Dollars & Sense
The Risks and Rewards of Getting Your Own Motor Carrier Authority
When you operate under your own motor carrier authority, you get to call your own shots and keep more of your income by negotiating rates directly with customers and not having to share a cut of your revenue with a carrier.
But all the support that a carrier supplies -- such as sales and marketing, dispatch, and other important business services -- you'll have to handle on your own. And while the rewards of getting your own authority can be attractive, the risks are high.
What is it really like to operate on your own authority? How do you get started building your business? Is getting your own authority right for you?
ExpeditersOnline.com spoke with Henry Albert, a truckload driver who has been operating on his own authority with Mooresville, North Carolina-based Albert Transport Inc. since 1996. In this interview, Albert gives us a glimpse into the risks, rewards, and what it takes to succeed when operating under your own motor carrier authority.
Why did you decide to venture out completely on your own?
I started driving in 1983 and drove for private carriers. And during that time, twice I saw companies evaporate out from underneath of me. So, in my case, I'm like, well, if I'm the boss, I only have one person to be irritated with if things don't go right. Having been through two of those deals, I thought, I'm just as secure working for myself.
How did you prepare to start your business?
I spent two years prior to obtaining my own authority getting advice from the Small Business Administration (SBA) and talking to other individuals in the business that were on their own authority or had small fleets or in some cases larger fleets. And then I made my plan as to how I was going to execute.
Part of my plan was I didn't want to get tied into the trap that many people do when they get their own authority -- they end up hauling almost all brokered freight. And that means they don't have any of their own customers because they don't service the same areas often enough to build those relationships.
So, they start taking loads anywhere in the country. One load takes you to San Francisco, but you don't have any freight contacts in that area. Then when you get to San Francisco, you're calling another broker that sends you to the Dakotas. But you still don't have any contacts there. Well, you can't ever develop contacts because you're operating somewhat like a gypsy, going from one spot to another spot where you don't know anyone.
When I started on my own, I picked two cities and concentrated on the freight that went between those two cities so that I would continue to see the same customers over and over again and be able to develop those relationships. In our worst year, we were still only 10-percent brokered freight; the rest of it we had directly with our customers.
What were those initial two cities?
Philadelphia and Charlotte [North Carolina].
How long did you focus on those cities before expanding?
For the first eight years and then we expanded from there, from the northern point in Westfield, Massachusetts, to the southern point in West Palm Beach, Florida, to the west in Atlanta and Cincinnati.
How did you find your customers?
My wife runs the office side of the business, and we both work on finding contacts and doing sales calls. Some of the sales opportunities I found while out on the road and others we researched together. For example, in the early days, if I got hung up without a load at a lumber yard -- I was a flatbed carrier then and I hauled to a lot of lumber yards -- and I was waiting to find my next load, I walked around the yard and looked at the tags on the end of the lumber. Where did it come from? If it was coming from where I needed to go, I jotted that down as one I needed to call on.
We also looked up the SIC (Standard Industry Codes) on different items. This gives you all the pertinent information you need, all the key contacts in that industry, what a company's last year's revenue was, how many years they've been in business, where they're located, and a whole lot of information that really helped us be more educated when we called on those contacts. And when we called them, we already knew a lot about their business, so it showed that we took an interest in what they did, which set us apart.
What's the advantage for customers to hire a driver like you operating on your own authority versus hiring a larger carrier?
For me, I'm able to provide my customers intelligence on their customers that they don't usually get by using drivers through a larger carrier.
For example, I had a major shipper that I found out through the back door that their customer was getting ready to drop them like a hot potato. We're talking millions upon millions upon millions of dollars of business for them was about to go up in smoke. When I found out about this, I got a hold of the sales department, and, of course, at first, they thought, "What's this crazy truck driver telling us this information. He doesn't know what he's talking about."
But I took it all the way up to the CEO of the company and said, "Look, I care about this because if they're not buying from you, I can't haul. So this is important for both of us. You need to check this out and deal with it." As it turns out, they were able to address the problem and save the customer.
I also sell myself on the fact that I represent what you think of your customer by who you send to deliver your load. I really look at it as that I directly represent my customer when I make the delivery.
What's your advice to other truckers who are considering operating under their own authority?
Remember that the opportunity for great success also leaves room for great failure.
So, if you're not going to take the time to plan your business, if you're not going to take the time to find customers, if you're not going to do all the necessary steps it takes to be on your own authority, you're probably better off being leased to a carrier.
And in some cases you might be better off being a company driver. I've met many a person that was a really good truck driver, but they weren't a good business person. As soon as you buy a truck -- whether you're leasing to somebody or not -- you become a truck driver second and a business owner first.
Earlier in our conversation, you mentioned that you met with someone at the Small Business Administration for two years to help you develop your business plan. What exactly did you learn that prepared you for the next two decades of operating on your own motor carrier authority?
The SBA consultant] put me through the ringer. He had me put my business plan together. He had me put a backup to my business plan together, and he had me put a backup to my backup business plan together.
After that was all done, I'll never forget what he said: "Henry, it looks like you've got all of your stuff in order. I ran your business plan by my peers, and they all said there's no way you could have that bad of a year, because you're very conservative with your numbers. If there's enough money for you to squeak by even in a worst-case scenario, you're going to make it."
But it was his next question that got me. "So, you have your plan together. But tell me this: Why in the world would anybody ship using you?"
I hesitated a half a second before I answered him, and he put his hand up and said, "I don't even want to hear your answer. Come back and see me in a week. If that wasn't right at the tip of your tongue, you're not ready."
Wow. So, how did you respond?
That was probably the most valuable lesson that I was given. And I found the answer in toothpaste.
Think about it: How does Crest get you to try their product if you're a Colgate user?
Sometimes they give you free samples, right? Or they might send you a coupon or whatever it may be to get you to just try the product with the hopes that you'll make the switch and become loyal and keep purchasing from them.
I started applying that principle to get my business started. When I got a customer, I said, "Look, there's a special rate for you to try me." The rate would be good for X amount of loads for X amount of time, and it varied depending on how much I wanted the customer.
I told the customer: "This will give me a chance to see what it really costs to do your business. And it will give you a chance to see what I'm all about and what I'm worth to you. When that's over with, we'll sit down and negotiate what the rate needs to be."
Then during that time period, I would spoil their customers to the point where they're calling my customer, saying "You need to send this Henry guy all the time." So, when we sat back down to negotiate the rate, that gave me the upper hand in that negotiating battle, whereas before I was just trying to get in the door.
Any parting advice?
When you're in business, your job is to solve somebody else's problem. The problem can be as simple as they need their product to get from their dock to another dock. I always looked for problems to solve, because that's my job. With every problem is an opportunity.