A family trucking business is a carrier operation owned and staffed by members of the same family — most often an owner-operator who expands to a second truck driven by a spouse, son, or daughter. Building one is a financial decision before it is a family one: the cash flow, the cost per mile, and the freight commitments all have to support the added equipment.
Family trucking businesses aren’t rare. Maybe we don’t see “Smith and Sons” so often anymore, but family trucking businesses aren’t gone. We’ve seen several over the years, including some of our oldest clients.
Growing a family operation usually means growing the fleet, and that is a numbers decision: here is how to tell if it is time to buy trucking equipment.
It’s a great idea to build a family trucking business, but the mechanics of the process aren’t just legal. Regardless of relationships, expanding from an independent owner operator to a small fleet manager requires an understanding of cash flow, finances, and when is the right time to grow.
Cash Flow
Buying more equipment requires money. Whether it’s cash or a loan, the price of equipment may be low right now, but the price has to be paid.
If an owner operator wants to expand, the cash flow to cover the costs has to be considered. Buying another rig or another trailer has the original investment, but also
- extra insurance and bonds
- getting a trucking authority
- more fuel expenses (and more IFTA)
- more back office management – invoices, compliance, and maintenance.
If your business is already dependent on factoring, adding another truck to increase capacity may also increase the factoring fees.
Another rig brings in more cash – but requires more support.
But cash flow isn’t the only concern.
Finances
Taking on extra debt to buy more equipment may require more cash flow, but it’s a decision based on actual numbers, not guesses.
Kevin Rutherford on a recent Overdrive Radio podcast talked about the numbers any trucking business needs to know.
How many of you have a good business report? Whether its a profit and loss or something else, you’ve got something that you can look at at any time and know what your numbers are?
Kevin says knowing your business numbers is the one thing to turn a business around or to make it grow. So where do you get those “numbers”? What numbers is he talking about?
- Fuel efficiency.
- Maintenance costs.
- Expenses per mile.
- Revenue per mile.
- Gross and net profit margins.
The financial decision to expand from an independent owner operator to start a family trucking business has to take these factors into consideration.
But it’s my family!
It’s a great thought, to have a business with one’s sons or daughters. Or to see a husband or wife join you on the road. Why let money stop the creation of a family trucking business?
Because money doesn’t care about your family. If there’s not enough money to service the debt of a new cab or trailer, it may drive a wedge between family members rather than bring them together.
- If a trucker can measure how much time and capacity they can cover – and see that there’s more opportunity out there, then expansion may be a good choice.
- If the deadhead miles are too high or there aren’t consistent freight lanes and regular customers, choosing expansion will cost more than it brings in.
- Depending solely on load boards isn’t enough. A load board is hit or miss – and the best freight never makes it to the load boards. A strong relationship with a few brokers who understand the value of a specific trucker’s skills or the right equipment is far more profitable.
- Kevin Rutherford says everything that a trucker can do to maximize their mileage has a side benefit of keeping a truck in ideal condition – and reduces the number of maintenance issues. Some truckers would rather buy a new cab than try to fine-tune a rig to improve fuel efficiency. But if a family wants to expand their trucking business, they need the cash to maintain the fleet and protect the investment.
The Right Time to Grow
There are four questions that help determine when it’s the right time to grow a family trucking business.
- Do I have guaranteed freight – or just hope?
- Will expansion increase profit or just revenue?
- Is there enough cash flow support payroll, repairs, and fuel?
- Who will manage the drivers, compliance, and dispatch?
Building a family trucking business can’t be a single person’s decision. Communication between the parties is critical to success. Understanding the business’s needs and balancing them with the family’s can be a treacherous high-wire act. Regular check-ins, open discussions about plans and goals, and using a complete trucking management software to handle the back office work are all good ways to keep everyone informed of the state of the business.
Keep the home fires burning: Make home be home and not the dispatch center. Keep family relationships personal and not just professional. A family trucking business has to balance both sides – on the road and off. While the four questions above focus on the business, asking each member to be honest, to consider the value of the familial relationships, and remember to love each other is the key to making a family trucking business work.
Frequently Asked Questions About Building a Family Trucking Business
What is a family trucking business?
A family trucking business is a carrier operation owned and staffed by members of the same family — most often an owner-operator who expands to a second truck driven by a spouse, son, or daughter. Expanding from an independent owner-operator to a small fleet manager requires an understanding of cash flow, finances, and when the right time to grow is.
What does it cost to add another truck?
Beyond the original investment in the rig or trailer, adding capacity brings extra insurance and bonds, getting a trucking authority, more fuel expenses (and more IFTA), and more back office management for invoices, compliance, and maintenance. If the business already depends on factoring, adding another truck can also increase the factoring fees.
What numbers should you know before expanding a trucking business?
Fuel efficiency, maintenance costs, expenses per mile, revenue per mile, and gross and net profit margins. Kevin Rutherford of Overdrive Radio says knowing your business numbers is the one thing that turns a business around or makes it grow. The decision to expand has to be based on actual numbers, not guesses.
When is the right time to grow a family trucking business?
Four questions decide it: Do I have guaranteed freight — or just hope? Will expansion increase profit or just revenue? Is there enough cash flow to support payroll, repairs, and fuel? Who will manage the drivers, compliance, and dispatch?
Are load boards enough to support a second truck?
No. Depending solely on load boards is not enough — a load board is hit or miss, and the best freight never makes it to the load boards. A strong relationship with a few brokers who understand a specific trucker’s skills or the right equipment is far more profitable.
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