Choosing a Trucking Company (Part 3)
Carrier contracts are NOT all the same. In fact they are sometimes worlds apart. In the Book “Making Your Miles Count: Choosing a Trucking Company” a methodical comparison of contracts reveals several key issues in Lease/Owner operator success. There are five issues I call deal breakers. The fifth one is “NEVER- drive for a carrier who forces you to upgrade your truck (or accept any liability/cost/sacrifice) without adequate compensation.”
Operators more than ever before cannot afford to trade off their trucks for new ones unless they work at the highest paying carriers (A rated). In 1996 most B and all C rated clients had to hold onto their trucks for longer than four years in order to provide themselves a return on their investment. In 2012 all B’s and C’s (and even some A’s) have to hold onto their trucks longer than four years.
This observation supports the simple verbal survey I made while attending 2014 truck world in Toronto. I concluded that over 60% of operators drove 6+ year old trucks and had little to no intention of “upgrading”. I highly doubt that this trend will change in the next number of years or even decade.
The third deal breaker is “Never- drive for a carrier that doesn’t adequately compensate for all market fuel price fluctuations.” Approximately 40% of all carrier contracts still do not have adequate fuel subsidy formulas. This represents a huge risk for the entire lease operator industry. It’s a risk that (in my opinion) is a deal breaker. Never get involved with a carrier that will not provide an adequate fuel subsidy that is tied to market indexes (outside management control).
This requires operators to know what type of fuel subsidy is acceptable and what type is not. The book outlines in detail how to evaluate a proper fuel subsidy (not everyone does). Once a proper subsidy is revealed it must be able to be compared to other carrier contracts. It requires both contracts you are comparing to have adequate subsidies. Too often one (or even both) will not be able to provide them. Included in an adequate subsidy is the whole topic of exchange rates. Every contract must supply exchange rate protection.
These may seem like demanding points to make to an employer. However, operators must not consider or think of themselves as employees (with trucks), they are independent contractors with significant investments. Operators must ensure their risks are covered… NO EXCEPTIONS. If proper preparation and analysis is not made at the beginning an operator only has themselves to blame.
Educating oneself in their profession is the operator’s responsibility, not anyone else’s. Gaining the knowledge for success is always worth the investment.