Like a shock from a defibrillator applied to the chest of an accident victim on the morning of November 6, the stock market and investor optimism jerked and seemed to wake up, with the S&P hitting all-time highs on November 8. Post-election news wasn’t lost on drivers and owner-operators, either.
It appears that, with nothing more than a psychological shift toward hope, a majority of workers and small business owners feel saved. Within a few days, trucking pundits declared “the freight recession is over!” Yet though the election-day shock may have felt like a defibrillator, stocks had been hitting highs well beforehand, too. It's important to also recognize not everyone wins the lottery, and as one of my business partners from the past shared with me, “Perhaps one of the most valuable pieces of advice I’ve ever learned throughout my 50 years in business is: The number one goal of a salesman is to figure out how to separate you from your money!”
Yet maybe it's high time that, as owner-operators, we break out of conduct, beliefs and behaviors that can trap us in reflexive negativity. Take a moment and try and remember the pride so many of us felt the first time we were able say to someone, “I am an owner-operator.”
Now, manage your reactions soberly without wholesale throwing cold water on renewed optimism, either. For our owner-operator and driver community -- who’ve been waiting, working, hanging on for a new day with optimistic expectations -- when public emotions seem to be moving in just one direction, the majority undoubtedly begin to feel pressure to act, and fast. To be quick off the line as the starter pistol’s fired or miss out on opportunity.
Fear of missing out (FOMO! as the kids say) can take many forms. Here’s one: A knee-jerk jump on the first new offer from a company, agreeing too soon to a load once you’re empty. Reaction, in essence, overtakes care in planning -- care that was once a bedrock part of the business plan.
With average brokered freight rates so beaten down, we’ll probably see some movement upward, yet it’s way too early to go all in with so much ground to make up. That goes for other crucial parts of this business, too.
A study of the data available shows spot rates have been trending in some cases a full $1/mile, I’ll contend, below what the owner-operator community truly needs to operate with acceptable profit levels. (And just recently, one information network was touting how an 8 cents/mile increase in the average was something to celebrate!) When there is so much ground to make up after so much time spent bouncing along the bottom, if an owner has been unable to pay themselves and also generate an additional return on investment, it’s going to be some time indeed before the savings accounts and emergency funds everyone needs build back to acceptable levels.
[Related: Kick the tires of Overdrive's new 'Load Profit Analyzer']
How are you taking inventory of your own situation? Use caution if trying to compare your revenues with the published averages. Ask any truck owner what a rosy loaded-miles estimate does to a per-mile rate. Understimate loaded miles by 10% on a load you're expecting to come out at $1.75 per mile and you'll really be earning just $1.57! (Factor in deadhead to get you to the pickup and you can drop that figure even further.)
Supply and demand drive rates -- rates drive cost
During perhaps the shortest economic recession in history -- that experienced in 2020 with the COVID lockdowns -- our federal government distributed cash, prompting people to react with what could be referred to as retail therapy spending. Money to consumers combined with the government’s business-focused PPP and Economic Injury Disaster Loan programs to flood the economy with what may have been seen as free money, fueling spending by untold numbers of households and businesses. Demand for freight movement soared, high rates triggered owner-operator truck and trailer purchases and moves to operate with motor carrier authority to tap into what looked like the Gold Rush of 1886 for brokered markets.
As long as that jackpot existed, prices for goods and services just didn’t seem to matter. Yet was this historically high gross revenue, coupled with the government handouts, really the win-win that would change forever the owner-operator business model?
I observed two developments:
- A high percentage of owners began to think they would be paying higher income taxes, thus feeding additional spending and demand in the economy, helping inflate costs higher.
- Costs for goods and services, meanwhile, did not deflate when freight rates came crashing down.
[Related: More 'cheap freight' curves ahead: Better ways to assess rates and revenue, costs and emotions]
It seems logical that our cost to operate will continue to increase. The overall inflation rate is down, sure, yet the Bureau of Labor Statistics’ most recent Consumer Price Index reading showed an annualized 2.6% rate of inflation, reflecting that costs for goods and services generally continue to rise. With respect to the costs associated with our businesses, it’s anyone’s guess what the inflation rate is now or will be. It's probably safe practice to expect it come in higher than 2.6%.
Think like a new business owner
Remember that pride I mentioned earlier. Combine that with a planning reset, and you’ll have an advantage compared to when you were the brand-new owner operator sitting in that first orientation class at your leasing carrier. You’ll be able to apply lessons learned over the last two-three years -- you’ll see actions that were available yet not taken. Take them now, and they could pave the way for a smoother transition into a new business era in 2025-’26 and beyond.
Consider writing a new business plan, adjusting goals and plans to achieve them. Define for yourself how progress can be more easily tracked. Here are just a few suggestions, and questions to ask yourself, to help get started:
- Reassess your fixed costs with a close look at your own data.
- Inventory -- what capital purchases were delayed that might now need to be made? For instance, with the used truck market back to relative normalcy, even in buyers' favor, is it time to upgrade or replace equipment?
- How many other owners answer that last question with a yes? How might reductions of inventories at dealerships shift negotiating power?
- Could increasing cash flow support an increase in fixed truck lease or loan payments?
- What variable expenses for certain preventive repairs or discretionary improvements can be justified/afforded?
- Tune up the business plan by first deciding how to write a budget. As suggested above, prioritize your fixed cost spending first for the business, then for personal spending – easy to knock out, given these are bills we’re already paying routinely.
Finally, get more self-aware. Do you have trouble accepting necessary changes? Yes, this is a very broad suggestion and question -- we’re all in our own unique place in life and business, with different needs.
Yet being aware of your own tendencies will go a long way toward making better decisions.
[Related: Evaluate any load's cost in relation to time, not just miles]
