Factors to Consider When Growing Your Fleet

All drivers, at one time or another, dream of owning their own fleet of trucks; it’s not uncommon for one to ponder what life would be like as an owner of an operation instead of playing a cog in a wheel. It’s also natural for fleet owners to think of ways they can grow their fleet, which would allow for additional profit; as the company grows, so does the bottom line. With either starting a fleet or growing one, there are inherent challenges that one must face, none any bigger than risk. It’s your neck on the line if something goes sideways. Here’s a look at several of the factors that should be examined before making the jump. 

Financial 

For anyone looking to start their own business or grow a fleet, the financial component is a big one. There are several options to consider and each have their pros and cons. From leasing, a loan from the bank to purchase new equipment, buying used equipment, or putting on owner-operators, there are couple of options to choose from. Leasing equipment has become popular in recent years. The lease payments can be completely written off one’s taxes, and through negotiation, one can add routine maintenance, repair and replacement/loaner clauses to the contract. Some lease contracts will also provide accounting services to calculate road use and other taxes, then including those fees in the monthly payments so they are paid to the government as they come due. While this option may seem attractive, it’s important to remember that the contractee will never own the equipment outright nor will they build equity. 

If a driver or small fleet owner has good credit, an option might be to finance new equipment through a bank or credit union. There are accelerated depreciation options that assist with taxes beyond the cost of doing business. However, the monthly payments, which could be as much as $2,000, are not tax deductible. On the other hand, the buyer has full control of the equipment, can schedule maintenance at their leisure and will be able to sell or trade the equipment at their discretion after the loan is paid off. 

While buying new equipment is an option, good used trucks can be obtained for half of what a new truck would cost. That said, one also risks also buying someone else’s problems. If you’re considering purchasing used equipment, make sure there are good maintenance history records on the equipment to mitigate finding issues later. 

Leasing on owner-operators may be a good option because one doesn’t have to make truck payments. Debbie Audett and her husband started a trucking company with a lease purchase program truck that they were able to pay off. After winning a contract with a major food manufacturer, they initially turned to owner-operators to grow their fleet, but ended up going another route. “We live and run the upper east coast,” Audett said. “We found that not many owner-operators wanted to run that region, so I came in off the road to run the office, and we ended up buying five more trucks.” 

Discounts 

It’s common belief in the trucking industry that the largest carriers enjoy huge discounts on fuel, tires and even truck pricing, but what some might not be aware of is that small to medium-sized fleets can often get the same or similar discounts the big boys enjoy. Joining a trucking aggregate such as TruckersB2B or Truckers Solutions often times allows small trucking companies access to discounts that save them valuable financial resources. 

Freight vs. Contract 

There are pros and cons with depending on freight or contract work when growing your fleet. It’s probably best to do a little bit of both. Freight options can fluctuate and contracts that seemed steady are at the risk of being underbid by a competitor. 

Scott Schriner, president of Weston Transportation out of Kansas City, Missouri has found a balance between contract and freight work. Weston’s 30-truck fleet hauls primarily auto parts, but fills with broker freight when auto parts slow down. 

The previously mentioned Audett, who has a contract with the major food manufacturer, fills her return trucks with broker freight. “We do well doing short haul within the Northeastern states, then work our trucks back home with broker freight to meet our contractual agreements.” 

Cash Flow 

A side note to freight is cash flow, which is something that brings down many fleets. It can take clients up to 90 days to pay on an invoice which can ring the death knell for fleets lacking financial resources in reserve. Factoring the fleet’s bills is one way to get around this and is relatively new to trucking. 

Factoring is selling one’s invoices to a company who will then pay a percentage until the freight invoice is paid. They will then give another small percentage retaining handling costs when the invoice is paid. Factoring companies will also provide credit checks on potential clients and most feature a deadbeat list of clients to avoid. The main drawback is the percentage that the fleet loses to handling costs, but the pro is that the cash keeps flowing. 

Drivers and Other Employees 

A big issue facing all fleets – big and small – is the very real shortage of dependable drivers. The turnover rate is nearly 100 percent with drivers continually hopping from fleet to fleet, looking for greener grass. Small fleet owner looking to grow might not be able to compete with a bigger fleet’s pay structure, but they can look for other ways to make a job attractive. Guaranteeing weekends at home or incentive plans can be just enough to keep a good driver around long enough to enable growth. 

In addition to drivers, when you grow your fleet, you’ll also need to have someone at the home office to handle operational duties such as dispatch, accounting, or payroll. A good office manager who can play the role of “Jack of All Trades” might be the best route to take while getting started.  Growing your fleet is a high risk, high reward situation. Make sure to carefully evaluate all the different scenarios before jumping in with both feet. When carefully planned, starting or growing a fleet can be accomplished, but it might not be an overnight process. As T.S. Eliot once said, “If you’re never in over your head, you’ll never know how tall you are.” 

Featured article by Sandy Long. Sandy is an award-winning truck driver who spanned a 45-year career over the road. She a charter member of Women in Trucking and has been published in multiple trucking publications including.