Going It Alone
by Jim Park
The independent trucker. Now there's a phrase that conjures up an image. Back in the days when having an operating authority was a licence to print money, there were plenty of other truckers who wanted a piece of the action but weren't allowed into the game. The cartels that had the licences made darned sure that few, if any, of the others were ever granted entry. That's when the independents arrived on the scene. Back then, we called them 'gypsies'.
No licences, no operating authorities, no fixed address half the time. Just a truck, a trailer and nerves of steel. These were the folk to follow if you had to dodge a scale. They knew all the back roads and knew which scale operator was willing to turn his back occasionally - and for a price. It was tough, but there was good money to be made. The only alternative for the shipper, after all, was to pay the going rate to the big carriers. And those shippers were tired of being gouged and looking for a way out.
Today, the talking heads in the mainstream media seem to be the only ones using the 'gypsy' term any more. It's as antiquated as the concept itself. Today's independent trucker is likely to have everything the larger carriers have, including the necessary authority. And why not? Thirteen years after deregulation started, it's now as easy to get as a dog licence. In fact, I'd venture that it's slightly easier to get full continent-wide operating authority than a tag for a pit bull terrier, but I'd only be guessing.
For something close to $3000, owner-ops can set up their own North American authority, make all the insurance filings, and have all the necessary paperwork in place to conduct business as a fully registered carrier. A small one, but still a carrier. It's a big change of pace from working under the security blanket - some see it as a yoke - of a larger trucking outfit. You're truly on your own. But that means you're alone to look after all the administrative details, file and pay the necessary fees, arrange the next backhaul, collect the outstanding invoices, and oh, we almost forgot, keep the wheels turning as well.
Many who've tried it say going out on their own was a real awakening. Surprises come at every turn, and most of them come with a price. Dan Litton, a former independent trucker based in Vancouver, says that going back to a lease arrangement with a carrier was the best move he's ever made.
"I really didn't do all the research I should have done up front," he told us. "I learned most of what I needed to know after it was too late."
Litton says that hauling his own freight meant doing everything he could for the customer, even if it sometimes got him into trouble. "That's where I drew the line. They were expecting me to haul heavy because they knew I'd be afraid of losing the contract," says a wiser Litton. "I did for a while until they brought in another carrier and started a bidding war. Whatever I did after that still wasn't enough."
Bev Robinson runs a small consulting business in Langley, B.C., specializing in making the applications and doing the filings required to set up an operating authority. She says that plenty of lease operators come through her doors dreaming of starting their own business, but turn and leave pretty quickly when they discover what they're getting themselves into.
"They see the rate they're earning under contract to a carrier of say, $1.20 a mile, but they know the load pays about $1.80 a mile," she says. "Then they start to believe they could run the load themselves for something in between and still make money. They seem to think that by eliminating the middleman [the carrier[ they can pocket the difference."
As Robinson points out, "It doesn't quite work that way."
She says in deciding to make a go of it on their own, many wannabe independents fail to recognize the amount of overhead that the big carriers have to deal with. At the same time, most of them also fail to recognize that independents have much the same overhead, or that it's just wearing a different hat.
"They think by getting out from behind the carrier's skirts they're eliminating one of the middlemen. But almost without exception, they all go out and start doing business with load brokers," Robinson says with a hearty laugh. "What the heck is a load broker? And to make it worse, they now have the cost and aggravation of having to collect the freight charges themselves. I could tell you a few stories there..."
If you think the carrier is ripping you off at $1.20 a mile, consider what it's worth to have a company fuel card, a cheque waiting in your box every week, or your loads handed to you over the Qualcomm every morning. Weigh that against the costs and potential losses of doing it yourself.
Robinson suggests that if more lease-ops had a basic understanding of the cost of doing business, fewer of them would venture out into the snake pit alone. "What I'd like to see before anyone gets their own authority is some proof that they've taken some sort of business course," she says.
Well, you can lead a horse to water...
Steve Bradley is a shipper/traffic manager for a forest product wholesaler in northern Ontario. He sees more and more independents knocking at his door every day. "Frankly," he admits. "I wish they'd leave me alone."
While the actual rates he pays are destination-dependent, he says he frequently sees the small, one-truck independent operators bidding a full dollar per mile less than he's happy to pay to a carrier he knows will be around to serve him next month and even next year.
"Those guys leave way too much on the table when they come bidding on work," Bradley says. "I don't know if it's because they're used to being fed a steady diet of low-paying work from [a major local steel mill that recently scaled back operations, or if it's because they don't know the value of the service they provide. In any case, whenever my boss sees those quotes, he's all over me for not using one of them. What he doesn't see are the service failures or the missed appointments after they've found someone else who'll pay them a nickel a mile more than they bid on my work. I need dependable carriers, and I'm willing to pay for the piece of mind. Those $1.50-a-mile guys are crazy."
Bradley also suspects that some of the independents are scared of starving when things slow down, so they'll work for next to nothing just to keep the wheels turning. He calls it problematic and harmful for the rest of the competitors who won't haul for nothing.
"These clowns are making it difficult for everyone," he says.
All of that said, it's still possible to make independence work. Robinson says she sees plenty of success stories in her work as well, mostly the brighter operators who've found some small niche market requiring a little extra of the carrier. In a market that's as price-sensitive as trucking, you simply can't price yourself too far beyond what the shipper's willing to pay. That's why all the good intentions in the world often just don't work.
Whether it's stocking shelves at a retail outlet, for $40 or $50 an hour to the truck, while it's turned off, or hauling an unusual commodity requiring some special handling, there's money to be made in servicing the uncommon shipper.
Henry Postulart is a small operator in Tottenham, Ont., who used to have his own authority. Now retired, he hauled plaster cast forms used in facing structural columns and wall panels in commercial construction. The forms required special handling, including blanket wrapping and zillions of load-securement straps to prevent damage. He also had very specific loading and unloading appointments to maintain. It wasn't the kind of thing that absolutely no one else could do, but Postulart just did a damn good job at keeping the shipper happy.
"The rates were more than enough to compensate me for the entire trip," he says. "If I loaded something else home again, it was gravy. I never worried about a backhaul just because I needed one. If something clicked, great."
That's the kind of contract, Robinson says, that's ideally suited to the small operator. She's talked many a customer out of fattening her bank account because she didn't think their business plan would work. Many more wouldn't listen and have paid the price. If there's a lesson to be learned here, it's that independence comes with a hefty price tag.
"Just getting your own authority because you think your present carrier is ripping you off isn't a good enough reason," she says. "You'll wind up as a really small fish in a large pond that's already too full of really big, really mean sharks."
Finally, here are a few points to consider before you take a long walk off what could be a very short pier:
1. Know your costs to the penny, all your costs. That includes the cost of running the truck, plus the cost of insurance, safety and compliance, communications, collections, legal fees, etc. There's often more there than meets the eye. Robinson says she wouldn't even consider turning her own key for less than US$1.60 per mile.
2. Understand the implications of being a carrier, not just an owner-operator. Carriers are subject to audits and certain other unpleasantries that can tax the spirit as well as the bank account. Are you ready to assume the administrative burden that goes along with earning the bigger bucks? Remember, non-compliance at this level can carry steep penalties and liabilities.
3. To what extent will you rely upon load brokers for a source of revenue? Without tarring and feathering the entire load broker community, there are plenty of characters in that business who are here today and gone tomorrow, possibly with a large chunk of your children's inheritance. Can you afford to lose that kind of money on an untrustworthy broker? If the lanes you're servicing are steady, you'll be able to develop relationships with the brokers, and you'll learn who can be trusted. But don't believe for a minute that there's a living to be made hauling a steady diet of brokered freight.
4. Go back now and weigh the bad deal you're getting from your present carrier and compare that with the potential cost of going it alone. Take a real good look. Maybe it's not as bad as you think.