Rescue Your Revenue
Don't Let the Downtime Grinch Steal YOUR Income
Some small trucking businesses are fortunate to have dedicated runs and haul very consistent loads week in and week out. However, most expeditors’ loads are not as consistent. Loads may fluctuate with the holidays, seasons, market demand, and other factors.
There are high seasons for holiday merchandise, farm produce, livestock, forestry products, fairs and convention setups, and endless others. Each industry has its busy and not-so-busy shipping schedules. These may be based on time of year, climate, activity, demand, etc. Pumpkins, turkeys, hams and Christmas trees are just a few of the items which are shipping-date-sensitive, due to consumer demand and contracts. As an expeditor, you likely have high seasons that are outside of the norm as well.
With more traffic back on America’s roads and truck stops, the odds of getting hit increase. It’s bad enough to get hit near the Christmas holidays, but if it’s also your high season, it’s even worse.
Of course, lead time is important with holiday deliveries. Christmas shipments are often delivered months in advance. If an owner operator misses the season’s narrow window of opportunity due to downed equipment, there’s no making it up.
Oftentimes, a trucker will haul lower-profit loads outside of high season in anticipation of making up income during high season. If equipment is out of service due to an accident in high season, those downtime losses can cripple a business for months or even years to come.
For example, if your truck is out of service due to an accident, you can’t haul the loads you agreed to haul. However, shippers need their products delivered on time, so they’ll find someone that can. This is especially true in the world of expedited loads. If it wasn’t time sensitive, a less expensive shipping option would have been utilized. In many cases, truckers in this situation lose a contract or priority and have to work themselves back into shippers’ good graces over time.
Highly Perishable Commodities
Highly perishable food commodities have sensitive shipping schedules. Take the U.S. cranberry industry, for example. Cranberry season is short – only a couple of months in autumn. Because of the perishable nature of berries, growers can’t afford to wait until a truck is repaired. Time is of the essence and if you’re not there to haul the loads, someone else will.
Similarly, a guy that hauls grain at harvest-time has a narrow window. If he misses harvest season, he’s lost that income opportunity for a year. Trucking companies may work for years to establish and keep long-term relationships with their grower-clients. These growers rely on the timing and reliability of the transportation companies chosen. If a trucking company can’t make their commitments because of downed equipment, will they be the first one contacted next time or do they lose their place in line?
The calendar and weather are important factors in the timing of shipments. For example, ice road trucking is limited to a few months up North in the middle of winter. Many families rely on the high income their businesses earn between January and March to carry them through the lean times.
Warm weather brings a lot of seasonal work as well. While farm produce comes to mind, even work like hauling loads destined to carnivals and state fairs are highly seasonal and can be highly profitable.
We hope your equipment is never hit. However, it’s important to have contingencies in place if it is down. Some of our suggestions include:
- Establish a relationship with a truck rental company or motor carrier that will provide you with equipment should yours be down.
- Keep a rainy-day fund. If your equipment is down and you can’t rent any, make sure you have enough money in escrow or savings to pay business and personal bills for at least 2-3 months.
- Keep a good relationship and line of credit open with your bank. Be aware that rental companies ask for a $5,000 - $10,000 deposit on their equipment.
- Increase the limits on your credit cards. You may be able to use a credit card for the rental truck deposit. Just make sure you pay those cards off each month!
- Work on increasing your credit score. You won’t be able to rent or buy the equipment if your credit score is poor.
Calculation of Losses
As we all know, it’s important to keep good business records. This information is crucial in proving losses due to an accident.
Often, a trucking business’ exact loads lost cannot be precisely calculated because the loads weren’t actually booked. Therefore, an average of past loads may be the best way to calculate losses. When a trucking business lost loads during their high season and/or lost contracts during that time, losses may need to be calculated in a special way. It is important to discuss this calculation with a professional experienced in calculating losses so the business is not shortchanged.
Adverse insurance companies often use an industry average for their offers of settlement. However, no trucking business is average. Each company and each truck make a different amount than the next. Consider focusing on your true losses, not some artificially created industry average that may be offered by the other driver’s insurance company.
And finally, be the best advocate for your business by demanding your true losses. Provide the proof that the insurance company needs in order to settle your claim for a fair amount. Seek assistance where needed and get back to the business of trucking as soon as possible.
The information provided is for general informational purposes only and does not constitute legal advice.
For more information on this or other legal issues, please contact The Law Offices of Eckert & Associates, P.A.