Can someone starting out with a brokerage turn a profit?

If you are looking for a day job with bankers hours and schedule, and willing to take no risk with equipment, then that hourly rate is about right. The O/O's I know that make it are the ones that buy and own their equipment ASAP, do most of the maintenance themselves, are willing to go where needed and work as needed. With how you are looking to run, and the hours/days you want to work, I think you ought to stick with being a driver for someone. Nothing wrong with that.

My issue is financing, how can I finance a truck and trailer without a reputable business? Most loans for $100,000-$200,000 require 2 years in business how do I get to that point with out wasting money or is there other financing available.

Also I wouldn't mind the occasional regional run if it means making significantly more but I would rather be home daily with my family

Hi Joseph. You are doing the right thing by doing a break down of the numbers and asking questions. The next thing to do is immediately ignore the sarcastics that criticize you for that and for being open and honest about what you want to achieve. I had similar goals when I got started, and I promise it is possible. You do not need to run the road, rebuild your own engines or even pay all cash for equipment to be successful. I do have a fair amount of input for you.
$5000+ does sound about right for end dump work that you get through a broker or another carrier. However, you can very reasonably get direct freight in the market you want to run. Much of the freight you will be hauling in that operation will be aggregates. The majority of this work comes from and/or goes to local quarries, concrete plants and landscape supply companies. The majority of these are locally owned and very receptive to working with owner operators. While I’m not anti broker, you can get this work direct by walking in and introducing yourself. A good strategy is to go to a receiver (such as a concrete plant) that gets most of their deliveries organized by their supplier and they just pay a pass through rate for the shipping. For example, a concrete plant may buy stone from a quarry, and the quarry hires the truck and passes the trucking cost through to the concrete plant. In such a case, the concrete plant never actually directly pays a trucking company- it is just added to their invoice from the quarry. However, that concrete plant has the option to pick the stone up themselves, or hire their own trucking company to pick it up on their behalf. In this case, the concrete plant will not pay shipping on their invoice from the quarry, because they will settle direct with the trucking company they hired. You can offer to be that 3rd party truck and do it for the same rate that their supplier currently charges them for the shipping. Its a win win because you get consistent work and your customer gets tighter, more custom service. You are also not undercutting anyone and dragging down the industry. While not jackpots, the rates are usually decent and sustainable, as they usually originate from fleets that have higher costs than owner operators. If you do use a broker, be careful what kind of non competes you sign. They could forbid you from working direct with your best local prospects.

As for your projections...

$44,400 per year to rent a truck is $3,700 per month. $18,000 per year to rent a trailer is $1,500 per month. $5,200 per month is a huge equipment cost and you own nothing! It is an awful idea. My one smart ass comment to you is this- if you are only willing to "get your toes wet" don't do it. You need to be fully committed and have full control of your business so you can make strategic decisions. If you want to lower your risk there is a way to do it, but renting and leasing is not it. You will lose control of your business this way and have 0 equity in your equipment regardless of how long you make payments. The best "entry strategy" in my opinion is to own (whether outright or financed) your equipment and lease onto another carrier's authority. In your case, Bruce Oakley may be a good option if they have local work in your area.

Renting another carrier's trailer is also a poor idea as it limits you to only hauling for that carrier. You will lose control of your business. If that is your plan, you may want to strongly consider leasing onto that carrier and not getting your own authority. Reduce your cost and liability. Not having your own trailer with full control of your business removes most of the advantage and upside of having your own authority.

Maintenance programs organized by leasing companies are a disaster. They collect and hold your money, then require you to get their approval before spending it. This can be very costly in regards to downtime. They aren't always quick to give approvals. They may also fight you tooth and nail to keep the balance if you exit the lease. You want to have full control over the maintenance of your truck. Perhaps this is a full service lease where they promise to fix anything that goes wrong. While it sounds better, you still lose control over organizing what gets done on your truck as well as where and when. The downtime of maintenance is nearly always more expensive than the invoice. Owning your own truck with no limitations on service decisions will help avoid downtime.

Here is arguably the biggest problem in your thought process- budgeting $3,700 per month for a truck that is going to yield you 5mpg! Please do not spend more than $40k or $800/month for a truck that gets 5mpg. New, PROPERLY SPECCED trucks are getting 9-11mpg out of the box. These are mostly downsped powertrains in Mack, Volvo or Freightliner platforms with low number rear end ratios. For all the shade that gets thrown on them, Volvo/Mack and Freightliner are way ahead of the rest on putting out a proven efficient heavy duty diesel engine. This means moving on from the long hood with a Cummins mode of thinking. Those trucks likely will get you 5mpg. You also don't need to buy a new truck to get very good fuel mileage. 8mpg is a very good target for you running a used truck. Even much older trucks when specced, tuned/modified and driven correctly can get 8-9 mpg. If early 2000s or older is your thing, the Detroit Series 60 and Cummins N14 are great pre emissions engines with lots of potential for efficiency. Late model used Volvos, Macks and Freightliners in the $70-80k range can very easily achieve 8mpg. I'm not saying it's impossible to get respectable mpg from Cummins, Paccar or International, but it will definitely be a larger challenge, especially in an old school style cab. If you get 8mpg instead of 5mpg, your yearly fuel expense drops by $35k!

$20k for first year insurance is a good estimate, though its possible to get better if you have a clean MVR. CarrierHQ has a great program and saved me lots of money in my first year.

Ignore taxes in your calculations. The goal is to increase your net income. Taxes are what they are and will be there regardless if you are an owner operator or an electrician. Set up an LLC and file an S Corporation tax election, which will allow you to pay yourself a modest salary ($40k or so) through payroll and take the rest of your earnings as owner's draws. You will not need to pay payroll taxes on the draws, removing about 15% from your effective tax rate on them.

Let's sum this up with just a few modifications to your budget/strategy. Buy an efficient used truck for $75k and used trailer for $35k. Total equipment cost of $110k results in a monthly payment of $2,200. This is a $36,000 yearly savings. Operating a truck that gets 8mpg instead of 5mpg is a $35,000 savings. You just took full control of your business and without touching any other numbers, including revenue, increased your yearly net income $71,000, more than doubling it to $129k! All you have to do is purchase the right truck and trailer and not rent or lease purchase the wrong ones.

Hello Joesph, Patrick gave you some solid advice. The only thing I'd add is regarding the financing aspect of your venture. While there are certainly companies that specialize in equipment financing, many of which do require 2 years of business experience you can probably find one that will work with you if you look good on paper. Also, check with your bank. If you have a good relationship with them, solid credit, and are adequately capitalized, they may very well be willing to take a look at your plan. To get the best interest rate, you should plan on at leat a 20% down payment. The less you put down, the higher your interest rate will be. If 20% is too steep for you, I'd say this may not be the right time to jump in. Trucking tends to eat cash like a hungry person at the chineese buffet. Dropping $5,000 or more on a repair is not uncommon not to mention what you need to cash flow your personal bills, fuel, and insurance untill you start cash flowing your business. Factoring and quick pay has become common place these days, but doing so will also cost you between 2-5%. You will be money ahead if you have at least 2-3 months of cash in the bank when you get started and not factor or quick pay. Finally, get a good fuel discount card. I use TCS for T/A Petro, and RTS for Pilot Flying J. I've found for what I do and where I run, they are best for me. Oakley was mentioned and may be a good choice for you. If you consider them reach out before you buy a truck. They have specific equipment requirements for leasing on. There is a guy on youtube who is an owner operator for Oakley and he does a good job of giving an insight on life at Oakley. I don't remember his channel, but if you search Oakley on Youtube you will find him.

Good Luck👍

You've got to raise your sights in order to succceed. $5500 for 2000 miles is only $2.75 a mile. That will never cut it. You need at least $3.75 for all miles and be willing to work whenever the work is available to succeed. 8 miles per gallon for local work is extremely optimistic. I run a fleet of 31 Macks (pulling walking floors) with auto shifts gear ratios spec'd for mpg limited to 60 mph turn them over every 5 years and average just under 7mpg. Just be prepared to do whatever it takes, maintain your truck yourself on the weekends and grab whatever work you can in order to build up a cushion for that rainy day which will inevitably come.

I'm impressed you can add. But take it from 33 years experience, there are several line items you haven't even thought of yet. You think your math dosen't add up now, wait till you learn about the expenses you don't know about .

Hello again Joseph,

I apologize for such a delay in getting back to you, as I didn't want to rush a response. I know its long ago, but its such a great topic and you have the perfect attitude for learning. The $2,200 per month was if financing 100% of the truck and trailer acquisition cost of $110k at 8% interest. It is always best to make a down payment, but even if you made a considerable one, you are essentially borrowing from yourself. The down payment does lower your risk and saves you interest expense which is considerable right now, especially for start up owner operators as they typically see high interest rates anyway. I wish I could reference you to a good financing source, but unfortunately I don't have any sources. I think Barry offered good advice about approaching your local bank if you have a good relationship. It is common that banks won't finance titles vehicles, but they often have partnerships with local equipment financing companies that do, so starting a conversation can't hurt. I will say that having a detailed and organized written out business plan with go a LONG way. The most important thing in their eyes will be where your work will come from and how confident the source is. This is another reason I would really push you into walking into local prospective customers and trying to establish a relationship. It is worth the hard work and social discomfort of doing so. Perhaps you even have a friend or family member that knows management at a local quarry, concrete plant, ashpalt plant or landscape center. An introduction would go a long way. The fact that you are young will work in your favor. Local business owners love helping motivated young people get their start. I am also young, turning 32 this weekend. I started my business at 28. My launch and still largest customer has been an invaluable asset in my ability to get off the ground, be profitable day 1 and continue to grow to 6 trucks currently. Below are some highlights of how I was able to manage the hardest parts of getting off the ground. For context, my company does local pneumatic tank dry bulk work, mostly delivering cement powders to concrete plants. Hopefully you can identify some silimarities to your situation or pick up some tips that you can use.

Intro to trucking and preparing to start a business: I had 0 experience with trucks when I decided I wanted to start a trucking business. I was working out in Kansas at the time on the business side of aviation. I moved home to Philly to live with my parents while I went to CDL school and while working my first company driver jobs. This allowed me to save the majority of my income and prepare to start my business. I stayed at home for 2 years until I got married to my wife, which was just a couple months prior to starting the company.

Launch customer: my good friend's dad introduced me to his friend, the president of a company that owns concrete plants and quarries. I met with him in a diner and was open and honest with him about my future goals. We formed a plan together where I would work for him, drive his in house dry bulk tankers to learn the operations, then as soon as I was ready, I would purchase my own equipment, start my business and he would sub work out to me. They run their own trucks but also sub out tons of work. His commitment to me was I would be their first outside company to receive work. This was essentially a year round guarantee of daily work. It went exactly as planned.

Financing: I got extremely lucky with this. A close family friend and local business owner had a good relationship with a local family run equipment financing company. This company intentionally avoids financing trucking companies because of their high failure rate, but my friend put in a very strong reference and got me a phone call with them. The owner was impressed with the plan and trusted my friend's reference. He asked for a business plan, which I put a week's worth of work into. It sealed the deal. A major part of this was my commitment of work from my customer, who wrote a letter stating his intention. This was included in my business plan along with detailed financial projections. Remember, I was already running the routes and was able to project their expenses, and I also knew the revenue. This made the financial projections extremely accurate and the finance company knew this. This is why I can't stress enough the importance of knowing your customer before starting. It gives you financial predictiability and a considerably better chance at securing financing. I don't believe "the broker said this" will carry much weight with banks.

Initial cash flow: This is a very real consideration. Though I was profitable day 1, it took about 6 weeks to get my first paid invoice, yet still had to pay my operating expenses. My customer pays weekly, but each check is payment for invoices 4+ weeks prior, so the first one takes a long time to get. While I spent 2 years saving and preparing, as mentioned I also got married and bought a house with my wife a few months prior to starting. This took most of my cash. I was able to finance 100% of my truck and trailer, except for 2 months of payments down. That doesn't mean its the best way, but with my guaranteed and predictable work, I knew the numbers worked out with minimal risk. I did end up using most of my cash and even using credit cards to fund my start up expenses and the first 2 months of operations as there was not money coming in yet. This initial period cost about $25k and I did not take any pay during this time. I also prioritized paying off the credit cards immediately as their interest is a large expense. While my financing arrangement was a huge help in getting started, so was my wife! She has a very good job and was able to cover our living expenses for the first 2 months when I was unable to pay myself. This was a huge advantage. The same can be had by living with your family while getting started.

Growth: I spent the first year with just 1 truck and drove it 13 hrs a day, saving everything except my living expenses, which I've always kept low. My customer is also large enough to support multiple trucks, so after about 1 year, when I had the opportunity to buy 2 lightly used trucks, I did so. They were great trucks for the work we do, and I chose to purchase both because I saw it as an opporunity, but this was a risk and another tough time for cash flow. I was running 1 truck, but paying for 3, including full insurance on all 3. I was barely breaking even during this time, but knew that would be the case when making the decision. It was an AWESOME decision. I got the first one seated with an incredible driver and person. He has been invaluable to our continued growth with his awesome attitude and flexibility to help get new accounts up and running. I chose to only seat 1 of the new trucks at first while adjusting to managing my first employee, but a few months later, we seated the second one and began running 3 trucks full time. My customer supported all 3 everday. Avoiding too many details, I've since added 3 more trucks and this customer runs 3-5 of them every day, with a couple other customers accounting for the other trucks. We would not have the new customers without my initial customer's ability to support multiple trucks. It is so important to find that right customer and then be relentless in supporting them. I was able to have multiple trucks becasue of them, and then still serve them everyday (though not with every truck) while building new relationships. Keeping current customers' expecations filled while growing new customers is a delicate balance and can be very stressful. I know there are days they expect more, but I do everything possible to make that happen and ultimately have only increased our capacity to them each year. They are awesome and I can't express enough appreciation for them. This is why it is worth putting yourself out there to develop a direct, and personal relationship with a good local customer. It is not just about the extra revenue of not having a broker, its the strength of the relationship with the actual source of the work. The loyalty will be stronger and your work more guaranteed. It also ties back into the financing piece. Securing the financing and keeping that source confident by having good relationships allows you to add the needed equipment. Yet, you don't want to go overboard with financing and make your overhead too high in a competetive industry. 5 of my 9 trailers were purchased cash, and I have been putting 40% down on new trucks. Though it sucks to lose that cash, it gives us the best equipment at a daily overhead number I am comfortable with.

Lastly, though our trucks all work long hours, our schedule has always primarily been M-F, so trust me, it's possible! I spend many hours on weekends working on equipment and doing office work, but at just 1 truck, there wasn't too much of that required. While overnight hours are popular in the concrete industry, my and my current drivers' preferences are to drive during the day. My customer respects this and does a great job accomodating it. We preload our trailers each afternoon/night, so we do not need to get loaded in the morning. This allows us to start most days between 4-6am instead of 1-3am. You can absolutely build a business that meets all the needs you laid out, but I do think it would be tough if only calling on brokers. The local aggregate and bulk market does not have many brokers involved. I believe that to find the work that fits your goals through a broker will prove more difficult than establishing your own customer, especially work that will be reliable long term. Buying only a truck and no trailer and leasing on to an established carrier in your area is likely to be a better option than brokering local freight with your own authority, and is a good option if you decide you aren't ready to make the full investment. It is a good business model, much stronger than doing full authority with leased/rented equipment running brokered freight. There are many ways to succeed in this industry, including ways that I have not mentioned or experienced. That said, my personal opinion is that your best options for your goals are: 1) own all equipment with full authority and direct customers. 2) own a truck and lease to a carrier. I am happy to talk direct with you, so feel free to send me a direct message and I'll give you my contact info.

Pat