F250 Hot Shot Help

[GAmes]

Wow, what a dismal picture you paint. For every failed O/O operation there are quite a few successful ones. It's a business. Take care of the truck, it will take care of you. Avoid unnecessary expenses and the profit margin goes up. The least cost is not always the least expensive. For example, I use Michelin tires, in fact just bought four of them last week to replace the 80k mile tires I had on the back. I routinely get 100k miles from the steer tires. $216 per tire works out to 2.7 cents per mile, per tire. Fuel and maintenance costs this year have come to 25.2 cents per all miles driven (includes the cost of the tires), loaded and empty. Worst case is a truck that only lasts 250k, assuming it is properly cared for, but even so that expense is $63k, the truck is still worth something and it isn't unreasonable to expect a gross income of $200k in that many miles. Deduct fixed expenses (insurance, phone, operating expenses, etc) and there is still a living wage left over after taxes. It's all about working smart, not always about working hard.

 

[Wayne M.]

Doremire and Ames, both of you paint a different picture, both bringing out excellent points. Can each of you briefly describe your operations?

 

[Tuesdak]

Wow, what a dismal picture you paint. For every failed O/O operation there are quite a few successful ones. It's a business. Take care of the truck, it will take care of you. Avoid unnecessary expenses and the profit margin goes up. The least cost is not always the least expensive. For example, I use Michelin tires, in fact just bought four of them last week to replace the 80k mile tires I had on the back. I routinely get 100k miles from the steer tires. $216 per tire works out to 2.7 cents per mile, per tire. Fuel and maintenance costs this year have come to 25.2 cents per all miles driven (includes the cost of the tires), loaded and empty. Worst case is a truck that only lasts 250k, assuming it is properly cared for, but even so that expense is $63k, the truck is still worth something and it isn't unreasonable to expect a gross income of $200k in that many miles. Deduct fixed expenses (insurance, phone, operating expenses, etc) and there is still a living wage left over after taxes. It's all about working smart, not always about working hard.

Frankly I am being optimistic. Going to a light duty "pickup" from a commercial truck is a different cost per mile. Going from a fleet driver to Owner Operator is like going from employee to business owner. More to it than windshield time... You are not going to get that tire life out of the LT tires the 250 Ford has on it. Truck is totaled or outright stolen... Another hint make sure the 'declared value' on the commercial insurance covers the replacement cost of your truck. Drop a new $10,000 engine in it make sure you change the coverage to reflect the higher value.

Words to live by for sure: "It's all about working smart, not always about working hard." This means that you need to be making a profit when your wheels are turning. You can run all day working hard and be loosing money. So make sure the jobs you accept will make you money and back-hauls home are worth the trouble. You can't avoid some expenses and this is where the CPM difference comes in.

$63,000 truck.
$63504 to go 250K at 0.252. (Low IMO as the IRS gives you around .50 a mile, but, fuel is cheaper than when I was running.)
Insurance and other fixed non-CPM expenses?

Not saying one can't make money at it just saying that there is a lot more to it than the OP's DOT concern... Absolutely a learning curve to being a business owner. Care to ask me how much fun the IRS is to deal with on a business expense audit? Expensive to fight like any govt money and time wasting agency. Like any business there are some not fun things to deal with or hire out.

 

[Tuesdak]

Doremire and Ames, both of you paint a different picture, both bringing out excellent points. Can each of you briefly describe your operations?

Family business now retired from it.

Started in RV hauling with the usual sucker's recruitment in early 2008. New 2500 HD Duramax and got an immediate cost disadvantage of 10% lower MPG from the new emission systems on diesels.
Found out 'hook and tow' where you have a trailer or camper on a flatbed and also tow a trailer would have paid more, but, not advertised. Yes there are ways to make some money hauling RV's, but, it's not one at a time like they recruit for. No backhauls period.

Toured the USA and Canada, eh. Seriously I am just going to buy my own RV and enjoy it more. IMO the cost is the same as hauling them and you can stay and enjoy the actual RV as an RV vs. cargo.

Dad drove and I did dispatch, paperwork, and other business related items. I also drove some including split shifts later.

Watched The Great Depression V2.0 hit in 2008. Don't care how well you took care of things as no work means no pay and the fixed expenses don't exactly go away. Hauled dealer to dealer, repo yard to auction, auction to dealer, new rigs from BK closing dealer to auction. Was supposed to be factory to dealer, new.

Switched over to cargo on a daily parts and tire route. 550 miles a day 5 days a week. Delivered tires and auto parts including batteries to dealers, mom and pop tire shops, farms, mines, etc. Think UPS for auto parts. The pay/profit was better than hauling RV's.

Parts broker couldn't pay us for 2 weeks at one point. We stopped running for them. As reserves were exhausted from making it through 2008 there went the truck. 2008-2010 was survival period.

Broker finally paid us and then later in a weird twist asked us to haul for them again. Used the money they paid us to get an the 1993 ebay special, now the Rat Rod, and learned a lot about working a 6.5TD hard. Say like there is an engine working hard that can use more fuel than a 454 and go slower while doing so!

Paid fuel cash daily were our terms and they did it. Found out why they begged us to come back - another driver blew a $1000 TPIM, ECM, etc. on their Dodge diesel and couldn't afford to fix it. Yeah ok a 6.5TD took over for a Cummins at one point in history.

Dad left at 2AM to deliver before places opened. Would get back at noon or so. I would take the truck trailer downtown in the evening and load it at the depo. Made sure the parts were in order on the trailer by stop. I would usually make it back before 2AM. Unless SHTF and others had trouble loading like blown airlines on trailer brakes etc. (You don't need glow plugs if the engine never completely cools off.) Work on the truck if needed in the middle of the night.

Blew the engine due to oil failure scuffing a piston. (Conditions caused the limits of the engine oil to be reached.) Rented a rig and swapped engines over 30 days.

Back on the road we hit a furry 1 ton pregnant rat, known as Elk. 3 weeks and 7000 miles on the rebuilt engine. Loose the route over that. New Dodge Diesel took over, better MPG and power than the 6.5. They paid us a week to ride along and show the new driver where things were at.

Buy truck back and rebuild it from insurance funds. Haul overflow now and then for broker.

Step back into hauling RV's from auction and enjoy a little profit as father/son for a short time. Drive Motorhome while pickup delivers trailer to same location and both ride back in empty pickup.

Spent 'profit' on new front end for Rat Rod. Write it off as a loss for that time anyway.

Find out where all the fuel is going on the 6.5TD. Send working GMx turbo to the scrapyard to be melted down. $700 large turbo upgrade takes towing MPG from 7 to 10.4 MPG. (Extreme grades on the route mean even a modern diesel is around 12 MPG.)

Fuel is a big expense. Biodiesel is a nightmare 10% MPG loss, higher expense, and that's when it doesn't foul things up with 'bugs in fuel'. Wallet catches on fire over that bad luck bill.

Go through IRS audit over business expenses. Waste of several days going over a wheelbarrow of receipts.

Have a rebuilt 24 year old pickup with 1/4 million miles to show for it. Not saying we had the best run business, but, a lot of good well run and funded businesses didn't even make it through The Great Depression V2.0 as long as we did.

IMO Hot Shot may have some money in it. Hauling cars is better than hauling RV's, but, not sure there is any profit in either.

 

[GAmes]

Wayne, I don't have an "operation". I'm an owner operator leased to a carrier. They take care of all DOT compliance requirements (drug testing, log book history and the stack of other bureaucratic BS the gov't puts trucking companies through). They find the loads, negotiate the rates, pay for tolls & permits (which are passed to the customer), provide license plates & insurance and more for a measly 18% of the line haul. I transport trailers which has a lot of similarities to hot shotting, but is definitely different as well. I don't have to drag an empty trailer between jobs and I don't have to maintain that trailer. On the other hand, I usually am at the mercy of luck when it comes to follow on loads, have no "lanes", carry every type of hitch known to man and have to stay flexible. Fortunately, and the reason I do it is because I only work when it is convenient to me. There are no forced dispatches and seldom a "must deliver by" date. I choose my own route and drive, or sight see, at my discretion. Yes I do have another income source.

J, I agree with a lot of what you say, but disagree with several things. For one thing, there isn't any requirement to spend $63,000 on a truck. It would be foolish to start a business venture with a huge debt when a $15,000 truck would do just as good a job. Same with a trailer, I bought a deckover gooseneck for $1500, put a thousand into brakes, tires & lights, and had a capable trailer for my personal use.

When I started driving for pay the IRS rules only allowed actual cost for deduction, however, this year that changed. I'm unsure where the IRS gives you .50 a mile though. I just gave you the actual CPM lifted off my spreadsheet. In 2014 when fuel was a lot more expensive CPM was 40.5, but the fuel surcharge was much higher and my profit per mile was relatively the same. My maintenance costs were pretty high that year too.

Your point that DOT is a small part of the equation has a lot of merit in my case. All the hoops a O/O with their own authority has to jump through makes it difficult, and in some cases, costly.

 

[Tuesdak]

GAmes the IRS gives you the ~$0.50 as a standard mileage deduction for business use of a vehicle and that's just a base number for reference and a better context for Uber drivers rather than trucking/Hot Shot. Diesel hit over $5.00 a gal in 2008, new truck payment, etc will have different CPM and fixed cost numbers. One must know these numbers to find profit as they are different for each operation. Regardless you can take actual expense or mileage as long as you stick with it over the tax years for the specific business situation. (I have the IRS battle scars to prove that...) Going from RV hauling to parts/cargo allowed us to change to actual expenses from mileage.

New vehicles have a warranty and you don't have to rebuild them from the radiator to the lug nuts, also an expensive chore. Lemon law protection as well on new. Yes, there is a happy middle somewhere, but, some advantages to a new rig. I mentioned the suckers recruitment for RV hauling and this is similar to the same for Uber starting you with a new car payment lock in... Live and learn.

If anyone hates NAFTA it would be me. Mainly from watching RV's and other imports zip into The USA while we waited for customs to clear us into Canada and the agent saying 'why don't you sign up?' for the program. Well we tried to sign up. We found out just how hostile the United States Government is toward businesses trying to export items. Nevermind the extra paperwork burden and having to store that krap for 7 years. We were denied and the sack of garbage in human skin in the government was downright hostile to us for even trying. So the next time the border agent suggested we sign up for the fast track whatever we told them to STFU about it in no uncertain terms.

Finishing my story.

Yes we had our own MC number along with the DOT number. Paperwork galore and the point of contact service required to do interstate business - that 18% is well spent if your broker does that for you. Commercial insurance with 1 mil liability is sticker shock expensive. Then add the cost of a bond...

Having a trucking accountant firm hired in is useful. They told us that our deadhead miles were eating us alive and we need to change how we were doing business. Charge more, less deadhead, or stop the bleeding. Hauling new RV's had more than 50% deadhead miles. The fellow that won a new Dodge truck from Horizon was complaining that he still didn't make a profit at one event and had no truck payment.

We found the "local" used RV hauling to be somewhat profitable as the deadhead miles were less. Only real PIA was the old Chinese trailer tires separating/blowing up all the time on the used RV's. This was true even for our cargo trailer that separated all 4 trailer tires in 2 weeks from new, defective with a pile of them at the cargo trailer dealer, and just under 30K average tread life on replacement 16" ST tires.

The parts hauling turned out to be less than minim wage. Further the old truck we got later was like an alcoholic owning a bar. Bad MPG combined with lots of repair parts had us in the red. Never-mind labor to put the parts on. Having to pay a mechanic to do that would have stopped operations PDQ.

The local RV hauling turned unprofitable when our broker failed to pay us and a bunch of other drivers. 'Although we haven't paid you in 2 weeks can you take another load?'

We hauled some more overflow cargo before we stopped the commercial insurance and wound it down.

Getting paid by a reputable broker is just one thing more important than DOT concerns.

So next time you visit the Hospital ER and listen to the staff bitc... err...complain about having to work 24 hours straight you can suggest they ask the government to extend trucking hours of service and the fun paperwork logs to them. In one way the hours of service logs prevent brokers from abusing truck drivers from excessively long hours on delivery routes etc. They have to hire more people to do the work so one won't fall asleep in the middle of an operation. What can I say Truck Drivers are more important than Hospital Staff...

 

[GAmes]

I had a feeling you were talking about the standard mileage rate, but it is more than 50 cents per mile. Unfortunately I started using my truck when it was required to use actual expenses for vehicles for hire. (2003). It wasn't until after 2011 vehicles for hire could use the standard rate, and then only if the vehicle was put in service using the standard rate. That left me out.

Since our company isn't limited to new RVs my deadhead miles are much lower than 50%. I have literally delivered a trailer, crossed the street and picked one up. My standard is to not sign up for a trailer that is farther away than I need to tow it. I don't mind deadheading 500 miles to pick up a trailer that is going 1100 miles.

A person can do a lot of repairs for the $50k difference between a truck in warranty and one that is a few years old. The best part of owning my current truck was driving it past warranty. The one time it was in a dealers service bay (for a warranty issue) they ripped off my wife. My first Dodge/Cummins was a '92 that was a lemon. At that time the lemon law in TX was a joke, it still might be. When it reached the end of the warranty period my next ride was very nearly a Ford/Powerstroke. Had a duelly with 3.55 gears been available it would be parked in my driveway. I really feel I lucked out to the max when I signed the papers for the Dodge I have now.

 

[MMeier]

I wasn't tramping anything. Federal laws are federal laws. State by state doesn't matter. It doesn't make a dang difference if you have 2 tires on and axle or 4. The weight of the axle is the same. The reason I asked this question was to see if anyone else had a problem with the dot in this line of work.*

Wanna bet state laws doesn't matter ? Fed laws are just that, federal laws, each state is free to add to them as they want, or just come up with their own interpretation of said federal laws.

 

[bnbellis3377]

I run a 2500 ram short bed and pull a 30' pj flatbed I've never had any problems with the dot, I run only in Nevada Arizona and California based out of Pahrump Nv also I stay under the 26000 limit never have had the dot pull me for an inspection have had them ask me for all my insurance papers but that's been it

 

[jhenderson]

Wanna bet state laws doesn't matter ? Fed laws are just that, federal laws, each state is free to add to them as they want, or just come up with their own interpretation of said federal laws.

Quit taking things out of context. The OP asked about srw vs drw. State law doesn't change axle wt ratings. Period.

 

[Tuesdak]

I had a feeling you were talking about the standard mileage rate, but it is more than 50 cents per mile. Unfortunately I started using my truck when it was required to use actual expenses for vehicles for hire. (2003). It wasn't until after 2011 vehicles for hire could use the standard rate, and then only if the vehicle was put in service using the standard rate. That left me out.

Since our company isn't limited to new RVs my deadhead miles are much lower than 50%. I have literally delivered a trailer, crossed the street and picked one up. My standard is to not sign up for a trailer that is farther away than I need to tow it. I don't mind deadheading 500 miles to pick up a trailer that is going 1100 miles.

A person can do a lot of repairs for the $50k difference between a truck in warranty and one that is a few years old. The best part of owning my current truck was driving it past warranty. The one time it was in a dealers service bay (for a warranty issue) they ripped off my wife. My first Dodge/Cummins was a '92 that was a lemon. At that time the lemon law in TX was a joke, it still might be. When it reached the end of the warranty period my next ride was very nearly a Ford/Powerstroke. Had a duelly with 3.55 gears been available it would be parked in my driveway. I really feel I lucked out to the max when I signed the papers for the Dodge I have now.

That explains the difference. ~ is 'about' as I don't recall the exact numbers the IRS gives you. After all I hired the tax prep out - worth every penny.

Another advantage to owing a cheaper truck vs. financing a new truck is you own it. I make a payment to the parts store when I run. If I am not running and making money the bank doesn't take the truck away.

I did have a chance to get a 97 dodge Cummins after we totaled the the 1993 6.5TD. One one hand it may have been a better choice. Not just CPM, but, may have had more easier to 'tune' power to meet DOT hours of service the under-powered 6.5 had trouble making. (Slow climbing the grades and DOT hours of service limits is one reason we split some time on the the route with two drivers.) The other hand my 2003 5.9 cost way more to have the engine overhauled. In the end it was a memorable project with dad to rebuild the truck ourselves. Finding the lack of power in the 6.5TD due to GM's choice of small turbo was also interesting, but, expensive.