What you don’t know can hurt you, or at least it can hurt your bottom line. In fact, last year saw an increase in the number of small fleets that ceased doing business. Some lessons can only be learned with practice over time, but others can be avoided altogether.
The best way to hit the ground running is to quickly learn how to avoid common mistakes. The list of common challenges facing new carriers, and the habits that will help you overcome those obstacles, is compiled from feedback we’ve received from our users at FR8Star.
We wrote this article with new carriers in mind, however, carriers who have been in the industry for a while will likely benefit from a reminder.
Getting Reliable Information
You will undoubtedly run into erroneous information. It’s not that the broker or shipper is trying to trip you up, sometimes people just make mistakes, be it addresses, appointment times, or the type or quantity of cargo you’ll be carrying. There are many variables involved in trucking that, if not communicated accurately, can have a negative impact on your bottom line.
Our users have found an easy way to decrease (or completely eradicate) mistakes relating to critical information. They made it a habit to verify everything. Habits are sometimes hard to form, but if successful, you will quickly reap the benefits.
By making it a habit to see what Google’s Street View shows at your pickup address, you will get a good sense of whether or not it’s an obvious location for a commercial truck to make a pickup. This way, you will avoid sending your driver to the wrong location.
In the same way, when you’re given a contact number for the dock manager, give them a quick call and make sure the phone number is correct and that they’re expecting you at the appointment time. That way, you won’t run into a bind later when you discover you don’t have the right contact information.
These extra steps take a bit more time, but our users report that these changes made a recognizable difference in their success. These good habits will save you time, money, and much of frustration!
Avoiding Cash-Flow Crunch
Many customers will not pay you for 30 days or longer. You need to have a plan to avoid a cash-flow crunch. Some costs come out of your pocket long before you ever see a dime from your customer. For example, fuel, maintenance costs, tolls, and scales are going to be paid before you get paid. Take this into account when you’re thinking about your monthly and quarterly operational funds.
Our users suggest saving up three months of operational funds before going full-time on the road. That said, if you’re compelled to get on the road sooner rather than later, you have a few options to consider in order to lessen your cash-flow burden.
First, you can ask for a deposit from your customers. Warning: It will be a difficult (but not impossible) to convince a new customer to provide a deposit if they have never done business with you. The risk will seem too high.
Second, you have the option to reach out to a few factoring companies to evaluate their offers. Again, it is important to note that factoring companies will likely take a higher percentage of your receivables. As a newer company, they will perceive you to be a riskier bet. If you put yourself in their shoes, it’s easy to understand their situation.
Successfully Negotiating for a Fair Rate
The big one! The best way to be successful is to make sure no one is taking advantage of you. Negotiating a fair rate is key to your success. You’re providing a service and you want to receive a fair payment for the effort you’re putting into running the load.
As a new carrier, you are at a disadvantage when negotiating with a broker or shipper because they know you need to start making a return on your investment. They’re aware that you have invested in the hardware (your truck, trailer, tires, etc) and the paperwork (your operating authority with USDOT, your insurance, etc.), so you appear to be at their mercy.
That said, they aren’t the only one with leverage. They clearly need a service performed or else you wouldn’t be having a conversation in the first place.
It’s important to have a sense of your costs up front so you can explain them clearly to a customer and ask for a reasonable profit margin. If the customer isn’t willing to meet your number, move on. Your priority should be in forming long-term relationships with your customers. Avoid one-offs. As the old saying goes: there are lots of fish in the sea. That’s the same with the number of loads available on load boards! If you don’t believe me, check out the FR8Star load board here.
We’d love to hear what you think about our list! What did we miss? Drop us a line and let us know.
Drive safe and stay loaded.
By: Benny Hammond, Director of Business Operations at FR8Star