substantially this year. And so the ability to just be a load board trucker has reduced tremendously in 2019.
DUKE.AI: So, if you can’t build a viable business grabbing $2 freight any more, how are Owner Operators thriving in 2019 given the glut of trucks on the road?
MM: The answer for truckers is landing real contracts — contracts that are longer term and sustainable; contracts that you can trust and build a business on. In the past, you could have opened up your laptop every morning to grab $2 freight from the load boards and make it work, like many did in 2018, but that time has passed.
Now the way to build a trucking business and combat over-supply is by building relationships with the shippers and getting real contracts. Whether that’s a contract with Home Depot. Or a contract for shipping refrigerated goods for HEB. Or a contract to haul cars for Nissan. Wherever you can get a real contract, that’s how Owner Operators are solidifying their stability for the longer term.
We’re in the environment now where successful trucking companies are adapting by landing good, profitable contracts for the long term. That is versus those companies keeping their fingers crossed for high paying loads to come across the load boards every morning — those are the ones that are really struggling.
DUKE.AI: It’s clear that you can be a great trucker or delivery driver and still struggle to balance over the road responsibilities with doing an equally great job at bookkeeping and accounting tasks. We built the Duke mobile app to do accounting without any specific know-how or any real time investment for the trucker. With all the struggles truckers face this year, we’re seeing DUKE.ai users lean into other tools in the app to help with smart decisions on new expenses as they crop up.
The Duke app has become a tool truckers also use to see how one small purchase decision can impact profits down the line. Do you have any additional advice for those who struggle to sustain profits in the trucking business?
MM: Following the rules of accounting is a requirement for business owners, whether it’s trucking or something else. Even if you can’t afford to have a full time bookkeeper, you still have to get your books done properly, so we think that outsourcing your bookkeeping and accounting is a great strategy.
DUKE.AI: We agree! Instead of manual data entry to do the books yourself, it’s DUKE.ai app’s job as a scanner and automated accounting and bookkeeping tool to do the heavy lifting. Customers tell us every day that managing finances isn’t a hassle any more. We give them a window into the health of the business that they’re growing that’s available any time they want, just by opening the app.
MM: If you don’t know how to do your books and you can’t afford a full time bookkeeper, your only other choice is to outsource your accounting. DUKE.ai could be that landing strip for trucking businesses to be able to get this stuff done, because the need to do it doesn’t go away.
DUKE.AI: So, moving from being a good driver to managing a fleet requires a CEO mindset and that involves managing your debt and expenses well, continuously keeping up with your bills and bookkeeping. We see the DUKE.ai community of truckers, fleet owners and carrier companies are on the same page!
MM: On the topic of good records, especially when you’re seeking financing, we can approve perfect credit on an easy credit application. But to get that new vehicle, we need bank statements. We need tax returns. We need you to be able to get them to us quick. Even after 25 years in the finance business, there are still a lot of companies that aren’t able to access these documents and it slows the process down.
DUKE.AI: Sometimes when you need a new truck, getting snagged in a bottleneck can be frustrating. Is there anything else you see that business owners could be doing better to streamline their access to financing?
MM: We also see a tremendous intermingling of business and personal expenses. The bank doesn’t want to see that. If you put your kid’s birthday party on your company bank card, that’s not a sign of a healthy business. We want to see they have the financial discipline to keep business and personal expenses separate. Intermingling your expenses is a big deal. If someone doesn’t have the discipline to run their business on separate bank statements, they probably don’t have the discipline for a lot of things. The emphasis is on everyone learning to be good business owners and not just a trucker.
Special thanks to Matt Manero, President of CFF, one of the top trucking finance companies in the nation. Go back and read Part 1 of the Matt Manero interview now. To get more tips on strengthening your financial health in the trucking business, head over to www.commercialfleetfinancing.com.