Let’s face it; running a trucking business is hard and expensive. Whether your are new to being your own boss or have been around the block a few times you have certain ideas of what will impact your bottom line. Let's examine 8 financial myths you might encounter while running your busness as an owner-operator or owner of a small fleet.
Myth 1: Your brokers and shippers credit history does not affect your bottom line.
FALSE: Since a businesses credit history tells the story of when they pay their bills, how many bills they still have outstanding and how long they have been in business, it can directly impact the financial success of your business. When you haul a load, there are many expenses you pay for upfront, including pricey fuel, and if your broker or shipper does not have a good history of paying their bills on time that will directly impact your cash flow and ability to cover those expenses.
Myth 2: You always have to have the funds for fuel before you haul the load.
FALSE: The good news is some financial partners who know the trucking industry can provide a fuel advance based on your customers' credit. A fuel advance provides you with the funds you need to cover your fuel expenses before you haul the load, eliminating the risk that you won’t be able to cover your fuel expenses. With a fuel advance, you will manage the load as usual, and the finance company will simply confirm the pick-up of the load and provide you with the funds.
Myth 3: You can’t control when your freight bills get paid.
TRUE and FALSE: You can include terms on your freight bills that indicate when you would like to be paid but the truth is that when the payment arrives to you from your shippers and brokers is out of your control. That is unless you partner with a freight bill factoring company. When you utilize factoring services, you will get the funds from your freight bill immediately, and the factoring company will wait to be paid by your customer.
Myth 4: To get the cash discount at the pump you have to carry cash.
FALSE: Fortunately, when you utilize a fuel card one of the many benefits is you can get to pay the cash price even when using the card. An added bonus is you will also generally receive an additional discount per gallon when using your fuel card.
Myth 5: You and your business have to have good credit and an established history to get access to much-needed working capital.
FALSE: Even though those are often criteria for a bank line of credit there are other alternatives that can get you access to the working capital you need. One option is freight bill factoring, which looks at the creditworthiness of your clients instead of yours and your company’s. Another option is to work with an equipment-leasing company that offers programs such as a sale-leaseback that can provide you with immediate working capital.
Myth 6: The highest-paying freight is best.
FALSE: Finding freight is easy but not all freight is created equal. Actually finding good high-paying freight is hard. Long-term relationships and reliable, honest partners are your key to continued success. Also, often the highest-paying freight is with new or unreliable shippers/brokers. As a result, they have to pay more for the freight to be moved. The larger, more established companies pay less per mile because there is much less risk of them not paying. Large companies usually also understand the shipping dynamics and supply and demand better than small freight brokers, making it easier for you.
Myth 7: Being self-employed is easy and what you expect.
FALSE: Many of the people we have talked to started as company drivers and have always wanted to become owner-operators. The perception is that the company is taking all their hard-earned money. However, once self-employed, they realize they have a ton of items to track and take care of in addition to driving. This is where partners that know the trucking industry can help. For example some companies will handle all your paperwork and billing so you can do what you are great at… delivering the loads.
Myth 8: Small expenses are no big deal.
FALSE: In trucking, everything is very expensive. A new truck is $150k, an engine rebuild is $20-25K, a new set of tires is $5K, and to fill your truck with fuel is several hundred dollars. Because everything is so expensive, it seems that people in trucking do not sweat the small expenses. $20 here and there seems insignificant. However, added up throughout a years’ time it could be thousands of dollars. For example, our clients have access to a fuel program with fuel discounts. However, many of them do not participate. They think $0.10 per gallon is not worth their time. But if they are running normal miles this means several thousand dollars in discounts each year. All should be participating unless they have a better discount somewhere else. Additionally, you may encounter companies providing services such as financing that have hidden fees with charges that are $5, $10 or $20. But throughout the year this is can add up to be thousands of dollars.