[greg334]

You know Rich, if Phil pays it off and freight market drys up, it would make one great RV and it would be cheaper than most.

[davekc]

I would recommend a D unit, something that would carry 15K at least and something that is about 20 feet of cargo space (notice I am not saying box size). Lift gates are cheap if you don’t mind a used one but don’t get a reefer.

So to answer the question, DO NOT LOOK at getting a truck for a specific company but a truck that you can move around between companies, a C unit will tie you into a specific company. Get something that you can be a little versatile in but at the same time Frugal.

====================================
Bingo!! Someone figured it out. It is return on investment that folks need to pay attention to. I won't go into that number on a $255,000 truck investment. Take my word for it......ugly doesn't begin to describe it.

[ATeam]

Originally Posted by davekc

Bingo!! Someone figured it out. It is return on investment that folks need to pay attention to. I won't go into that number on a $255,000 truck investment. Take my word for it......ugly doesn't begin to describe it.

Dave,

You frequently mention "return on investment." For those of us (including me, it seems) who do not understand why this is important, would you be kind enough to explain just what ROI is, why it is important, and what an acceptable ROI number is to you? For people contemplating a first-time truck purchase, what exactly should they know and do so as not to end up with a severe case of ugly ROI?

[davekc]

It can be lengthy in detail, but for the purposes of a single post, I will try to summarize. Length may constitute boredom and the key points are missed.

When I talk about ROI, I look at the percentage/amount of dollars invested, verses the return/risks on those invested dollars.

Every time a dollar is invested, there is a general risk. With regards to expediting, I look at several things.
1. Initial investment
2. investment ratio against potential revenue in the market place.
3. Vertical movement= can this vehicle be moved to another company or industry and maintain its marketability
4. Cost to maintain the investment against the initial investment.
5. Recovery/risks of investment dollars should one exit the industry whether by choice or forced circumstance
6. Value of investment in an open market or resale value at the end of investment cycle.
7. Market competition and government regulation against initial investment.
8. Since I am a fleet owner, is the truck marketable to potential drivers?


When I put an investment of $255,000 and todays WG/specialty rates together, I get an ugly picture. Doesn't mean one doesn't make money, but by comparison, there are a whole lot of other places I would stick my money.
Additionally, if I mean if the truck is $255,000 and was financed, the actual payoff and costs could be considerably higher.

[rodeehos]

What kind of profit are you left with after paying for a $255,000 rig? What you doing that you need to pay that much for a truck?

[greg334]

3. Vertical movement= can this vehicle be moved to another company or industry and maintain its marketability

Dave,
Don't you mean a lateral movement - like company to like company is lateral, right?

Also another factor involved is competition within the company and that is the basis for my frugal comment. You are in direct competition with other owners/drivers in the company. say I am in an apartment on wheels with a 1900 a month mortgage on the apartment I drive, my bottom rate is $1.35 a mile at $3.61 a gallon but Sam (or Juan) next to me has a paid off truck and his bottom rate is 96 cents a mile. I may be offered the run but if I turn it down, he may take it because of his operating expenses are a lot cheaper.

So i guess being Frugal means to be competitive and control your expenses.

Phil said it the best;

As a practical matter, it does not matter what they call the load (B, C, D). What matters is how much the load pays. For us, low paying B loads are treated the same as low paying C or D loads. They are delcined.

But I still have to add that it matters more that they make the offer to you in the first place.

[davekc]

No.
Vertical is what I meant.

Wiki definition
Vertical - Wikipedia, the free encyclopedia

Vertical market, a group of similar businesses and customers which engage in trade based on specific and specialized needs

You did bring up a point of internal competition. That could be considered in some folks circumstances. It doesn't apply to me personally.
Also, if you are never offered anything, you are still at a loss. Their is a inherit cost to just sitting.

[InIdaho]

You all are such a great resource.

Thank you for your candor and well reasoned answers.

John

[greg334]

Dave, I am thinking lateral within an industry but you are right.

But I think that there is something that is called Opportunity Cost that comes into play here too - the opportunity to sit in a big fancy quarter million dollar plus apartment on wheels trying to impress everyone who wonder how much it cost.

(no Phil that is not directed to you but someone else)

[highway star]

Originally Posted by davekc

Length may constitute boredom and the key points are missed.

Amen brother!!!

I chose a D-unit and I'm glad I did. I can't do 15k, but that's a good idea and my next one will be pusher or tandem.

[ATeam]

Originally Posted by davekc

It can be lengthy in detail, but for the purposes of a single post, I will try to summarize. Length may constitute boredom and the key points are missed.

I too will be brief. ROI is a figure that can be twisted to mean pretty much anything anyone wants it to mean, depending how it is spun. Therefore, in and of itself, ROI is a meanless number. It is only meaningful when taken in the context of other business health indicators and the assumptions on which ROI are based are not only known, but valid in a given context.

Being the wordsmith I am, I can easily construct a spin that will sound just as good and look just as impressive as DaveKC did above. I will not do so because it would be just as vulnerable to a third spin by yet another opinion holder about what ROI is and how important it should or should not be.

Supporting my point is a quote from Investopedia, a financial web site that defines ROI, and by the way, one of many such sites that offer a variety of views about ROI. Because ROI can be defined or "factually supported" pretty much anyone wants to say, ROI is essentially a meaningless number when applied to a one-truck expedite truck business like Diane and I run.

DaveKC lives and works in a different world than we do. One in which ROI is more important. To each his own. I don't want his life and he does not want mine. We both share from our experience and knowledge here in the Open Forum, leaving readers to freely determine the value of what we write.

From Investopedia:

"This flexibility (of how ROI is calculated) has a downside, as ROI calculations can be easily manipulated to suit the user's purposes, and the result can be expressed in many different ways. When using this metric, make sure you understand what inputs are being used."

[ATeam]

Originally Posted by rodeehos

What kind of profit are you left with after paying for a $255,000 rig? What you doing that you need to pay that much for a truck?

Well, according to some here in the Open Forum, we are left with no profit whatsoever with a $255,000 CR-unit. We are living in a world of self delusion, happy and comfortable in our full-featured truck, which we do not realize is taking us on a ride straight to financial ruin. The truth is, life sucks as an expediter in a full-featured truck. There is absolutely no way anyone can be happy, healthy and successful in a truck like ours. Do not follow our path. It will be the end of you for sure!

[RichM]

Dave you nailed it right on.An investment should generate the maximun return based on known factors. Now if I want to erect a 5 million dollar motel my demographics have told me that I can expect 80% occupancy based on my location and lack of competition. Calculating anticapted revenue vs operating expenses leaves a profit of 1 million dollars. This gives me a ROI of 20%. So I do it. The following year here comes MR Patel to erect a larger motel with more features. My occupancy rate drops buy 20% but my operating expenses only drop 5%. So my ROI is now less that anticpated because of my competition.

This senario can and does apply to this industry especially a specialized unit.

[ATeam]

Originally Posted by RichM

This senario can and does apply to this industry especially a specialized unit.

RichM, you are absolutely correct. Your comparison of a $5 million dollar hotel business to a one-truck expediting business is especially informative. Diane and I are headed to the poor house for sure. Specialized units are the kiss of death.

[greg334]

Originally Posted by ATeam

ROI is a figure that can be twisted to mean pretty much anything anyone wants it to mean, depending how it is spun. Therefore, in and of itself, ROI is a meanless number. It is only meaningful when taken in the context of other business health indicators and the assumptions on which ROI are based are not only known, but valid in a given context.

You know Phil, I sort of agree with you but I don’t.

I seem to be a lone voice here on this site when I make serious suggestions. I seem to think that my business experiences have more to do with making sure others just don’t get into things blindly and do the right thing. I see others get trapped in opinions and banter between experienced and semi-experienced owners but the solution is to listen, learn and then use the tools that you need to have to make decisions.

So…… for all of that babbling, I always recommend to anyone who wants to start a business, any business and if they especially have any major expenditure like $250k or even $100k outlay for a truck to get two things – a lawyer and an accountant.

Not a tax preparer, not a financial advisor but a real accountant with real credentials and experience.

You use them as tools to make decisions, not to keep track of you money. You pay them to advise you to find ways to be successful.

It takes time to find both a lawyer and accountant but it is worth the time taken.

If you are lucky, you will get one who knows the industry, transportation and will help you direct your information gathering. When I got into this messy business, I left ROIs, depreciations and a lot of other terms in my accountants lap and he gave me three choices and how to be successful, I took one that was not the easiest but don’t regret it because my truck is really my truck, paid for.

Originally Posted by ATeam

Being the wordsmith I am, I can easily construct a spin that will sound just as good and look just as impressive as DaveKC did above. I will not do so because it would be just as vulnerable to a third spin by yet another opinion holder about what ROI is and how important it should or should not be.

OK….. If you say so…… yes you can spin things any which way you want but again business has not changed in some 250 years, the terms and the way people look at things have not changed but management has. You can say one thing, Dave can say another but truthfully, my accountant and other accountants have a consistent message – they are closer to Dave than most.

Originally Posted by ATeam

Well, according to some here in the Open Forum, we are left with no profit whatsoever with a $255,000 CR-unit. We are living in a world of self delusion, happy and comfortable in our full-featured truck, which we do not realize is taking us on a ride straight to financial ruin. The truth is, life sucks as an expediter in a full-featured truck. There is absolutely no way anyone can be happy, healthy and successful in a truck like ours. Do not follow our path. It will be the end of you for sure!

I don’t know about others, but to me you seem to be doing the right thing for you.

Would I recommend someone to follow your footsteps? No way.

You do what you do and have success at it but others may not – they have to come up with their own plan for a successful business.